Declining marginal value of coastal proximity l.jpg
Advertisement
This presentation is the property of its rightful owner.
1 / 14

Declining Marginal Value of Coastal Proximity PowerPoint PPT Presentation

Declining Marginal Value of Coastal Proximity Kenneth Wehrmann How is Coastal Property Valued? How much extra would you pay for a house on the beach? How much less for a house that was on the second row of houses? Third?.... MAP of Beach Research Previous Hedonic Studies Rosen

Download Presentation

Declining Marginal Value of Coastal Proximity

An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Declining marginal value of coastal proximity l.jpg

Declining Marginal Value of Coastal Proximity

Kenneth Wehrmann


How is coastal property valued l.jpg

How is Coastal Property Valued?

  • How much extra would you pay for a house on the beach?

  • How much less for a house that was on the second row of houses?

  • Third?....

MAP of Beach


Research l.jpg

Research

  • Previous Hedonic Studies

    • Rosen

      • Beginning of Hedonic Method

    • Islands

    • Power Plants, Toxic Sites, Pollution

      • Negative externalities affecting nearby properties

    • Flood Risk

      • How consumers discount property due to risk

    • View

      • Do consumers consider view when making purchasing decisions? (Coastal)


Theory l.jpg

Theory

Coastal homes are highly valued for their close proximity to a scarce resource, our beautiful North Carolina shores. Coastal proximity provides utility to consumers and will therefore demand a premium. This premium will decline as distance to the shore increases and should show signs of diminishing returns.


Theory graphs l.jpg

Theory Graphs

PD

P

Price Differential

∆ Distance to Shore

Q

Distance to Shore


Data source l.jpg

Data Source

  • Bin, Okmyung., Tom Crawford, Jamie Kruse, and Craig E. Landry. "Flood Prone with a View: Coastal Housing Market Response to Risk and Aminity." Working Paper. East Carolina University. 2006

  • New Hanover County, NC

  • 1075 Property Sales from 1995 to 2002

  • $30,000 to $3,500,000 sales price

  • 12% were new homes

Map of Beaches


Hedonic model l.jpg

Hedonic Model

  • Goods are broken down into their constituent attributes. These attributes create utility for consumers and therefore hold value. This value can be estimated by quantifying these constituent parts and analyzing their relationships. For the housing industry characteristics are traditionally broken down into three groups; structural, neighborhood, and environmental attributes.


Variables structural l.jpg

VariablesStructural

  • Age

    • 0 81 22.06

  • New Home (D)

    • 12%

  • Square Footage

    • 392 8354 1784.08

  • Lot Size

  • # of Bedrooms

    • 1 8 3.15

  • # of Bathrooms

    • 1 7.5 2.491

  • Air Conditioning (D)

    • 90%

  • View (Sum of Degrees of View)

    • 0 178.18 18.36


Variables neighborhood l.jpg

VariablesNeighborhood

  • Neighborhood (D)

    • Figure 8 Island 10%

    • Kure Beach 34%

    • Wrightsville Beach 17%

    • Carolina Beach 40%

  • Distance to Nearest Highway

  • Distance to Central Business District


Variables enviormental l.jpg

VariablesEnviormental

Distance to Nearest Shore

Range: 73 Ft to 1 mile

Average: 1743 ft or 3/10ths of a mile

Distance to Neatest Shore Squared (Diminishing Returns)


Results l.jpg

Results

  • Model 1

    • T-stat: -4.4

    • Consumers do pay a premium for properties with close proximity to the shore

  • Model 2

    • Dist-13.69

    • Dist Sq 12.83

    • These premiums show evidence of diminishing returns as each foot of distance away from the shore supplies marginally less utility to consumers


Model 3 l.jpg

Model 3


Future research l.jpg

Future Research

  • Mountains

    • View Variable

    • Distance to CBD (Boone)

    • Value of being in a gated community


Questions l.jpg

Questions?


  • Login