2022/10/25 by Jason R. Bailey, D. Lauria, Bailey, Jason R. +7
Economics, Econometrics and Finance · #Computational Finance (q-fin.CP) #FOS: Economics and business #Housing Market and Economics
paper · pdf · doi:10.48550/arxiv.2210.14266
openalex publication_date 2022/10/25 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
We consider the use of P-spline generalized additive hedonic models for real estate prices in large U.S. cities, contrasting their predictive efficiency against linear and polynomial based generalized linear models. Using intrinsic and extrinsic factors available from Redfin, we show that GAM models are capable of describing 84% to 92% of the variance in the expected ln(sales price), based upon 2021 data. As climate change is becoming increasingly important, we utilized the GAM model to examine the significance of environmental factors in two urban centers on the northwest coast. The results indicate city dependent differences in the significance of environmental factors. We find that inclusion of the environmental factors increases the adjusted R-squared of the GAM model by less than one percent.