Mass appraisal of residential real estate using multilevel modelling

Iván Arribas, Fernando García, Francisco Guijarro, Javier Oliver, Rima Tamošiūnienė

Research output: Contribution to journalArticle

19 Citations (Scopus)

Abstract

Mass appraisal, or the automatic valuation of a large number of real estate assets, has attracted the attention of many researchers, who have mainly approached this issue employing traditional econometric models such as Ordinary Least Squares (OLS). However, this method does not consider the hierarchical structure of the data and therefore assumes the unrealistic hypothesis of the independence of the individuals in the sample. This paper proposes the use of the Hierarchical Linear Model (HLM) to overcome this limitation. The HLM also gives valuable information on the percentage of the variance error caused by each level in the hierarchical model. In this study HLM was applied to a large dataset of 2,149 apartments, which included 17 variables belonging to two hierarchical levels: apartment and neighbourhood. The model obtained high goodness of fit and all the estimated variances of the parameters in HLM were lower than those calculated by OLS. It can be concluded as well that no further neighbourhood variables need be added to the model to improve the goodness of fit, since almost all the residual variance can be attributed to the first hierarchical level of the model, the apartment level.
Original languageEnglish
Pages (from-to)77-87
JournalInternational Journal of Strategic Property Management
Volume20
Issue number1
DOIs
Publication statusPublished - 2016

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Keywords

  • Housing market
  • Price modeling
  • Mass appraisal
  • Hierarchical linear model
  • Real estate

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