Summer School in Urban Economics 2017 in Paris — Call for Papers

l'X/UEA SUMMER SCHOOL IN URBAN ECONOMICS
for Economics PhD Students


Co-sponsored by Ecole Polytechnique (l'X), CREST, Université Paris-Saclay and the Urban Economics Association (UEA)

June, 14-16, 2017
Fondation Hellénique, Cité Universitaire, Paris

This Summer School is designed for Economics PhD students with an interest in Urban Economics. In addition to those students specialized in Urban Economics, we encourage the participation from PhD students in Labour, Development, Public, Trade and other applied fields who want to improve their knowledge in the field. The objective of the school is twofold: to offer an intensive training program for interested PhD students, and to provide them with the opportunity to present and discuss their own ongoing research with leading researchers in the field in a relaxed and open atmosphere.

Faculty: Christian Hilber (London School of Economics), Henry Overman (London School of Economics), André de Palma (ENS Cachan), Diego Puga (CEMFI), Holger Sieg (University of Pennsylvania), Jacques-François Thisse (Université Catholique de Louvain).

Scientific Committee: Gilles Duranton (University of Pennsylvania), Matthew Kahn (University of Southern California), Isabelle Méjean (Ecole polytechnique), Amine Ouazad (Ecole polytechnique), Diego Puga (CEMFI), Jacques Thisse (Université Catholique de Louvain), Kurt Schmidheiny (Universität Basel),  Harris Selod (Development Research Group at the World Bank), Elisabet Viladecans-Marsal (University of Barcelona and IEB).

Organizing Committee: Amine Ouazad (Ecole polytechnique), Weronika Leduc (Ecole polytechnique).

The program and details about the application process can be found at:
http://www.summerschoolurban.eu/paper-submission/

Deadline for applications: March 5, 2017.

How Zillow could improve Zestimates

Zillow’s well-known Zestimates provide an ‘estimate of the market value of a property‘, in Zillow’s own words:

The Zestimate home valuation is Zillow’s estimated market value for a home, computed using a proprietary formula. It is a starting point in determining a home’s value and is not an official appraisal. The Zestimate is calculated from public and user-submitted data. Updating your home facts can help make your Zestimate more accurate.

That so-called proprietary formula is in fact fairly well-known standard econometrics, as Zillow combines information on properties (tax records have a wealth of information on the topics), information on neighborhoods, past transactions, and location-specific effects to provide a linear estimate. They also provide a confidence interval around these estimates.

Criticism of Zillow’s zestimates abounds. Part of the criticism is based on a misunderstanding of basic statistics. The zestimate is a forecast of the average price, based on minimizing the mean-squared error between the estimate and the actual transaction price. There will necessarily be prediction error. For instance, this website attacks the accuracy of zestimates based on 3 data points (!).

There are two more serious issues with the zestimates. The first issue is that estimating prices requires long time series — that’s how statistical estimates converge –, but also requires recent data — house prices can be very volatile in the short-run, e.g. Staten Island suddenly became a hot market experienced some very high upward volatility. There is a fundamental trade-off between how recent estimates are and how much precision one can expect from the zestimates.

A second issue with the zestimate is that, apart from a tax perspective, the ‘value’ of a house doesn’t really make sense/is not measurable. The buyer’s reservation price does, the asking price does, and the transaction price do make sense. There is no such thing as the value of a house. Certainly, the maximum price that a buyer is ready to pay for a property depends on:

  • his time horizon, i.e. his ability to wait for more offers.
  • the amount of friction on the market, i.e. the rate of arrival of offers.
  • his specific preferences for amenities; single individuals won’t have the same valuation of a house than couples with kids.
  • the characteristics of the mortgage that the buyer could get.

So at the end of the day there is no specific reason why even displaying the average or median transaction price would make sense from a buyer’s perspective, and it’s clear that Zillow is setting itself up for failure by providing an estimate that is independent of the buyer’s specific characteristics. The composition of the pool of buyers can change quite quickly over time.

Note: a few weeks after writing this blog post, I realized that the following paper in the Review of Economics and Statistics is an in-depth analysis of the points I mentioned.

Goetzmann, William, and Liang Peng. “Estimating house price indexes in the presence of seller reservation prices.” Review of Economics and statistics 88.1 (2006): 100-112.

 

Summer School in Urban Economics 2017

We’re starting to prepare the Summer School in Urban Economics, coorganized by the Ecole polytechnique in Paris, the Center for Research in Economics and Statistics, and the Urban Economics Association. The event will take place June 14 to June 17, and the deadline will be early March. More details on submissions soon.

We’ve found a gorgeous location for the event: the Greek Foundation in central Paris, surrounded by greenery (yes, it’s in June), close to good hotels and good restaurants. As for the previous editions, there will be an impressive line up of great urban economists which will be announced in the next 10 days.

fondation-hellenique-cite-internationale-universitaire

So I’ll be putting the call for papers out there fairly soon. Deadline: early march, answer: early april, registration deadline: early may, and event on June 14-16.