Technical Paper: Hedonic House Price Models for Small Geographical Areas

This technical paper lays out the methodology used to develop a hedonic price model to measure price trends around The 606, a newly established linear park system on the northwest side of Chicago. Two pricing models were required to understand how the housing market responded to the development of the trail. First, in order to analyze the project’s impact by time and geographical area, the Institute for Housing Studies (IHS) examined house price changes after the project was announced in 2012 and segmented its analysis of trends for the areas surrounding The 606 and by different distances from The 606. Second, IHS analyzed the house price premium by distance from the trail after the project was announced. To analyze the impacts to different segments of the market, IHS divided the areas into two distinct markets based on house prices and income levels, the eastern half of the trail east of Western Avenue (higher cost housing market) and the western half of the trail west of Western Avenue (low and average housing market).