WHAT RESIDENTIAL REAL ESTATE INDICES IGNORE: THE IMPACT OF IMPLICIT AMENITY VALUES IN THE RECESSIONARY MANHATTAN MARKET

Abstract

While indices report huge drops in real estate prices, little is known about the actual composition of the equity losses that occurred as a result of the Great Recession. After manually compiling a micro-data set of apartment sales and corresponding property characteristics for the island of Manhattan from 2006 to 2012, this study develops a hedonic model to estimate implicit prices of the characteristics examined. By allowing the value of different sets of variables to fluctuate with time and later running a Blinder- Oaxaca decomposition, we were able to observe whether individual components had an effect on average property prices and if so, whether these effects were homogeneous or variable-specific. Our significant findings indicate a flight to quality, in which individual characteristics with the greatest value in a static period increased the most in value after the Recession