Measuring Price Behavior in New Residential Subdivisions

Abstract

Early buyers of single-family residences in newly developed subdivisions assume a greater level of risk than later buyers in choosing to purchase a home in a new subdivision where the market has not been sufficiently established. This risk stems from such things as uncertainty regarding the maintenance of development standards and other negative externalities inherent in purchasing in the early stages of the development cycles. Because of this, early buyers may require lower prices to compensate them for the additional risk that they assume. This paper explores the evolution of the price of residences in newly developed single-family subdivisions through the phases of development.

Keywords: Housing markets, Subdivisions, Development sequence, Price structures

JEL Classification: R31, R32