TABLE 3.

The Hedonic-Based Neighborhood Measure (HBNM) at a Glance

HBNM measures…	HBNM does not measure…
Average local neighborhood condition observed by potential homebuyers	Any covariates included in the first stage regression model
Considerations for use of the HBNM
The HBNM reflects the mean subjective value of neighborhood attributes that can be observed by prospective homebuyers and is sensitive to the mean valuation of local housing market participants
HBNM will measure neighborhood features differently in different housing markets
Measurement error associated with the HBNM will be greater in neighborhoods with fewer market sales or when variables included in the first stage regression are measured with error
Researchers may aggregate data to the buffer size that is theoretically most relevant to the research question. However, lack of housing market activity or scarcity of sfr (or apartment) properties may limit the resolution of the appraisal data used to measure neighborhoods as buffer size decreases
HBNM should be constructed using appraisal data for only one type of property (i.e., single family residence or apartment)
HBNM should only be used in jurisdictions where policies are in place to govern the integrity of appraisal data. In many cases, property appraisal data is the basis for assessing taxes, thus robust systems exist to ensure data integrity