House price impacts of construction quality and level of maintenance on a regional housing market: Evidence from King County, Washington

ABSTRACTAccurately estimating the monetary value of the construction quality and the level of maintenance of a house is a significant gap in house price research. Such estimates would be valuable for various actors in the housing market. Homebuyers would benefit from this information during the bidding process. Homeowners would benefit from it during renovation—particularly when financing their homes with a home equity line of credit—and when deciding on the need for renovation before selling their homes. Property value assessors would be able to provide better estimates of property values, and developers might make better decisions regarding the quality of new construction projects. Finally, lending institutions and public-sector housing agencies would benefit when providing loans or grants for housing rehabilitation and renovation.This research employs spatial econometric regression modeling and finds that construction quality and level of maintenance significantly affect house prices. For example, a medium-quality house sells for approximately 25% more than a low-quality house, and a well-maintained house sells for approximately 5% more than a house that is not well-maintained. The research also reports on the interaction between the quality and maintenance variables and how these variables vary with house size and the number of bedrooms.