Wednesday, May 06, 2009

Do Los Angeles Celebrities Collect More $ When They Sell Their Homes than Matt the Economist?

What is the price of fame? If a famous person has lived in a house, does it sell for a price premium? Is this a selection effect? The famous live in nicer neighborhoods and homes? Or, are we status conscious and want to use a bathroom that was once used by Burt Reynolds?

Each Week, the Los Angeles Times publishes data on celebrities who are selling their homes. I took these data and turned it into an .xls data set. Because, I like you and I believe in open source; here are the data; L.A Celebrity Real Estate data .

I have a second data set that contains all 54,000 real estate sales in Los Angeles county. I pool the two data sets and estimate some hedonic price regressions.

For 40878 home sales in Los Angeles county where the home is a single detached house,
the dependent variable = log(sales price/interior square footage of the house)

This is regressed on zip code fixed effects and a quadratic of what month the home sold (these terms proxy for the recession of 2008 and time series effects). The key variable in the regression is the "celebrity" dummy. This variable equals one if the seller is a celebrity listed in the data set above and equals zero otherwise. The omitted category are nobodies like you and me.

Note the key finding; the celebrity premium is 11%. That's not big and remember it bundles the fame effect and the fact that the home is likely to have better unobservables. So , I conclude that there isn't a big "fame" premium in status obsessed LA.

40,878 observations and R2=.743

log(price/per square foot) = 5.73 + .115*Celebrity

274 zip code fixed effects and the month quadratic are suppressed.