This Insights article was contributed by Edward Graham, Professor of Finance, [email protected], and Adam Jones, Associate Professor of Economics, [email protected], Department of Economics and Finance, the Cameron School, UNCW
A Little Background
Throughout the academic year, Cameron School faculty examine and discuss the ebb and flow of commerce with students and help prepare them for success following graduation. In turn, the faculty remain abreast of current topics and research in members’ given fields.
For an economics or finance faculty member, the financial crisis remains a topic of interest, even if increasingly farther in the rearview mirror. While housing markets have largely recovered, the conversations spurred a second round of student questions focusing on how residents interact with their communities and markets.
For example, among an endless list of questions and topics spread across disciplines, how might alternative forms of energy, public transportation and greenspace affect home prices?
These questions from students provide the opportunity to examine how traditional macro-factors, including personal income, interest rates, unemployment and expectations, play a role in shaping home prices, as well as housing characteristics like age and size.
With a solid foundation, students are ready to delve into the literature and search for answers to their more contemporary questions. One such topic is the effect of greenspace on housing values. The attractiveness of new parks and playgrounds seems certain until one factors in these areas potentially being catalysts for undesirable activity or considers the possible displacement of families due to the park’s construction.
The Greenspace “Story” and Housing Values
Newly developed parks invite a plethora of responses from proximate homeowners. Nearby families may celebrate the new space or they may lament the activity that comes with it. A jogger or bicyclist seems innocuous enough but what of a large coterie of teenagers or cyclists and runners circulating behind a home, instead of in front?
The overall impact of the space is reflected in the change in property values that occurs with the introduction of the new park or path. How does that change differ from the change in other home values in the market? Do houses near a park or pathway increase more
in value than homes that are farther away?
Research of just this sort is being completed for home values near Carrollton, Georgia, a small semi-rural community about 45 minutes west of Atlanta. Heather Bono, William Smith and Macy Walker, all from the University of West Georgia, are considering the impact of the “Carrollton Greenbelt,” a park that will one day “encircle the city of Carrollton.”
The authors of the research control for all the “usual suspects” like home size and age, and find that the closer a home is to an entrance to the Carrollton Greenbelt, the greater the selling price of the home.
While the initial findings are not highly significant (a statistical code for “there might be some problems with our data”!), they are nonetheless telling. A similar set of findings exist for the Barton Creek Greenbelt near Austin, Texas.
At first blush, it seems the green spaces favor home values – and by implication the qualities of the homeowners’ lives – but how might these findings echo across the Cape Fear Region?
Wilmington also has greenbelts and an expanding trail network through the city. The Cross City Trail - running from the Intracoastal Waterwa just west of the Wrightsville Beach Bridge, down Eastwood Road, around the university and down Randall Parkway, Independence Boulevard and past Halyburton Park - is somewhat analogous to the Carrollton Greenbelt. Other similar projects include the River to Sea Trail, the Summers Rest trail, the multi-use path in RiverLights and many others sprinkled throughout the region.
While the value of the local trails certainly invites additional study, one only needs drive past the trail’s convergence with Eastwood and Rogersville roads on a warm afternoon to see anecdotal evidence - cars crammed into small sand patches - of the trail’s amenity value to local residents.
Furthermore, voters seem to appreciate the story the data is starting to tell as the 2016 Wilmington Parks bond was approved. The approval of the bond suggests residents tend to believe the marginal benefit of a parks project outweighs the marginal costs. Academic research is validating what the voters intuitively know.
This all makes us wonder - are people rational, after all? Do they really act like homoeconomicus?
For a definition of homoeconomicus, a discussion of what it means to be rational, or whether we’ve hit the optimal level of parks and greenspaces, take a class, mentor a student or join us for a guest lecture.
You can help prepare the students too, or just maybe, they’ll help prepare you.
Robert T. Burrus, Jr., Ph.D., is the dean of the Cameron School of Business at the University of North Carolina Wilmington, named in June 2015. Burrus joined the UNCW faculty in 1998. Prior to his current position, Burrus was interim dean, associate dean of undergraduate studies and the chair of the department of economics and finance. Burrus earned a Ph.D. and a master’s degree in economics from the University of Virginia and a bachelor’s degree in mathematical economics from Wake Forest University. The Cameron School of Business has approximately 60 full-time faculty members and 20 administrative and staff members. The AACSB-accredited business school currently enrolls approximately 2,000 undergraduate students in three degree programs and 200 graduate students in four degree programs. The school also houses the prestigious Cameron Executive Network, a group of more than 200 retired and practicing executives that provide one-on-one mentoring for Cameron students. To learn more about the Cameron School of Business, please visit http://csb.uncw.edu/. Questions and comments can be sent to [email protected].