This paper analysis two central influences on real estate urban market: (a) neighborhood as cognitively-perceived identity units, and (b) heterogeneity of preferences of households. In doing so, two methodological changes are applied. Firstly, a neighborhood spatial matrix is proposed and...

This paper provides a model for the well-known empirical phenomenon that houses of different quality experience different price developments. The typical pattern is that luxury houses appreciate more in boom periods and depreciate more during busts. The standard model of housing demand treats...