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arXiv · 2611.08956

A Jump-Diffusion Model of Home Price Dynamics and Neighborhood Change

Ashley Peake·Adam Gilbert-Diamond·Anette E. Hosoi
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Abstract

We develop a dynamical model that links the fluctuations of individual home prices to changes in the full distribution of home prices in an urban area. We model the price of an individual home as a jump-diffusion stochastic differential equation. To capture the dynamic and hyper-local economic conditions that drive the residential real estate market, we allow all parameters to depend on both time and neighborhood. In the mean-field limit, we derive the associated Fokker-Planck partial integro-differential equation (PIDE) governing the evolution of the home price distribution in a neighborhood. We quantify spatial heterogeneity within a city by using the Wasserstein-2 distance to compare home price distributions across the city's neighborhoods. We validate our model using data from Boston, Massachusetts as a case study.

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Ashley Peake, Adam Gilbert-Diamond, Anette E. Hosoi. 2026-11-06. A Jump-Diffusion Model of Home Price Dynamics and Neighborhood Change. https://arxiv.org/abs/2611.08956

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