Changes and modifications in residential neighborhoods as a factor of housing pricing: Jerusalem and Haifa as case studies

Households may undertake housing changes and modifications (HCMs) for two basic reasons: increasing property value and gaining personal utility. In environmentally unfavorable or physically deteriorated neighborhoods, in which no substantial price gain can be expected, HCMs may be motivated mainly by improving personal utility, rather than by maximizing return on HCMs. As a result, in such neighborhoods relatively little accumulation of HCMs may occur. To verify this hypothesis, eight residential neighborhoods in two large cities in Israel, Jerusalem and Haifa, were analyzed. The incidence of HCMs was found to be related to neighborhood and building characteristics, while the amount of accumulated post-occupancy HCMs helped to explain the variation of selling prices of apartments and houses.