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On Choosing Among House Price Index Methodologies

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Author Info
Bradford Case
Henry O. Pollakowski
Susan M. Wachter

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Abstract

This paper compares housing price indices estimated using three models with several sets of property transaction data. The commonly used hedonic price model suffers from potential specification bias and inefficiency, while the weighted repeat-sales model presents potentially more serious bias and inefficiency problems. A hybrid model combining hedonic and repeat-sales equations avoids most of these sources of bias and inefficiency. This paper evaluates the performance of each type of model using a particularly rich local housing market database. The results, though ambiguous, appear to confirm the problems with the repeat sales model but suggest that systematic differences between repeat-transacting and single-transacting properties lead to bias in the hedonic and hybrid models as well. Copyright American Real Estate and Urban Economics Association.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/1540-6229.00554
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Publisher Info
Article provided by American Real Estate and Urban Economics Association in its journal Real Estate Economics.

Volume (Year): 19 (1991)
Issue (Month): 3 ()
Pages: 286-307
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Handle: RePEc:bla:reesec:v:19:y:1991:i:3:p:286-307

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  2. David Duffy, 2001. "The Use of Location Variables in a Mix-Adjusted Index for Dublin House Prices," Papers WP138, Economic and Social Research Institute (ESRI). [Downloadable!]
  3. A. Collins & A. E. Scorcu & R. Zanola, 2007. "Sample Selection Bias and Time Instability of Hedonic Art Price Indexes," Working Papers 610, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
  4. Andre H. Gao & George H. K. Wang, 2007. "Multiple Transactions Model: A Panel Data Approach to Estimate Housing Market Indices," Journal of Real Estate Research, American Real Estate Society, vol. 29(3), pages 241-266. [Downloadable!]
  5. Robert J. Shiller, 1991. "Arithmetic Repeat Sales Price Estimators," Cowles Foundation Discussion Papers 971, Cowles Foundation, Yale University. [Downloadable!]
  6. Duffy, David, 2009. "Measuring House Price Change," Papers WP291, Economic and Social Research Institute (ESRI). [Downloadable!]
  7. David Duffy, 2001. "Does Controlling For Neighbourhood Quality Matter More For Different Types Of House," Economics, Finance and Accounting Department Working Paper Series n1091001, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth. [Downloadable!]
  8. Christopher J. Meyer, 1993. "Assessing the performance of real estate auctions," Working Papers 93-1, Federal Reserve Bank of Boston. [Downloadable!]
  9. Julio Escobar & Carlos Huertas & Dora Alicia Mora & José Vicente Romero, . "INDICE DE PRECIOS DE LA VIVIENDA USADA EN COLOMBIA - I P V U - Método de ventas repetidas," Borradores de Economia 368, Banco de la Republica de Colombia. [Downloadable!]
  10. G. Donald Jud & Terry G. Seaks, 1994. "Sample Selection Bias in Estimating Housing Sales Prices," Journal of Real Estate Research, American Real Estate Society, vol. 9(3), pages 289-298. [Downloadable!]
  11. Denis Conniffe & David Duffy, 1999. "Irish House Price Indices ? Methodological Issues," Papers WP110, Economic and Social Research Institute (ESRI). [Downloadable!]
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  12. Olympia Bover & Pilar Velilla, 2002. "Hedonic house prices without characteristics: the case of new multiunit housing," Working Paper Series 117, European Central Bank. [Downloadable!]
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  13. Olympia Bover & Mario Izquierdo, 2003. "Quality-adjusted prices: hedonic methods and implications for national accounts," Investigaciones Economicas, Fundación SEPI, vol. 27(2), pages 199-238, May. [Downloadable!]
  14. Piermassimo Pavese, 2007. "Hedonic Housing Price Indices: The Turinese Experience," Rivista di Politica Economica, SIPI Spa, vol. 97(6), pages 113-148, November-. [Downloadable!]
  15. Randall S. Guttery & C. F. Sirmans, 1998. "Aggregation Bias in Price Indices for Multi-Family Rental Properties," Journal of Real Estate Research, American Real Estate Society, vol. 15(3), pages 309-326. [Downloadable!]
  16. K. Chau & S. Wong & C. Yiu, 2005. "Adjusting for Non-Linear Age Effects in the Repeat Sales Index," The Journal of Real Estate Finance and Economics, Springer, vol. 31(2), pages 137-153, September. [Downloadable!] (restricted)
  17. Robert J. Shiller, 1992. "Measuring Asset Values for Cash Settlement in Derivative Markets: Hedonic Repeated Measures Indices and Perpetual Futures," Cowles Foundation Discussion Papers 1036, Cowles Foundation, Yale University. [Downloadable!]
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  18. George H. Lentz & Ko Wang, 1998. "Residential Appraisal and the Lending Process: A Survey of Issues," Journal of Real Estate Research, American Real Estate Society, vol. 15(1), pages 11-40. [Downloadable!]
  19. Benoit Julien & Paul Lanoie, 2007. "The Effect of Noise Barriers on the Market Value of Adjacent Residential Properties," International Real Estate Review, Asian Real Estate Society, vol. 10(2), pages 113-130. [Downloadable!]
  20. Bradford Case & Susan Wachter, 2005. "Residential real estate price indices as financial soundness indicators: methodological issues," BIS Papers chapters, in: Bank for International Settlements (ed.), Real estate indicators and financial stability, volume 21, pages 197-211 Bank for International Settlements. [Downloadable!]
  21. Randall S. Guttery & C. F. Sirmans, 1995. "Creating a Constant-Quality Index for Small Multifamily Rental Housing," Journal of Real Estate Research, American Real Estate Society, vol. 10(5), pages 557-568. [Downloadable!]
  22. Sharada Vadali, 2008. "Toll roads and economic development: exploring effects on property values," The Annals of Regional Science, Springer, vol. 42(3), pages 591-620, September. [Downloadable!] (restricted)
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