Revisions in Repeat-Sales Price Indexes: Here Today, Gone Tomorrow?
AbstractPrice indexes based on the repeat-sales model are revised all the way to the beginning of the sample every time a new quarter of information becomes available. Revisions can adversely affect practitioners. In this paper we examine this revision process both theoretically and empirically. The theory behind the repeat-sales method says that revisions should lower the standard error of the estimated indexes; we prove that, in fact, the revised index is more efficient than the original one. This implies that large samples should make revisions trivial. However, our data, and the Freddie-Fannie data, suggest that revisions are large, insensitive to sample size and systematic; revisions are more likely to be downward than upward. In Los Angeles and Fairfax, revisions are usually downward and statistically significant. This bias in initial repeat-sales estimates is caused by sample selectivity; properties with only one or two years between sales do not appreciate at the same rate as other properties. We hypothesize that these "flips" are improved (possibly cosmetically) between sales. One implication of our analysis is that flips should be removed or downweighted before calculating repeat-sales indexes. The same model estimated without flips appears free of bias. We find small increases in efficiency from adding up to 4,300 observations to a base of 1,200. Copyright American Real Estate and Urban Economics Association.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by American Real Estate and Urban Economics Association in its journal Real Estate Economics.
Volume (Year): 27 (1999)
Issue (Month): 1 ()
Contact details of provider:
Postal: Indiana University, Kelley School of Business, 1309 East Tenth Street, Suite 738, Bloomington, Indiana 47405
Phone: (812) 855-7794
Fax: (812) 855-8679
Web page: http://www.blackwellpublishing.com/journal.asp?ref=1080-8620
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Yongheng Deng & John Quigley, 2008.
"Index Revision, House Price Risk, and the Market for House Price Derivatives,"
The Journal of Real Estate Finance and Economics,
Springer, vol. 37(3), pages 191-209, October.
- Deng, Yongheng & Quigley, John M., 2008. "Index Revision, House Price Risk, and the Market for House Price Derivatives," Berkeley Program on Housing and Urban Policy, Working Paper Series qt4sw0x30t, Berkeley Program on Housing and Urban Policy.
- Bourassa, Steven C. & Hoesli, Martin & Sun, Jian, 2006.
"A simple alternative house price index method,"
Journal of Housing Economics,
Elsevier, vol. 15(1), pages 80-97, March.
- Marc Francke, 2010. "Repeat Sales Index for Thin Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 41(1), pages 24-52, July.
- Michel Baroni & Fabrice Barthélémy & Mokrane Mahdi, 2009.
"A Repeat Sales Index Robust to Small Datasets,"
- Baroni Michel & Barthélémy Fabrice & Mokrane Madhi, 2009. "A repeat sales index robust to small datasets," THEMA Working Papers 2009-16, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Baroni, Michel & Barthélémy, Fabrice & Mokrane, Mahdi, 2009. "A repeat sales index Robust to small datasets," ESSEC Working Papers DR 09003, ESSEC Research Center, ESSEC Business School.
- Michel Baroni & Fabrice Barthélémy & Mahdi Mokrane, 2008.
"Is It Possible to Construct Derivatives for the Paris Residential Market?,"
The Journal of Real Estate Finance and Economics,
Springer, vol. 37(3), pages 233-264, October.
- Michel Baroni & Fabrice Barthélémy & Mahdi Mokrane, 2007. "Is it possible to construct derivatives for the Paris residential market?," THEMA Working Papers 2007-24, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Baroni, Michel & Barthélémy, Fabrice & Mokrane, Mahdi, 2007. "Is it possible to construct derivatives for the Paris residential market?," ESSEC Working Papers DR 07026, ESSEC Research Center, ESSEC Business School.
- de Vries, Paul & de Haan, Jan & van der Wal, Erna & Mariën, Gust, 2009. "A house price index based on the SPAR method," Journal of Housing Economics, Elsevier, vol. 18(3), pages 214-223, September.
- Dorsey, Robert E. & Hu, Haixin & Mayer, Walter J. & Wang, Hui-chen, 2010. "Hedonic versus repeat-sales housing price indexes for measuring the recent boom-bust cycle," Journal of Housing Economics, Elsevier, vol. 19(2), pages 75-93, June.
- S. Jansen & P. Vries & H. Coolen & C. Lamain & P. Boelhouwer, 2008. "Developing a House Price Index for The Netherlands: A Practical Application of Weighted Repeat Sales," The Journal of Real Estate Finance and Economics, Springer, vol. 37(2), pages 163-186, August.
- Paul Cheshire & Gerard Dericks, 2013. "Regulation, Rents and ?Iconic Design?: rent acquisition by design in the tightly constrained London office market," ERSA conference papers ersa13p1071, European Regional Science Association.
- James Bugden, 2013. "Renovations and the Repeat-Sales House Price Index," Working Papers 2013.08, School of Economics, La Trobe University.
- Arnaud Simon, 2009. "Quantifying the reversibility phenomenon for the repeat-sales index," Journal of Real Estate Research, American Real Estate Society, vol. 31(1), pages 27-62.
- James Bugden, 2014. "Quality-Adjusted Repeat-Sale House Price Indices," Working Papers 2014.01, School of Economics, La Trobe University.
- Paul Cheshire & Gerard Dericks, 2014. "'Iconic Design' as Deadweight Loss: Rent Acquisition by Design in the Constrained London Office Market," SERC Discussion Papers 0154, Spatial Economics Research Centre, LSE.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.