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A Semiparametric Method for Estimating Local House Price Indices

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  • John M. Clapp

Abstract

Spatial autoregressive hedonic models utilize house prices lagged in space and time to produce local house price indices, for example, the spatial and temporal autoregressive (STAR) model might be used this way. This paper complements these models with a semiparametric approach, the Local Regression Model (LRM). The greater flexibility of the LRM may allow it to identify space-time asymmetries missed by other models. The LRM is fitted to 49,511 sales from 1972Q1 to 1991Q2 in Fairfax County, Virginia. The local price indices display plausible and significant variations over space and time. The LRM price indices in selected neighborhoods are shown to differ significantly from those in some other neighborhoods. A new method for estimating standard errors addresses an overlooked problem common to all local price indices: how to evaluate the amount of noise in the estimates. Out-of-sample prediction errors demonstrate that LRM adds significant information to the hedonic model. Copyright 2004 by the American Real Estate and Urban Economics Association

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Bibliographic Info

Article provided by American Real Estate and Urban Economics Association in its journal Real Estate Economics.

Volume (Year): 32 (2004)
Issue (Month): 1 (03)
Pages: 127-160

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Handle: RePEc:bla:reesec:v:32:y:2004:i:1:p:127-160

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Cited by:
  1. Kolbe, Jens & Schulz, Rainer & Wersing, Martin & Werwatz, Axel, 2013. "Location, location, location: Extracting location value from house prices," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79732, Verein für Socialpolitik / German Economic Association.
  2. Kagie, M. & van Wezel, M.C., 2006. "Hedonic price models and indices based on boosting applied to the Dutch housing market," Econometric Institute Research Papers EI 2006-17, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  3. Menéndez, Patricia & Palacios, María Blanca & Bárcena Ruiz, María Jesús & Tusell Palmer, Fernando Jorge, 2011. "Measuring the Effect of the Real Estate Bubble: a House Price Index for Bilbao," BILTOKI 2011-07, Universidad del País Vasco - Departamento de Economía Aplicada III (Econometría y Estadística).
  4. Sheharyar Bokhari & David Geltner, 2012. "Estimating Real Estate Price Movements for High Frequency Tradable Indexes in a Scarce Data Environment," The Journal of Real Estate Finance and Economics, Springer, vol. 45(2), pages 522-543, August.
  5. John Clapp & Yongheng Deng & Xudong An, 2005. "Unobserved heterogeneity in Models of Competing Mortgage Termination Risks," Working Paper 8585, USC Lusk Center for Real Estate.
  6. Stefan Sebastian Fahrlaender, 2005. "Semiparametric Construction of Spatial Generalized Hedonic Models for Private Properties," Diskussionsschriften dp0507, Universitaet Bern, Departement Volkswirtschaft.
  7. Wolfgang Brunauer & Stefan Lang & Peter Wechselberger & Sven Bienert, 2008. "Additive Hedonic Regression Models with Spatial Scaling Factors: An Application for Rents in Vienna," Working Papers 2008-17, Faculty of Economics and Statistics, University of Innsbruck.
  8. 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.
  9. Liang Peng, 2012. "Repeat Sales Regression on Heterogeneous Properties," The Journal of Real Estate Finance and Economics, Springer, vol. 45(3), pages 804-827, October.
  10. Fuerst, Franz & McAllister, Patrick, 2008. "Green Noise or Green Value? Measuring the Price Effects of Environmental Certification in Commercial Buildings," MPRA Paper 11446, University Library of Munich, Germany, revised Sep 2008.
  11. Robert J. Hill & Michael Scholz, 2014. "Incorporating Geospatial Data in House Price Indexes: A Hedonic Imputation Approach with Splines," Graz Economics Papers 2014-05, University of Graz, Department of Economics.
  12. Franz Fuerst, 2008. "Office Rent Determinants: a Hedonic Panel Analysis," Real Estate & Planning Working Papers rep-wp2008-12, Henley Business School, Reading University.
  13. Rainer Schulz & Martin Wersing & Axel Werwatz, 2013. "Automated Valuation Modelling: A Specification Exercise," SFB 649 Discussion Papers SFB649DP2013-046, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  14. W. Brunauer & S. Lang & P. Wechselberger & S. Bienert, 2010. "Additive Hedonic Regression Models with Spatial Scaling Factors: An Application for Rents in Vienna," The Journal of Real Estate Finance and Economics, Springer, vol. 41(4), pages 390-411, November.
  15. Jens Kolbe & Rainer Schulz & Martin Wersing & Axel Werwatz, 2012. "Location, location, location: Extracting location value from house prices," SFB 649 Discussion Papers SFB649DP2012-040, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  16. 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.
  17. Wrenn, Douglas H. & Sam, Abdoul G., 2014. "Geographically and temporally weighted likelihood regression: Exploring the spatiotemporal determinants of land use change," Regional Science and Urban Economics, Elsevier, vol. 44(C), pages 60-74.

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