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APCA Factor Repeat Sales Index for Apartment Prices in Paris

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Author Info

  • Michel Baroni

    ()
    (ESSEC Business School, Cergy-Pontoise, France)

  • Fabrice Barthe´le´my

    ()
    (THEMA, Universite´ de Cergy-Pontoise Cergy-Pontoise, France)

  • Mahdi Mokrane

    ()
    (IXIS AEW EUROPE, Paris, France)

Abstract

This paper addresses the issue of building a repeat sales index based on explanatory factors. An earlier paper (Baroni, Barthe´le´my, and Mokrane, 2004), built a factorial index based on a selected linear function of economic and financial variables. Here, a more general and robust model based on Principal Components Analysis (PCA) is developed and applied to the Paris residential market over the 1973–2001 period. The PCA index for Paris is estimated and its characteristics and robustness are analyzed depending on estimation period, choice of observations, periodicity and reversibility. It is then compared to a standard repeat sales index (WRS), which was estimated using the same data, and the resulting indices are quite similar except in very particular market circumstances. Finally, contrary to the WRS index, the findings indicate that the PCA index can be efficiently used to forecast apartment prices.

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Bibliographic Info

Article provided by American Real Estate Society in its journal journal of Real Estate Research.

Volume (Year): 29 (2007)
Issue (Month): 2 ()
Pages: 137-158

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Handle: RePEc:jre:issued:v:29:n:2:2007:p:137-158

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Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
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  1. Bernard Thion & Philippe Favarger & Martin Hoesli, 2001. "Indices des ventes répétées et modification de l'environnement immobilier," Revue d'économie régionale et urbaine, Armand Colin, vol. 0(5), pages 809-830.
  2. Clapham, Eric & Englund, Peter & Quigley, John M. & Redfearn, Christian L., 2007. "Revisiting the Past and Settling the Score: Index Revision for House Price Derivatives," Berkeley Program on Housing and Urban Policy, Working Paper Series qt1m2340dt, Berkeley Program on Housing and Urban Policy.
  3. Quigley, John M., 2006. "Urban Economics," Berkeley Program on Housing and Urban Policy, Working Paper Series qt0jr0p2tk, Berkeley Program on Housing and Urban Policy.
  4. Palmquist, Raymond B., 1979. "Hedonic price and depreciation indexes for residential housing: A comment," Journal of Urban Economics, Elsevier, vol. 6(2), pages 267-271, April.
  5. Goetzmann, William N & Spiegel, Matthew, 1995. "Non-temporal Components of Residential Real Estate Appreciation," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 199-206, February.
  6. R. Carter Hill & J. R. Knight & C. F. Sirmans, 1997. "Estimating Capital Asset Price Indexes," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 226-233, May.
  7. Gatzlaff, Dean H & Haurin, Donald R, 1997. "Sample Selection Bias and Repeat-Sales Index Estimates," The Journal of Real Estate Finance and Economics, Springer, vol. 14(1-2), pages 33-50, Jan.-Marc.
  8. Allen C. Goodman & Thomas G. Thibodeau, 1998. "Dwelling Age Heteroskedasticity in Repeat Sales House Price Equations," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 26(1), pages 151-171.
  9. Cannaday, Roger E. & Munneke, Henry J. & Yang, Tyler T., 2005. "A multivariate repeat-sales model for estimating house price indices," Journal of Urban Economics, Elsevier, vol. 57(2), pages 320-342, March.
  10. Hwang, Min & Quigley, John M., 2003. "Selectivity, Quality Adjustment and Mean Reversion in the Measurement of House Values," Berkeley Program on Housing and Urban Policy, Working Paper Series qt4045q0v3, Berkeley Program on Housing and Urban Policy.
  11. Meese, Richard A & Wallace, Nancy E, 1997. "The Construction of Residential Housing Price Indices: A Comparison of Repeat-Sales, Hedonic-Regression and Hybrid Approaches," The Journal of Real Estate Finance and Economics, Springer, vol. 14(1-2), pages 51-73, Jan.-Marc.
  12. Case, Bradford & Pollakowski, Henry O & Wachter, Susan M, 1997. "Frequency of Transaction and House Price Modeling," The Journal of Real Estate Finance and Economics, Springer, vol. 14(1-2), pages 173-87, Jan.-Marc.
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Cited by:
  1. 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.
  2. Constantinescu, Mihnea & Francke, Marc, 2013. "The historical development of the Swiss rental market – A new price index," Journal of Housing Economics, Elsevier, vol. 22(2), pages 135-145.
  3. Eric Thompson & David Rosenbaum & Benjamin Schmitz, 2011. "Property values on the plains: the impact of historic preservation," The Annals of Regional Science, Springer, vol. 47(2), pages 477-491, October.
  4. 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.
  5. Michel Baroni & Fabrice Barthélémy & Mokrane Mahdi, 2009. "A Repeat Sales Index Robust to Small Datasets," Post-Print hal-00551732, HAL.

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