An Analysis of the Relationship between Price and Variance for Homogeneous Housing Stock
AbstractThis study examines the structure of price variance for homogeneous residential housing stock, where homogeneous is defined as economically equivalent, not necessarily physically identical. Assessed values, obtained from ad valorem tax rolls, are used as the basis for identifying properties considered to be economically equivalent. From these data an investigation of the distribution of sale price and variance for housing in selected value ranges is conducted. Subsequently, ANOVA is performed to determine the composition of variance through time and across cities within one metropolitan housing market. In line with conventional wisdom, we find that variance increases with price over the entire data set. The increase, however, is not constant nor does it exhibit a simple proportional relationship to price. Variance increases at an increasing rate in the lower to mid-price ranges and continues to increase but at a decreasing rate in the upper price ranges. From this it was determined that the functional relationship between price and variance is best approximated by a quadratic function in the lower to mid-price ranges and a cubic function when higher price properties are included. ANOVA results indicate that variance is significantly different through time and across location. The interactive term was also significant. The findings of this study would appear to have implications for fee appraisers, assessors, investors, and mortgage lenders.
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Bibliographic InfoArticle provided by American Real Estate Society in its journal Journal of Real Estate Research.
Volume (Year): 6 (1991)
Issue (Month): 1 ()
Contact details of provider:
Postal: American Real Estate Society Clemson University School of Business & Behavioral Science Department of Finance 401 Sirrine Hall Clemson, SC 29634-1323
Web page: http://www.aresnet.org/
Postal: Diane Quarles American Real Estate Society Manager of Member Services Clemson University Box 341323 Clemson, SC 29634-1323
Find related papers by JEL classification:
- L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- William A. Donnelly, 1989. "The Methodology of Housing Value Assessment: An Analysis," Journal of Real Estate Research, American Real Estate Society, vol. 4(2), pages 1-12.
- Mark G. Dotzour, 1988. "Quantifying Estimation Bias in Residential Appraisal," Journal of Real Estate Research, American Real Estate Society, vol. 3(3), pages 1-11.
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