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Price Indices Based on the Hedonic Repeat-Sales Method: Application to the Housing Market

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  • Clapp, John M
  • Giaccotto, Carmelo

Abstract

Shiller (1993) proposes the hedonic repeated-measures (HRM) approach to measuring constant quality price indices for heterogeneous assets such as some bonds and real estate. We derive a mathematical relationship between the coefficients of the HRM model and those from the standard repeat-sales model, and we demonstrate how hedonic characteristics should be chosen for inclusion in the HRM model. Empirical estimates using Fairfax, Virginia, housing transactions data show that the HRM price index evaluated at the mean of the hedonic variable is virtually identical to the standard repeat sales index, just as predicted by our mathematical relationship. But the HRM allows estimation of different price paths for heterogeneous assets. We demonstrate that use of assessed value as the only hedonic characteristic allows parsimonious HRM estimates. Copyright 1998 by Kluwer Academic Publishers

Suggested Citation

  • Clapp, John M & Giaccotto, Carmelo, 1998. "Price Indices Based on the Hedonic Repeat-Sales Method: Application to the Housing Market," The Journal of Real Estate Finance and Economics, Springer, vol. 16(1), pages 5-26, January.
    • Handle: RePEc:kap:jrefec:v:16:y:1998:i:1:p:5-26
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    Cited by:

    1. Gautier, Pieter A. & Vuuren, Aico van, 2019. "The effect of land lease on house prices," Journal of Housing Economics, Elsevier, vol. 46(C).
    2. Stephen Billings & Thomas Thibodeau, 2011. "Intrametropolitan Decentralization: Is Government Structure Capitalized in Residential Property Values?," The Journal of Real Estate Finance and Economics, Springer, vol. 42(4), pages 416-450, May.
    3. 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.
    4. Diewert, W. Erwin & Nishimura , Kiyohiko & Shimizu, Chihiro & Watanabe, Tsutomu, 2014. "Residential Property Price Indexes for Japan: An Outline of the Japanese Official RPPI," Economics working papers erwin_diewert-2014-17, Vancouver School of Economics, revised 27 Mar 2014.
    5. Steven C. Bourassa & Donald R. Haurin & Jessica L. Haurin & Martin Hoesli & Jian Sun, 2009. "House Price Changes and Idiosyncratic Risk: The Impact of Property Characteristics," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(2), pages 259-278, June.
    6. Shimizu Chihiro & Nishimura Kiyohiko G. & Watanabe Tsutomu, 2010. "Housing Prices in Tokyo: A Comparison of Hedonic and Repeat Sales Measures," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(6), pages 792-813, December.
    7. Sumit Agarwal & Yanying Chen & Jing Li & Yi Jin Tan, 2021. "Hedonic Price of Housing Space," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(2), pages 574-609, June.
    8. Billings, Stephen B., 2011. "Estimating the value of a new transit option," Regional Science and Urban Economics, Elsevier, vol. 41(6), pages 525-536.
    9. Stephen Malpezzi, "undated". "Hedonic Pricing Models: A Selective and Applied Review," Wisconsin-Madison CULER working papers 02-05, University of Wisconsin Center for Urban Land Economic Research.
    10. Matthew Chadourne & Seong-Hoon Cho & Roland Roberts, 2013. "Identifying priority target areas for the Knoxville–Knox County hillside and ridgetop protection plan: using the value of visual amenity during the real estate boom of 2002–2007 and the recession of 2," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(3), pages 911-934, June.
    11. Ooi, Joseph T.L. & Le, Thao T.T. & Lee, Nai-Jia, 2014. "The impact of construction quality on house prices," Journal of Housing Economics, Elsevier, vol. 26(C), pages 126-138.
    12. Ambrose, Brent W. & Coulson, N. Edward & Yoshida, Jiro, 2017. "Inflation Rates Are Very Different When Housing Rents Are Accurately Measured," HIT-REFINED Working Paper Series 71, Institute of Economic Research, Hitotsubashi University.
    13. Claudio Borio & Øyvind Eitrheim & Marc Flandreau & Clemens Jobst & Jan F Qvigstad & Ryland Thomas, 2022. "Historical monetary and financial statistics for policymakers: towards a unified framework," BIS Papers, Bank for International Settlements, number 127.
    14. Douglas S. Noonan, 2007. "Finding an Impact of Preservation Policies: Price Effects of Historic Landmarks on Attached Homes in Chicago, 1990-1999," Economic Development Quarterly, , vol. 21(1), pages 17-33, February.

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