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The Choice of Methodology for Computing Housing Price Indexes: Comparisons of Temporal Aggregation and Sample Definition

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  • Englund, Peter
  • Quigley, John M
  • Redfearn, Christian L

Abstract

Housing transactions are executed and recorded daily, but are routinely pooled into longer time periods for the measurement and analysis of housing price trends. We utilize an unusually rich data set, covering essentially all arm's length housing sales in Sweden for a dozen years, in an attempt to understand the effect of temporal aggregation upon estimates of housing prices and their volatilities. This rich data set also provides a unique opportunity to compare the results using the conventional weighted repeat sales model (WRS) to those based on a research strategy which incorporates all available information on house sales. The results indicate the clear importance of temporal disaggregation in the estimation of housing prices and volatilities--regardless of the model employed. The appropriately disaggregated model is then used as a benchmark to compare estimates of the course of housing prices produced by the two models during the twelve year period 1981-93. These results indicate that much of the difference between estimates of price movements can be attributed to the data limitations which are inherent in the repeat sales approach. The results, thus, suggest caution in the interpretation of government-produced price indices or those produced by private firms based on the repeated sales model. Copyright 1999 by Kluwer Academic Publishers

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Bibliographic Info

Article provided by Springer in its journal Journal of Real Estate Finance & Economics.

Volume (Year): 19 (1999)
Issue (Month): 2 (September)
Pages: 91-112

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Handle: RePEc:kap:jrefec:v:19:y:1999:i:2:p:91-112

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Web page: http://www.springerlink.com/link.asp?id=102945

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Cited by:
  1. Leung, Charles Ka Yui & CHEUNG, W. Y. Patrick & TANG, C. H. Edward, 2011. "Financial Crisis and the Comovements of Housing Sub-markets: Do relationships change after a crisis?," MPRA Paper 31627, University Library of Munich, Germany.
  2. Deng, Yongheng & McMillen, Daniel P. & Sing, Tien Foo, 2012. "Private residential price indices in Singapore: A matching approach," Regional Science and Urban Economics, Elsevier, vol. 42(3), pages 485-494.
  3. 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.
  4. Erling Røed Larsen & Dag Einar Sommervoll, 2003. "Rising Inequality of Housing? Evidence from Segmented Housing Price Indices," Discussion Papers 363, Research Department of Statistics Norway.
  5. James Bugden, 2013. "Renovations and the Repeat-Sales House Price Index," Working Papers 2013.08, School of Economics, La Trobe University.
  6. Berg, Lennart, 2001. "Prices and Constant Quality Price Indexes for Multi-Dwelling and Commercial Buildings in Sweden," Working Paper Series 2002:2, Uppsala University, Department of Economics.
  7. Englund, Peter & Quigley, John M. & Redfearn, Christian L., 1999. "Do Housing Transactions Provide Misleading Evidence about the Course of Housing Values?," Berkeley Program on Housing and Urban Policy, Working Paper Series qt3pk6m1zd, Berkeley Program on Housing and Urban Policy.
  8. 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.
  9. Yongheng Deng, 2012. "Discussant remarks on Chihiro Shimizu, Kiyohiko G Nishimura and Tsutomu Watanabe’s paper House prices from magazines, realtors,and the Land Registry," BIS Papers chapters, in: Bank for International Settlements (ed.), Property markets and financial stability, volume 64, pages 39-41 Bank for International Settlements.
  10. 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.
  11. Dag Sommervoll, 2006. "Temporal Aggregation in Repeated Sales Models," The Journal of Real Estate Finance and Economics, Springer, vol. 33(2), pages 151-165, September.
  12. Shi, Song & Young, Martin & Hargreaves, Bob, 2009. "Issues in measuring a monthly house price index in New Zealand," Journal of Housing Economics, Elsevier, vol. 18(4), pages 336-350, December.

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