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Non-temporal Components of Residential Real Estate Appreciation

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  • Goetzmann, William N
  • Spiegel, Matthew

Abstract

This paper separates the components of capital appreciation returns in an asset market into fixed and stochastic portions. It proposes a control for the problem of fixed components in the capital appreciation return used in transactions-based return estimates. We find a consistent bias in the index resulting from repeat sales regressions which may be eliminated through simple methods. The sign and magnitude of the bias, as well as its systematic variation across property, suggest that it is caused by incremental home improvements, as well as by price risk. We propose a maximum likelihood method for estimating the first and second moments of the fixed and temporal components of real estate returns that relies upon relatively small samples. Copyright 1995 by MIT Press.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 77 (1995)
Issue (Month): 1 (February)
Pages: 199-206

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Handle: RePEc:tpr:restat:v:77:y:1995:i:1:p:199-206

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Cited by:
  1. 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.
  2. Dubé, Jean & Thériault, Marius & Des Rosiers, François, 2013. "Commuter rail accessibility and house values: The case of the Montreal South Shore, Canada, 1992–2009," Transportation Research Part A: Policy and Practice, Elsevier, vol. 54(C), pages 49-66.
  3. Joseph Gyourko & Joseph Tracy, 2006. "Using Home Maintenance and Repairs to Smooth Variable Earnings," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 736-747, November.
  4. Marilena Locatelli Biey & Roberto Zanola, 1999. "Investment in Paintings: A Short-Run Price Index," Journal of Cultural Economics, Springer, vol. 23(3), pages 209-219, August.
  5. Michel Baroni & Fabrice Barthélémy & Mokrane Mahdi, 2009. "A Repeat Sales Index Robust to Small Datasets," Post-Print hal-00551732, HAL.
  6. Michel Baroni & Fabrice Barthe´le´my & Mahdi Mokrane, 2007. "APCA Factor Repeat Sales Index for Apartment Prices in Paris," Journal of Real Estate Research, American Real Estate Society, vol. 29(2), pages 137-158.
  7. Philippe Bracke, 2013. "House Prices and Rents: Micro Evidence from a Matched Dataset in Central London_x0003_," ERSA conference papers ersa13p112, European Regional Science Association.
  8. James Hansen, 2006. "Australian House Prices: A Comparison of Hedonic and Repeat-sales Measures," RBA Research Discussion Papers rdp2006-03, Reserve Bank of Australia.
  9. Abel Cadenillas & Robert Elliott & Hong Miao & Zhenyu Wu, 2009. "Risk-Hedging in Real Estate Markets," Asia-Pacific Financial Markets, Springer, vol. 16(4), pages 265-285, December.
  10. 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.
  11. Dröes, Martijn I. & Hassink, Wolter H.J., 2013. "House price risk and the hedging benefits of home ownership," Journal of Housing Economics, Elsevier, vol. 22(2), pages 92-99.
  12. Billings, Stephen B., 2011. "Estimating the value of a new transit option," Regional Science and Urban Economics, Elsevier, vol. 41(6), pages 525-536.
  13. James Bugden, 2013. "Renovations and the Repeat-Sales House Price Index," Working Papers 2013.08, School of Economics, La Trobe University.
  14. James Bugden, 2014. "Quality-Adjusted Repeat-Sale House Price Indices," Working Papers 2014.01, School of Economics, La Trobe University.
  15. William Goetzmann & Matthew Spiegel, 2000. "The Policy Implications of Portfolio Choice in Underserved Mortgage Markets," Yale School of Management Working Papers ysm161, Yale School of Management, revised 01 Mar 2001.
  16. Marvin L. Wolverton & Jimmy Senteza, 2000. "Hedonic Estimates of Regional Constant Quality House Prices," Journal of Real Estate Research, American Real Estate Society, vol. 19(3), pages 235-253.

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