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The Evolution of House Price Distribution

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  • OHNISHI Takaaki
  • MIZUNO Takayuki
  • SHIMIZU Chihiro
  • WATANABE Tsutomu
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    Abstract

    Is the cross-sectional distribution of house prices close to a lognormal distribution, as is often assumed in empirical studies on house price indexes? How does the distribution evolve over time? To address these questions, we investigate the cross-sectional distribution of house prices in the Greater Tokyo Area. We find that house prices (Pi) are distributed with much fatter tails than a lognormal distribution and that the tail is quite close to that of a power-law distribution. We also find that house sizes (Si) follow an exponential distribution. These findings imply that size-adjusted house prices, defined by lnPi - aSi, should be normally distributed. We find that this is indeed the case for most of the sample period, but not the bubble era, during which the price distribution has a fat upper tail even after adjusting for size. The bubble was concentrated in particular areas in Tokyo, and this is the source of the fat upper tail.

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    Bibliographic Info

    Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 11019.

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    Length: 21 pages
    Date of creation: Mar 2011
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    Handle: RePEc:eti:dpaper:11019

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    1. Stijn Van Nieuwerburgh & Pierre-Olivier Weill, 2006. "Why Has House Price Dispersion Gone Up?," NBER Working Papers 12538, National Bureau of Economic Research, Inc.
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