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Home Improvements and Appreciation Rates Reflected in the OFHEO House Price Index

Author

Listed:
  • Andrew Leventis

    (Office of Federal Housing Enterprise Oversight)

Abstract

The repeat-transactions model that is used in the construction of OFHEO’s house price index (HPI) does not perfectly control for changes in the average condition of the housing stock. If the value of home improvements is not exactly offset by the effects of home depreciation, the HPI could reflect more or less appreciation than would be reported in a true “constant quality” index. This paper attempts to measure the annual amount of “quality drift” embedded within the index.

Suggested Citation

  • Andrew Leventis, 2007. "Home Improvements and Appreciation Rates Reflected in the OFHEO House Price Index," FHFA Staff Working Papers 07-02, Federal Housing Finance Agency.
    • Handle: RePEc:hfa:wpaper:07-02
    as

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    File URL: https://www.fhfa.gov/PolicyProgramsResearch/Research/PaperDocuments/2007-06_WorkingPaper_07-2_N508.pdf
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    File URL: https://www.fhfa.gov/PolicyProgramsResearch/Research/Pages/Working-Paper-07-2.aspx
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    References listed on IDEAS

    as
    1. Chinloy, Peter, 1979. "The estimation of net depreciation rates on housing," Journal of Urban Economics, Elsevier, vol. 6(4), pages 432-443, October.
    2. Kiel, Katherine A & Zabel, Jeffrey E, 1997. "Evaluating the Usefulness of the American Housing Survey for Creating House Price Indices," The Journal of Real Estate Finance and Economics, Springer, vol. 14(1-2), pages 189-202, Jan.-Marc.
    3. Zabel, Jeffrey E, 1999. "Controlling for Quality in House Price Indices," The Journal of Real Estate Finance and Economics, Springer, vol. 19(3), pages 223-241, November.
    4. Jonathan McCarthy & Richard Peach, 2004. "Are home prices the next \\"bubble\\"?," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 1-17.
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    Cited by:

    1. Peter E. Earl & Ti-Ching Peng, 2011. "Home Improvements," Chapters, in: Samuel Cameron (ed.), Handbook on the Economics of Leisure, chapter 10, Edward Elgar Publishing.

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