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Transaction Composition and House Price Index Measurement: Evidence from a Repeat-Sales Aggregation Index

Author

Listed:
  • William D. Larson

    (Federal Housing Finance Agency)

  • Justin Contat

    (Federal Housing Finance Agency)

Abstract

We develop a framework for estimating city-level repeat-sales house price indices that are robust to submarket appreciation and sampling heterogeneity, two issues that confound classic approaches. A new algorithm ensures feasible estimation in all periods, despite cases of low transactions counts in some submarkets. With the geometric Laspeyres index as our target, numerical simulations show this algorithm uncovers the population index even when house prices, quantities, and transaction sampling vary across locations and over time. Then, using 40 million repeat-purchase transactions in the United States, we show differences exist between this index and transaction-weighted indices over certain periods and locations, especially in large cities.

Suggested Citation

  • William D. Larson & Justin Contat, 2021. "Transaction Composition and House Price Index Measurement: Evidence from a Repeat-Sales Aggregation Index," FHFA Staff Working Papers 21-01, Federal Housing Finance Agency.
    • Handle: RePEc:hfa:wpaper:21-01
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    More about this item

    Keywords

    sampling; standard urban model; index number theory;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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