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Revisiting the Past: Revision in Repeat Sales and Hedonic Indexes of House Prices

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Listed:
  • Eric Clapham
  • Peter Englund
  • John M. Quigley
  • Christian L. Redfearn

Abstract

This paper examines index revision in measuring the prices for owner-occupied housing. We consider the context of equityinsurance and the settlement of futures contracts. In addition to other desirable characteristics for aggregate price indexes, their usefulness in these contexts requires stability as they are revised. Methods that are subject to substantial or complex revision raise questions about the viability of derivatives markets. We find that revision is an inherent feature of indexes, but also that the commonly used indexes are not equally exposed to volatility in revision. Hedonic indexes appear to be substantially more stable than repeat-sales indexes and are less prone to substantialrevision in the light of new information. We analyze alternative settlement procedures and contracts to mitigate the impact of revision associated with repeat sale indexes.

Suggested Citation

  • Eric Clapham & Peter Englund & John M. Quigley & Christian L. Redfearn, 2004. "Revisiting the Past: Revision in Repeat Sales and Hedonic Indexes of House Prices," Working Paper 8594, USC Lusk Center for Real Estate.
  • Handle: RePEc:luk:wpaper:8594
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. James Hansen, 2006. "Australian House Prices: A Comparison of Hedonic and Repeat-sales Measures," RBA Research Discussion Papers rdp2006-03, Reserve Bank of Australia.
    3. Andre H. Gao & George H. K. Wang, 2007. "Multiple Transactions Model: A Panel Data Approach to Estimate Housing Market Indices," Journal of Real Estate Research, American Real Estate Society, vol. 29(3), pages 241-266.
    4. Zheng, Diehang & Deng, Yongheng & Gordon, Peter & Dale-Johnson, David, 2007. "An examination of the impact of rent control on mobile home prices in California," Journal of Housing Economics, Elsevier, vol. 16(2), pages 209-242, June.
    5. Dasgupta, Basab & Lall, Somik V., 2006. "Assessing benefits of slum upgrading programs in second-best settings," Policy Research Working Paper Series 3993, The World Bank.
    6. 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.

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