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Renovations and the Repeat-Sales House Price Index

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  • James Bugden

    (School Economics, La Trobe University)

Abstract

In the standard repeat-sales method, the maintained assumption is that the quality does not change between a house?s two sale dates. This assumption has been called into question. In particular quality changes from renovations carried out between a house?s two sales are not accounted for in the repeat-sales method. In this paper, I construct a novel way to incorporate renovations into the repeat-sales regression that controls for changes in housing quality between sales. The attractiveness of the method I propose is that it is consistent with the underlying hedonic theory, yet maintains the parsimony and simplicity of the repeat-sales method. Moreover, I am able to specify the exact way that ren- ovations enter the repeat-sales regression thus avoiding econometric problems related to mis-speci?cation of the functional form.

Suggested Citation

  • James Bugden, 2013. "Renovations and the Repeat-Sales House Price Index," Working Papers 2013.08, School of Economics, La Trobe University.
    • Handle: RePEc:trb:wpaper:2013.08
    Note: ISSN-1837-2198
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    References listed on IDEAS

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    Cited by:

    1. James Bugden, 2014. "Quality-Adjusted Repeat-Sale House Price Indices," Working Papers 2014.01, School of Economics, La Trobe University.

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    More about this item

    Keywords

    Price Indices; Repeat-Sales; Renovations; Housing;
    All these keywords.

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation

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