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Estimating Homeownership Costs: Owners' Estimates of Implicit Rents and the Relative Importance of Rental Equivalence in the Consumer Price Index

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  • Joseph F. Francois

Abstract

This paper discusses the relative importance of Rental Equivalence (REQ) in the U.S. Consumer Price Index. A hedonic model of rents is estimated, and the resulting parameters are then used to compare hedonic estimates of implicit rents to homeowner estimates like those actually used to estimate the REQ expenditure weight. There are several reasons why hedonic estimates might be below actual implicit rents, and these effects are controlled for in the model. Owner estimates of implicit rents are then shown to be comparable to such hedonic estimates. Results support the method used to estimate the expenditure weight.

Suggested Citation

  • Joseph F. Francois, 1989. "Estimating Homeownership Costs: Owners' Estimates of Implicit Rents and the Relative Importance of Rental Equivalence in the Consumer Price Index," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(1), pages 87-99, March.
    • Handle: RePEc:bla:reesec:v:17:y:1989:i:1:p:87-99
    DOI: 10.1111/1540-6229.00475
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    Cited by:

    1. Wynne, Mark A & Sigalla, Fiona D, 1996. "A Survey of Measurement Biases in Price Indexes," Journal of Economic Surveys, Wiley Blackwell, vol. 10(1), pages 55-89, March.
    2. Paul A. Armknecht & Daniel H. Ginsburg, 1992. "Improvements in Measuring Price Changes in Consumer Services: Past, Present, and Future," NBER Chapters, in: Output Measurement in the Service Sectors, pages 109-157, National Bureau of Economic Research, Inc.
    3. Sheng Guo & William G. Hardin, 2017. "Financial and Housing Wealth, Expenditures and the Dividend to Ownership," The Journal of Real Estate Finance and Economics, Springer, vol. 54(1), pages 58-96, January.

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