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The Measurement and Determinants of Single-Family House Prices

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  • Joe Peek
  • James A. Wilcox

Abstract

We assess the conceptual and empirical features of a number of house price series for the United States. We then calculate a measure of the net up-grading of the existing stock of houses that took place during the 1950-1989 period and adjust price indexes for this net increase in quality. Judgments about the trend, volatility, and determinants of house prices are shown to depend crucially on which price series is used. The Freddie Mac upgrade-adjusted house price measure rose 5.7% over the past four decades, falling 7.7% from 1950 through 1970 before rising 14.5% from 1970 through 1989. Real house prices declined in the early 1980s due to the increase in real after-tax interest rates and the decline in real materials costs. The recovery of house prices in the late 1980s is attributed to lower unemployment and real after-tax interest rates and particularly to demographic factors associated with the aging of baby boomers. Copyright American Real Estate and Urban Economics Association.

Suggested Citation

  • Joe Peek & James A. Wilcox, 1991. "The Measurement and Determinants of Single-Family House Prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(3), pages 353-382.
  • Handle: RePEc:bla:reesec:v:19:y:1991:i:3:p:353-382
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    References listed on IDEAS

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    1. Peter Linneman & Susan Wachter, 1989. "The Impacts of Borrowing Constraints on Homeownership," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(4), pages 389-402.
    2. Joe Peek & James A. Wilcox, 1991. "The Measurement and Determinants of Single-Family House Prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 19(3), pages 353-382.
    3. Palmquist, Raymond B, 1980. "Alternative Techniques for Developing Real Estate Price Indexes," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 442-448, August.
    4. Richard B. Freeman, 1979. "The Effect of Demographic Factors on Age-Earnings Profiles," Journal of Human Resources, University of Wisconsin Press, vol. 14(3), pages 289-318.
    5. James M. Poterba, 1990. "Taxation and Housing Markets: Preliminary Evidence on the Effects of Recent Tax Reforms," NBER Working Papers 3270, National Bureau of Economic Research, Inc.
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