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A Semiparametric Method for Estimating Local House Price Indices

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  • John M. Clapp

Abstract

Spatial autoregressive hedonic models utilize house prices lagged in space and time to produce local house price indices, for example, the spatial and temporal autoregressive (STAR) model might be used this way. This paper complements these models with a semiparametric approach, the Local Regression Model (LRM). The greater flexibility of the LRM may allow it to identify space-time asymmetries missed by other models. The LRM is fitted to 49,511 sales from 1972Q1 to 1991Q2 in Fairfax County, Virginia. The local price indices display plausible and significant variations over space and time. The LRM price indices in selected neighborhoods are shown to differ significantly from those in some other neighborhoods. A new method for estimating standard errors addresses an overlooked problem common to all local price indices: how to evaluate the amount of noise in the estimates. Out-of-sample prediction errors demonstrate that LRM adds significant information to the hedonic model. Copyright 2004 by the American Real Estate and Urban Economics Association

Suggested Citation

  • John M. Clapp, 2004. "A Semiparametric Method for Estimating Local House Price Indices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 32(1), pages 127-160, March.
  • Handle: RePEc:bla:reesec:v:32:y:2004:i:1:p:127-160
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    Cited by:

    1. Kagie, M. & van Wezel, M.C., 2006. "Hedonic price models and indices based on boosting applied to the Dutch housing market," Econometric Institute Research Papers EI 2006-17, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    2. Franz Fuerst & Patrick McAllister, 2008. "Green Noise or Green Value? Measuring the Price Effects of Environmental Certification in Commercial Buildings," Real Estate & Planning Working Papers rep-wp2008-09, Henley Business School, Reading University.
    3. Jens Kolbe & Rainer Schulz & Martin Wersing & Axel Werwatz, 2012. "Location, Location, Location: Extracting Location Value from House Prices," Discussion Papers of DIW Berlin 1216, DIW Berlin, German Institute for Economic Research.
    4. W. Brunauer & S. Lang & P. Wechselberger & S. Bienert, 2010. "Additive Hedonic Regression Models with Spatial Scaling Factors: An Application for Rents in Vienna," The Journal of Real Estate Finance and Economics, Springer, vol. 41(4), pages 390-411, November.
    5. Maria J. Barcena & Patricia Mendez & Maria B. Palacios & Fernando Tusell, 2013. "Measuring the effect of the real estate bubble: a house price index for Bilbao," Chapters from NBP Conference Publications, Narodowy Bank Polski, Economic Research Department.
    6. repec:eee:regeco:v:66:y:2017:i:c:p:108-118 is not listed on IDEAS
    7. repec:kap:jrefec:v:55:y:2017:i:4:d:10.1007_s11146-017-9632-1 is not listed on IDEAS
    8. Wrenn, Douglas H. & Sam, Abdoul G., 2014. "Geographically and temporally weighted likelihood regression: Exploring the spatiotemporal determinants of land use change," Regional Science and Urban Economics, Elsevier, vol. 44(C), pages 60-74.
    9. Cohen, Jeffrey P. & Coughlin, Cletus C. & Clapp, John M., 2014. "Semi-Parametric Interpolations of Residential Location Values: Using Housing Price Data to Generate Balanced Panels," Working Papers 2014-50, Federal Reserve Bank of St. Louis.
    10. Stefan Sebastian Fahrländer, 2006. "Semiparametric Construction of Spatial Generalized Hedonic Models for Private Properties," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 142(IV), pages 501-528, December.
    11. Cohen, Jeffrey P. & Coughlin, Cletus C. & Clapp, John M., 2015. "Local Polynomial Regressions versus OLS for Generating Location Value Estimates: Which is More Efficient in Out-of-Sample Forecasts?," Working Papers 2015-14, Federal Reserve Bank of St. Louis, revised 29 Oct 2015.
    12. Wolfgang Brunauer & Stefan Lang & Peter Wechselberger & Sven Bienert, 2008. "Additive Hedonic Regression Models with Spatial Scaling Factors: An Application for Rents in Vienna," Working Papers 2008-17, Faculty of Economics and Statistics, University of Innsbruck.
    13. Fuerst, Franz, 2007. "Office Rent Determinants: A Hedonic Panel Analysis," MPRA Paper 11445, University Library of Munich, Germany.
    14. John M. Clapp & Yongheng Deng & Xudong An, 2006. "Unobserved Heterogeneity in Models of Competing Mortgage Termination Risks," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 34(2), pages 243-273, June.
    15. repec:gam:jsusta:v:9:y:2017:i:11:p:2050-:d:118040 is not listed on IDEAS
    16. Marc Francke, 2010. "Repeat Sales Index for Thin Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 41(1), pages 24-52, July.
    17. Ghysels, Eric & Plazzi, Alberto & Valkanov, Rossen & Torous, Walter, 2013. "Forecasting Real Estate Prices," Handbook of Economic Forecasting, Elsevier.
    18. Liang Peng, 2012. "Repeat Sales Regression on Heterogeneous Properties," The Journal of Real Estate Finance and Economics, Springer, vol. 45(3), pages 804-827, October.
    19. Rainer Schulz & Martin Wersing & Axel Werwatz, 2014. "Automated valuation modelling: a specification exercise," Journal of Property Research, Taylor & Francis Journals, vol. 31(2), pages 131-153, June.
    20. Sheharyar Bokhari & David Geltner, 2012. "Estimating Real Estate Price Movements for High Frequency Tradable Indexes in a Scarce Data Environment," The Journal of Real Estate Finance and Economics, Springer, vol. 45(2), pages 522-543, August.
    21. repec:kap:jrefec:v:54:y:2017:i:3:d:10.1007_s11146-016-9570-3 is not listed on IDEAS
    22. Xudong An & Jeffrey D. Fisher & David Geltner, 2016. "Cash Flow Performance of Fannie Mae Multifamily Real Estate: Evidence from Repeated NOI and EGI Indices," The Journal of Real Estate Finance and Economics, Springer, vol. 52(4), pages 512-542, May.
    23. Löchl, Michael & Axhausen, Kay W., 2010. "Modelling hedonic residential rents for land use and transport simulation while considering spatial effects," The Journal of Transport and Land Use, Center for Transportation Studies, University of Minnesota, vol. 3(2), pages 39-63.
    24. Robert J. Hill & Michael Scholz, 2014. "Incorporating Geospatial Data in House Price Indexes: A Hedonic Imputation Approach with Splines," Graz Economics Papers 2014-05, University of Graz, Department of Economics.
    25. Dorsey, Robert E. & Hu, Haixin & Mayer, Walter J. & Wang, Hui-chen, 2010. "Hedonic versus repeat-sales housing price indexes for measuring the recent boom-bust cycle," Journal of Housing Economics, Elsevier, vol. 19(2), pages 75-93, June.

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