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Housing Renovations and the Quantile Repeat-Sales Price Index

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  • Daniel P. McMillen
  • Paul Thorsnes

Abstract

A median-based quantile estimator suffers less bias from positive outliers, such as unobserved renovations, than a standard mean-based estimator. Quantile repeat-sales estimates for single-family homes in the city of Chicago show nominal price appreciation of 68.9% between 1993 and 2002, substantially smaller than the standard approach's estimate of 77.8%. Omitting observations with building permits reduces the mean and median-based estimates by 4.4 and 1.6 percentage points. The results imply that quality improvements account for much of the rapid rise in house prices, and that a median-based quantile estimator produces a more accurate view of the price performance of a typical house. Copyright 2006 American Real Estate and Urban Economics Association

Suggested Citation

  • Daniel P. McMillen & Paul Thorsnes, 2006. "Housing Renovations and the Quantile Repeat-Sales Price Index," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 34(4), pages 567-584, December.
  • Handle: RePEc:bla:reesec:v:34:y:2006:i:4:p:567-584
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    Cited by:

    1. Nicodemo, Catia & Raya, Josep Maria, 2012. "Change in the distribution of house prices across Spanish cities," Regional Science and Urban Economics, Elsevier, vol. 42(4), pages 739-748.
    2. Villar, Jaume García & Raya, Josep Maria, 2015. "Use of a Gini index to examine housing price heterogeneity: A quantile approach," Journal of Housing Economics, Elsevier, vol. 29(C), pages 59-71.
    3. Carrillo, Paul & Yezer, Anthony, 2009. "Alternative measures of homeownership gaps across segregated neighborhoods," Regional Science and Urban Economics, Elsevier, vol. 39(5), pages 542-552, September.
    4. Stephen B. Billings, 2015. "Hedonic Amenity Valuation and Housing Renovations," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(3), pages 652-682, September.
    5. Shimizu, Chihiro & Nishimura, Kiyohiko G. & Watanabe, Tsutomu, 2016. "House prices at different stages of the buying/selling process," Regional Science and Urban Economics, Elsevier, vol. 59(C), pages 37-53.
    6. Diewert, W. Erwin & Nishimura , Kiyohiko & Shimizu, Chihiro & Watanabe, Tsutomu, 2014. "Residential Property Price Indexes for Japan: An Outline of the Japanese Official RPPI," Economics working papers erwin_diewert-2014-17, Vancouver School of Economics, revised 27 Mar 2014.
    7. Thomschke, Lorenz, 2015. "Changes in the distribution of rental prices in Berlin," Regional Science and Urban Economics, Elsevier, vol. 51(C), pages 88-100.
    8. James Bugden, 2014. "Quality-Adjusted Repeat-Sale House Price Indices," Working Papers 2014.01, School of Economics, La Trobe University.
    9. McMillen, Daniel P., 2008. "Changes in the distribution of house prices over time: Structural characteristics, neighborhood, or coefficients?," Journal of Urban Economics, Elsevier, vol. 64(3), pages 573-589, November.
    10. Liu, Sezhu & Hite, Diane, 2013. "Measuring the Effect of Green Space on Property Value: An Application of the Hedonic Spatial Quantile Regression," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 143045, Southern Agricultural Economics Association.
    11. Ambrose, Brent W. & Coulson, N. Edward & Yoshida, Jiro, 2017. "Inflation Rates Are Very Different When Housing Rents Are Accurately Measured," HIT-REFINED Working Paper Series 71, Institute of Economic Research, Hitotsubashi University.
    12. Hazer Inaltekin & Robert Jarrow & Mehmet Saglam & Yildiray Yildirim, 2009. "Housing Market Microstructure," Papers 0907.1853, arXiv.org.
    13. James Bugden, 2013. "Renovations and the Repeat-Sales House Price Index," Working Papers 2013.08, School of Economics, La Trobe University.
    14. İnaltekin, Hazer & Jarrow, Robert A. & Sağlam, Mehmet & Yıldırım, Yıldıray, 2011. "Housing prices and the optimal time-on-the-market decision," Finance Research Letters, Elsevier, vol. 8(4), pages 171-179.
    15. Alexander N. Bogin & William M. Doerner & William D. Larson, 2016. "Local House Price Dynamics: New Indices and Stylized Facts," FHFA Staff Working Papers 16-01, Federal Housing Finance Agency.

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