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A guide to aggregate house price measures

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  • Jordan Rappaport

Abstract

In recent years, the United States, like many other industrialized nations, has experienced wide swings in the growth rate of housing prices. To understand the behavior of housing prices and their influence on the economy, it is crucial to have an accurate measure of aggregate housing prices. In practice, however, it is difficult to develop such a measure. Analysts rely on three approaches to measure the aggregate price of housing. The first methodology simply averages all observed prices. The second looks at repeat sales of the same property. The third treats a house as a bundle of attributes, each with its own price that changes over time. ; Rappaport provides an overview of the three methodologies for pricing housing and a detailed guide to the major house price indexes used by housing analysts. The analysis suggests there is no one ?best? measure of housing prices. Each of the three methodologies has conceptual advantages and disadvantages, and the empirical house price indexes have practical advantages and disadvantages as well. Which is best depends on the question being addressed.

Suggested Citation

  • Jordan Rappaport, 2007. "A guide to aggregate house price measures," Economic Review, Federal Reserve Bank of Kansas City, vol. 92(Q II), pages 41-71.
  • Handle: RePEc:fip:fedker:y:2007:i:qii:p:41-71:n:v.92no.2
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    File URL: https://www.kansascityfed.org/documents/1400/2007-A%20Guide%20to%20Aggregate%20House%20Price%20Measures.pdf
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    References listed on IDEAS

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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. A house divided against itself cannot stand : Explaining the composition effect in housing prices
      by ? in FRED blog on 2020-02-24 14:00:00

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    Cited by:

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    3. Kelly D. Edmiston, 2009. "Characteristics of high foreclosure neighborhoods in the Tenth District," Economic Review, Federal Reserve Bank of Kansas City, vol. 94(Q II), pages 51-75.
    4. Barry Bosworth & Rosanna Smart, 2009. "The Wealth of Older Americans and the Sub-Prime Debacle The Wealth of Older Americans and the Sub-Prime Debacle," Working Papers, Center for Retirement Research at Boston College wp2009-21, Center for Retirement Research, revised Nov 2009.
    5. Karen Fierro & Thomas Fullerton & K. Donjuan-Callejo, 2009. "Housing Attribute Preferences in a Northern Mexico Metropolitan Economy," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 37(2), pages 159-172, June.
    6. Flor, Michael A. & Klarl, Torben, 2017. "On the cyclicity of regional house prices: New evidence for U.S. metropolitan statistical areas," Journal of Economic Dynamics and Control, Elsevier, vol. 77(C), pages 134-156.
    7. 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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    Keywords

    Housing - Prices;

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