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Sample Selection Bias in Estimating Housing Sales Prices

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Abstract

This paper explores the bias in estimates of housing price appreciation that arises because of problems of sample selection. As suggested by Haurin and Hendershott, sample selection potentially is a serious problem because studies normally are based on samples of only homes that have sold, not all houses. Using the procedure developed by Heckman, the empirical results of this study provide confirmation of the significance of the housing sample selection problem.

Suggested Citation

  • G. Donald Jud & Terry G. Seaks, 1994. "Sample Selection Bias in Estimating Housing Sales Prices," Journal of Real Estate Research, American Real Estate Society, vol. 9(3), pages 289-298.
  • Handle: RePEc:jre:issued:v:9:n:3:1994:p:289-298
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    1. Gatzlaff, Dean H. & Haurin, Donald R., 1998. "Sample Selection and Biases in Local House Value Indices," Journal of Urban Economics, Elsevier, vol. 43(2), pages 199-222, March.
    2. Clapp, John M & Giaccotto, Carmelo, 1992. "Estimating Price Trends for Residential Property: A Comparison of Repeat Sales and Assessed Value Methods," The Journal of Real Estate Finance and Economics, Springer, vol. 5(4), pages 357-374, December.
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    5. Dolton, P. J. & Makepeace, G. H., 1987. "Interpreting sample selection effects," Economics Letters, Elsevier, vol. 24(4), pages 373-379.
    6. Case, Bradford & Quigley, John M, 1991. "The Dynamics of Real Estate Prices," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 50-58, February.
    7. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
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    2. Banzhaf, H. Spencer & Farooque, Omar, 2013. "Interjurisdictional housing prices and spatial amenities: Which measures of housing prices reflect local public goods?," Regional Science and Urban Economics, Elsevier, vol. 43(4), pages 635-648.
    3. Stevenson, Simon & Young, James & Gurdgiev, Constantin, 2010. "A comparison of the appraisal process for auction and private treaty residential sales," Journal of Housing Economics, Elsevier, vol. 19(2), pages 145-154, June.
    4. David M. Brasington & Diane Hite, 2005. "Demand for Environmental Quality: A Spatial Hedonic Approach," Departmental Working Papers 2005-08, Department of Economics, Louisiana State University.
    5. Brasington, David M. & Hite, Diane, 2005. "Demand for environmental quality: a spatial hedonic analysis," Regional Science and Urban Economics, Elsevier, vol. 35(1), pages 57-82, January.
    6. Christafore, David & Leguizamon, Susane, 2012. "The influence of gay and lesbian coupled households on house prices in conservative and liberal neighborhoods," Journal of Urban Economics, Elsevier, vol. 71(2), pages 258-267.
    7. Leguizamon, Susane J. & Ross, Justin M., 2012. "Revealed preference for relative status: Evidence from the housing market," Journal of Housing Economics, Elsevier, vol. 21(1), pages 55-65.
    8. Nichols, Joseph B. & Oliner, Stephen D. & Mulhall, Michael R., 2013. "Swings in commercial and residential land prices in the United States," Journal of Urban Economics, Elsevier, vol. 73(1), pages 57-76.
    9. Stephen Malpezzi, "undated". "Hedonic Pricing Models: A Selective and Applied Review," Wisconsin-Madison CULER working papers 02-05, University of Wisconsin Center for Urban Land Economic Research.
    10. Min Hwang & John M. Quigley, 2004. "Selectivity, Quality Adjustment and Mean Reversion in the Measurement of House Values," The Journal of Real Estate Finance and Economics, Springer, vol. 28(2_3), pages 161-178, March.
    11. Kim, Taeyoung & Cho, Seong-Hoon & Larson, Eric R. & Armsworth, Paul R., 2014. "Protected area acquisition costs show economies of scale with area," Ecological Economics, Elsevier, vol. 107(C), pages 122-132.
    12. Chung, Il Hwan, 2015. "School choice, housing prices, and residential sorting: Empirical evidence from inter-and intra-district choice," Regional Science and Urban Economics, Elsevier, vol. 52(C), pages 39-49.
    13. Arthur Korteweg & Morten Sorensen, 2012. "Estimating Loan-to-Value and Foreclosure Behavior," NBER Working Papers 17882, National Bureau of Economic Research, Inc.
    14. Englund, Peter & Quigley, John M. & Redfearn, Christian L., 1999. "Do Housing Transactions Provide Misleading Evidence about the Course of Housing Values?," Berkeley Program on Housing and Urban Policy, Working Paper Series qt3pk6m1zd, Berkeley Program on Housing and Urban Policy.
    15. Collins, Alan & Scorcu, Antonello & Zanola, Roberto, 2009. "Reconsidering hedonic art price indexes," Economics Letters, Elsevier, vol. 104(2), pages 57-60, August.
    16. Mark Hoven Stohs & Yun W. Park, 2007. "Residential Stability or Rational Bubble: Proposition 13 in Southern California," International Real Estate Review, Asian Real Estate Society, vol. 10(1), pages 26-47.
    17. Randall S. Guttery & C. F. Sirmans, 1995. "Creating a Constant-Quality Index for Small Multifamily Rental Housing," Journal of Real Estate Research, American Real Estate Society, vol. 10(5), pages 557-568.
    18. David M. Brasington, 1999. "Which Measures of School Quality Does the Housing Market Value?," Journal of Real Estate Research, American Real Estate Society, vol. 18(3), pages 395-414.
    19. Joseph B. Nichols & Stephen D. Oliner & Michael R. Mulhall, 2010. "Commercial and residential land prices across the United States," Finance and Economics Discussion Series 2010-16, Board of Governors of the Federal Reserve System (U.S.).
    20. Takafumi Kato, 2013. "Usefulness of the Information Contained in the Prediction Sample for the Spatial Error Model," The Journal of Real Estate Finance and Economics, Springer, vol. 47(1), pages 169-195, July.
    21. Sharada Vadali, 2008. "Toll roads and economic development: exploring effects on property values," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 42(3), pages 591-620, September.
    22. Mark G. Dotzour & Everard Moorhead & Daniel T. Winkler, 1998. "The Impact of Auctions on Residential Sales Prices in New Zealand," Journal of Real Estate Research, American Real Estate Society, vol. 16(1), pages 57-72.
    23. Justin M. Ross, 2012. "Interjurisdictional Determinants of Property Assessment Regressivity," Land Economics, University of Wisconsin Press, vol. 88(1), pages 28-42.
    24. Randall S. Guttery & C. F. Sirmans, 1998. "Aggregation Bias in Price Indices for Multi-Family Rental Properties," Journal of Real Estate Research, American Real Estate Society, vol. 15(3), pages 309-326.
    25. repec:eee:jhouse:v:37:y:2017:i:c:p:42-51 is not listed on IDEAS

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    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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