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Controlling for Quality in House Price Indices

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  • Zabel, Jeffrey E

Abstract

Given the importance of house prices it is not surprising that house price indices are used for many purposes. One of the factors that differentiates these indices is the house price determinants (such as structural characteristics and neighborhood quality) that are accounted for--that is, held constant. Indices are usually generated from house price regressions. It is shown that, regardless of the desired level of accounting, it is necessary to control for all significant determinants of house prices in these regressions to obtain unbiased estimates of the growth in house prices. An empirical example shows that not controlling for neighborhood quality can lead to substantial biases in estimates of house price appreciation rates even if the index does not account for this factor. Copyright 1999 by Kluwer Academic Publishers

Suggested Citation

  • Zabel, Jeffrey E, 1999. "Controlling for Quality in House Price Indices," The Journal of Real Estate Finance and Economics, Springer, vol. 19(3), pages 223-241, November.
  • Handle: RePEc:kap:jrefec:v:19:y:1999:i:3:p:223-41
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    1. Dean Croushore, 1993. "Introducing: the survey of professional forecasters," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 3-15.
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    Cited by:

    1. Kiel, Katherine A. & Zabel, Jeffrey E., 2008. "Location, location, location: The 3L Approach to house price determination," Journal of Housing Economics, Elsevier, vol. 17(2), pages 175-190, June.
    2. David Duffy, 2001. "Does Controlling For Neighbourhood Quality Matter More For Different Types Of House," Economics, Finance and Accounting Department Working Paper Series n1091001, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
    3. Carlos Pestana Barros & Zhongfei Chen & Luis A. Gil-Alana, 2012. "Housing sales in urban Beijing," Applied Economics, Taylor & Francis Journals, vol. 44(34), pages 4495-4504, December.
    4. Weber, Rachel & Bhatta, Saurav Dev & Merriman, David, 2007. "Spillovers from tax increment financing districts: Implications for housing price appreciation," Regional Science and Urban Economics, Elsevier, vol. 37(2), pages 259-281, March.
    5. Krupka, Douglas J. & Noonan, Douglas S., 2009. "Empowerment Zones, neighborhood change and owner-occupied housing," Regional Science and Urban Economics, Elsevier, vol. 39(4), pages 386-396, July.
    6. James Bugden, 2014. "Quality-Adjusted Repeat-Sale House Price Indices," Working Papers 2014.01, School of Economics, La Trobe University.
    7. Zabel, Jeffrey E., 2004. "The demand for housing services," Journal of Housing Economics, Elsevier, vol. 13(1), pages 16-35, March.
    8. Barth, James R. & Benefield, Justin D. & Hollans, Harris, 2015. "Industry Concentration and Regional Housing Market Performance," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 45(2).
    9. Barros, Carlos Pestana & Gil-Alana, Luis A. & Chen, Zhongfei, 2014. "The housing market in Beijing and delays in sales: A fractional polynomial survival model," Economic Modelling, Elsevier, vol. 42(C), pages 296-300.
    10. Luis Otavio Reiff & Ana Luiza Barbosa, 2005. "Housing stock in Brazil: estimation based on a hedonic price model," BIS Papers chapters,in: Bank for International Settlements (ed.), Real estate indicators and financial stability, volume 21, pages 257-270 Bank for International Settlements.
    11. Nicholas Longford, 2008. "Inference with the lognormal distribution," Economics Working Papers 1104, Department of Economics and Business, Universitat Pompeu Fabra.
    12. James Bugden, 2013. "Renovations and the Repeat-Sales House Price Index," Working Papers 2013.08, School of Economics, La Trobe University.
    13. Yannis M. Ioannides & Jeffrey E. Zabel, 2003. "Neighbourhood effects and housing demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(5), pages 563-584.

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