The degree, impact and differences in house price index measurement

Macroeconomists and central banks need measures of residential property price inflation. They need to identify bubbles, the factors that drive them, instruments that contain them, and to analyze their relation to recessions. 1 Timely, comparable, proper measurement is a prerequisite for all of this, driven by concomitant data. This working paper draws on a number of publications including Silver (2011, 2015, 2016a and b). In section II we outline the problem: one of measuring constant quality price change for infrequently traded heterogeneous properties. The problem is further complicated by the fact that price data are typically from secondary sources including land registries (notaries), lenders, and realtors (estate agents) and not always fit for the purpose. Section III summarizes some results as to the importance of measurement and section IV turns to the use of hedonic regression estimates for estimating changes in constant quality average price change for residential property. The focus of the section is on the use of hedonic regressions and the paper foreshadows some results forthcoming in Silver (2016b).