IDEAS home Printed from https://ideas.repec.org/p/fip/fedpwp/04-22.html
   My bibliography  Save this paper

Hedonic estimates of the cost of housing services: rental and owner-occupied units

Author

Listed:
  • Theodore M. Crone
  • Leonard I. Nakamura
  • Richard Voith

Abstract

Recent papers have questioned the accuracy of the Bureau of Labor Statistics' methodology for measuring rent increases and changes in implicit rents for owner-occupied housing. We compare the BLS estimates of increases in rents and owner-occupied housing costs to regression-based estimates using data from the American Housing Survey. A hedonic approach that explicitly calculates capitalization rates produces a methodologically consistent measure of the rental cost of owner-occupied housing. We estimate that between 1985 and 1999 the Consumer Price Index (CPI-U) may have understated the cumulative increase in rents. But any understatement was slight. On the other hand, we estimate that the CPI overstated the increase in the cost of housing services for homeowners by 0.4 percent on an annualized basis from 1985 to 1999.

Suggested Citation

  • Theodore M. Crone & Leonard I. Nakamura & Richard Voith, 2004. "Hedonic estimates of the cost of housing services: rental and owner-occupied units," Working Papers 04-22, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:04-22
    as

    Download full text from publisher

    File URL: https://www.philadelphiafed.org/-/media/frbp/assets/working-papers/2004/wp04-22.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. repec:ucp:bknber:9780226304557 is not listed on IDEAS
    2. Theodore M. Crone & Leonard I. Nakamura & Richard Voith, 1998. "Measuring housing services inflation," Working Papers 98-21, Federal Reserve Bank of Philadelphia.
    3. Zvi Griliches, 1998. "Productivity, R&D, and the Data Constraint," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 347-374, National Bureau of Economic Research, Inc.
    4. Theodore M. Crone & Leonard I. Nakamura & Richard Voith, 2004. "The CPI for rents: a case of understated inflation," Working Papers 04-17, Federal Reserve Bank of Philadelphia.
    5. Linneman, Peter, 1980. "Some empirical results on the nature of the hedonic price function for the urban housing market," Journal of Urban Economics, Elsevier, vol. 8(1), pages 47-68, July.
    6. Linneman, Peter & Voith, Richard, 1991. "Housing price functions and ownership capitalization rates," Journal of Urban Economics, Elsevier, vol. 30(1), pages 100-111, July.
    7. W. Erwin Diewert & Kevin J. Fox, 1999. "Can measurement error explain the productivity paradox?," Canadian Journal of Economics, Canadian Economics Association, vol. 32(2), pages 251-280, April.
    8. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1, October.
    9. David Genesove, 2003. "The Nominal Rigidity of Apartment Rents," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 844-853, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Shimizu, Chihiro & Nishimura, Kiyohiko G. & Watanabe, Tsutomu, 2010. "Residential rents and price rigidity: Micro structure and macro consequences," Journal of the Japanese and International Economies, Elsevier, vol. 24(2), pages 282-299, June.
    2. Hill, Robert J. & Syed, Iqbal A., 2016. "Hedonic price–rent ratios, user cost, and departures from equilibrium in the housing market," Regional Science and Urban Economics, Elsevier, vol. 56(C), pages 60-72.
    3. Joshua Gallin, 2008. "The Long‐Run Relationship Between House Prices and Rents," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 36(4), pages 635-658, December.
    4. Morris A. Davis & Andreas Lehnert & Robert F. Martin, 2008. "The Rent‐Price Ratio For The Aggregate Stock Of Owner‐Occupied Housing," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 54(2), pages 279-284, June.
    5. repec:grz:wpaper:2014-03 is not listed on IDEAS
    6. Baltagi, Badi H. & Li, Jing, 2015. "Cointegration of matched home purchases and rental price indexes — Evidence from Singapore," Regional Science and Urban Economics, Elsevier, vol. 55(C), pages 80-88.
    7. repec:grz:wpaper:2012-08 is not listed on IDEAS
    8. W. Erwin Diewert, 2009. "Durables and Owner-Occupied Housing in a Consumer Price Index," NBER Chapters, in: Price Index Concepts and Measurement, pages 445-500, National Bureau of Economic Research, Inc.
    9. Joshua H. Gallin, 2004. "The long-run relationship between house prices and rents," Finance and Economics Discussion Series 2004-50, Board of Governors of the Federal Reserve System (U.S.).
    10. Sonia Gilbukh & Andrew Haughwout & Rebecca J. Landau & Joseph Tracy, 2023. "The price‐to‐rent ratio: A macroprudential application," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(2), pages 503-532, March.
    11. Bert M. Balk & W. Erwin Diewert & Alice O. Nakamura, 2009. "Introduction to price and productivity measurement for housing," Working Papers 09-5, Federal Reserve Bank of Philadelphia.
    12. Arthur Acolin & Richard K. Green, 2015. "Measuring Housing Adequacy in Sao Paulo Metropolitan Region," Working Paper 9387, USC Lusk Center for Real Estate.
    13. Quan Gan & Robert J. Hill, 2008. "A New Perspective on the Relationship Between House Prices and Income," Discussion Papers 2008-13, School of Economics, The University of New South Wales.
    14. W. Erwin Diewert & Alice O. Nakamura, 2009. "Accounting for housing in a CPI," Working Papers 09-4, Federal Reserve Bank of Philadelphia.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Theodore M. Crone & Leonard I. Nakamura & Richard Voith, 1998. "Measuring housing services inflation," Working Papers 98-21, Federal Reserve Bank of Philadelphia.
    2. Theodore M. Crone & Leonard I. Nakamura & Richard Voith, 2001. "Measuring American rents: a revisionist history," Working Papers 01-8, Federal Reserve Bank of Philadelphia.
    3. Charles R. Hulten, 2000. "Total Factor Productivity: A Short Biography," NBER Working Papers 7471, National Bureau of Economic Research, Inc.
    4. Kurz, Claudia & Hoffmann, Johannes, 2004. "A rental-equivalence index for owner-occupied housing in West Germany 1985 to 1998," Discussion Paper Series 1: Economic Studies 2004,08, Deutsche Bundesbank.
    5. Daniel J. Wilson, 2002. "Is Embodied Technology the Result of Upstream R&D? Industry-Level Evidence," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(2), pages 285-317, April.
    6. Andreas Hornstein & Per Krusell, 1996. "Can Technology Improvements Cause Productivity Slowdowns?," NBER Chapters, in: NBER Macroeconomics Annual 1996, Volume 11, pages 209-276, National Bureau of Economic Research, Inc.
    7. Jeffrey I. Bernstein & Theofanis P. Mamuneas & Panos Pashardes, 1999. "Factor Adjustment, Quality Change, and Productivity Growth for U.S. Manufacturing," NBER Working Papers 6877, National Bureau of Economic Research, Inc.
    8. Hoffmann, Johannes, 1998. "Problems of inflation measurement in Germany," Discussion Paper Series 1: Economic Studies 1998,01e, Deutsche Bundesbank.
    9. Pascal Petit & Luc Soete, 2002. "Is a Biased Technological Change Fuelling Dualism?," Chapters, in: Mark Setterfield (ed.), The Economics of Demand-Led Growth, chapter 15, Edward Elgar Publishing.
    10. Vincent BODART & Paul REDING, 2001. "Do Foreign Exchange Markets Matter Dor Industry Stock Returns ? An empirical investigation," LIDAM Discussion Papers IRES 2001016, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    11. Boucekkine, Raouf & de la Croix, David, 2003. "Information technologies, embodiment and growth," Journal of Economic Dynamics and Control, Elsevier, vol. 27(11-12), pages 2007-2034, September.
    12. Denis Lawrence & W. Diewert & Kevin Fox, 2006. "The contributions of productivity, price changes and firm size to profitability," Journal of Productivity Analysis, Springer, vol. 26(1), pages 1-13, August.
    13. Gabriel Di Bella & Mr. Martin D. Cerisola, 2009. "Investment-Specific Productivity Growth - Chile in a Global Perspective," IMF Working Papers 2009/264, International Monetary Fund.
    14. Charles R. Hulten, 2009. "Growth Accounting," NBER Working Papers 15341, National Bureau of Economic Research, Inc.
    15. Satoshi Nakano & Kazuhiko Nishimura, 2015. "Quality-adjusted productivity gain in the propagation of innovation," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 4(1), pages 1-16, December.
    16. Per Krusell, 1997. "Quality change in the CPI - commentary," Review, Federal Reserve Bank of St. Louis, issue May, pages 107-111.
    17. Robert J. Gordon & Todd vanGoethem, 2007. "Downward Bias in the Most Important CPI Component: The Case of Rental Shelter, 1914-2003," NBER Chapters, in: Hard-to-Measure Goods and Services: Essays in Honor of Zvi Griliches, pages 153-195, National Bureau of Economic Research, Inc.
    18. Charles Steindel & Kevin J. Stiroh, 2001. "Productivity: what is it and why do we care about it?," Staff Reports 122, Federal Reserve Bank of New York.
    19. Ian Goldin & Pantelis Koutroumpis & François Lafond & Julian Winkler, 2024. "Why Is Productivity Slowing Down?," Journal of Economic Literature, American Economic Association, vol. 62(1), pages 196-268, March.
    20. Andreas Hornstein, 1999. "Growth accounting with technological revolutions," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 1-22.

    More about this item

    Keywords

    Housing; Housing - Prices;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedpwp:04-22. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Beth Paul (email available below). General contact details of provider: https://edirc.repec.org/data/frbphus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.