Hedonic estimates of the cost of housing services: rental and owner-occupied units
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.
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- Peter Linneman & Richard Voith, 1988.
"Housing price functions and ownership capitalization rates,"
88-8, Federal Reserve Bank of Philadelphia.
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in: R&D and Productivity: The Econometric Evidence, pages 347-374
National Bureau of Economic Research, Inc.
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MIT Press, vol. 85(4), pages 844-853, November.
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- Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557.
- Theodore M. Crone & Leonard I. Nakamura & Richard Voith, 1999. "Measuring housing services inflation," Working Papers 99-9, Federal Reserve Bank of Philadelphia.
- Theodore M. Crone & Leonard I. Nakamura & Richard Voith, 2004.
"The CPI for rents: a case of understated inflation,"
04-17, Federal Reserve Bank of Philadelphia.
- Theodore M. Crone & Leonard I. Nakamura & Richard Voith, 2006. "The CPI for rents: a case of understated inflation," Working Papers 06-7, Federal Reserve Bank of Philadelphia.
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