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Quality-Adjusted Repeat-Sale House Price Indices

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  • James Bugden

    () (School Economics, La Trobe University)

Abstract

In the standard repeat-sales method, the maintained assumption is that the quality does not change between a house?s two sale dates. This assumption has been called into question. In particular quality changes from renovations carried out between a house?s two sales are not accounted for in the repeat- sales method. In this paper, I consider four simple adjustments to the standard repeat- sales method that attempt to control for quality changes between sales: in- cluding an intercept term; including a set of neighbourhood indicators as independent variables; de?ating the dependent variable appreciation rates by an estimate of renovations between sales; and dropping short-hold repeat- sales. I fi?nd that the neighbourhood and renovations methods work best and that the standard repeat-sales house price index signi?cantly over-estimates housing in?ation by over twenty percentage points over a a decade

Suggested Citation

  • James Bugden, 2014. "Quality-Adjusted Repeat-Sale House Price Indices," Working Papers 2014.01, School of Economics, La Trobe University.
  • Handle: RePEc:trb:wpaper:2014.01
    Note: ISSN-1837-2198
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    References listed on IDEAS

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    5. Kathryn Graddy & Jonathan Hamilton & Rachel Pownall, 2012. "Repeatā€Sales Indexes: Estimation without Assuming that Errors in Asset Returns Are Independently Distributed," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 40(1), pages 131-166, March.
    6. 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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    9. James Bugden, 2013. "Renovations and the Repeat-Sales House Price Index," Working Papers 2013.08, School of Economics, La Trobe University.
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    Cited by:

    1. James Bugden, 2013. "Renovations and the Repeat-Sales House Price Index," Working Papers 2013.08, School of Economics, La Trobe University.

    More about this item

    Keywords

    Price Indices; Repeat-Sales; Renovations; Housing;

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation

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