NDLI: Alternative Methods of Increasing the Precision of Weighted Repeat Sales House Prices Indices

Content Provider	Springer Nature Link
Author	Dreiman, Michelle H. Pennington Cross, Anthony
Copyright Year	2004
Abstract	Weighted repeat sales house price indices have become one of the primary indicators used to identify housing market conditions and to estimate the amount of equity homeowners have gained through house price appreciation. The primary reason for the acceptance of this methodology is that it derives a location specific (typically, census division, state or metropolitan area) average change in house prices from repeated observations of individual house prices. It is this repeat attribute that allows repeat sales price indices to claim that it is a preferable index which does a better job of holding quality constant. The amount of time between the two observed prices for a single property is determined by when the home transacts. Some homes transact twice in a period of months and others do not transact for decades. It is likely that individual house price appreciation rates vary from the mean appreciation rate, as estimated by the index, in a systematic fashion. In general, the longer the time between transactions the more variance there is in individual house price appreciation. This paper extends this concept to include new dimensions. For instance, houses that appreciate faster than the mean, as estimated by the index for that location, may experience a different variation structure than homes that appreciate slower. This process can be viewed as an asymmetric treatment of the variance of house price appreciation around the estimated index. In addition, the variance of expensive and affordable homes may also be different and time varying. This paper finds evidence that adding the dimensions of price tiers and asymmetry to the variance estimate has merit and does affect the estimated index as well as homeowner equity estimates. Homeowner equity estimates are especially sensitive to these added dimensions because they depend on both the revised index and the estimated variances, which are specific to each dimension considered—time between transaction, asymmetry, and price tier.
Starting Page	299
Ending Page	317
Page Count	19
File Format	PDF
ISSN	08955638
Journal	The Journal of Real Estate Finance and Economics
Volume Number	28
Issue Number	4
e-ISSN	1573045X
Language	English
Publisher	Kluwer Academic Publishers
Publisher Date	2004-01-01
Publisher Place	Boston
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Regional Science Finance /Banking
Content Type	Text
Resource Type	Article
Subject	Finance Urban Studies Accounting Economics and Econometrics

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