On Choosing Among House Price Index Methodologies

Case, Bradford; Pollakowski, Henry O.; Wächter, Susan M.

doi:10.1111/1540-6229.00554

Cited by 190 publications

(79 citation statements)

References 10 publications

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“…Therefore, the repeat sales model can be treated as a special estimation sample case of the pooled-database hedonic. 2 In spite of the popularity of both models, the discussion about their shortcomings has never stopped in the urban economics and econometrics literature. The hedonic model 2 It should be noted that while the RS model can be derived as the differential of the pooled-database hedonic model, it need not be so derived.…”

Section: Background and Literature Reviewmentioning

confidence: 99%

A new approach for constructing home price indices: The pseudo repeat sales model and its application in China

Guo

Zheng

Geltner

et al. 2014

Journal of Housing Economics

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Highlights We develop a "pseudo repeat sale price index" for newly-constructed homes in China. This index has advantages over the hedonic and the repeat-sales in China's case. Our empirical work using Chengdu data proves this methodology's strengths. This methodology can be applied in other rapidly developing countries. Highlights (for review) 1 A New Approach for Constructing Home Price Indices in China:The Pseudo Repeat Sales Model Abstract:Due to data and methodology constraints, there is a lack of good quality-controlled residential price indices publicly available in China. New home sales account for quite a large share of total home sales in Chinese cities (87% in 2010). As a result, the standard repeat sales approach cannot be employed, as a new housing units only appears once on the market. The hedonic method may be more suitable in principle, but it is vulnerable to an omitted variables problem which may be more significant in Chinese cities due to extremely dynamic urban spatial structure development and rapid building quality improvement.Taking advantage of the uniquely large scale and homogeneous nature of residential development in Chinese cities, we develop a -pseudo repeat sale‖ model (ps-RS) to construct more reliable quality-controlled price indices for newly-constructed homes. The new homes are developed in the form of residential complexes. Each complex is developed by a single developer, and often contains several phases and a number of high-rise residential buildings. Each housing unit within the same complex shares the same location and community attributes, as well as similar physical characteristics (such as structure type, architecture style, housing age, etc). Of course, there may still be important differences in unit size, number of bedrooms, floor level within the high-rise, and so forth. Based on specific criteria, we match two very similar new sales within three versions of a defined matching space: within a complex, within a phase of a complex, or within an individual building, respectively. We thus create a -pseudo-pair‖. We are able to generate a vast number of such pairs, many more than in traditional repeat sales models. By regressing the price differential across time between the two sales in each pseudo-pair onto the within-pair differentials in *Manuscript Click here to view linked References 2 unit-specific physical attributes as well as the usual repeat-sales time dummy variables corresponding to the index periods, thereby cancelling out or controlling for locational and community variations, we are able to construct a ps-RS price index for new homes. We examine three versions of such an index: complex-based, phase-based and building-based.This ps-RS price index approach not only addresses the problem of lack of repeat-sales data and the omitted variables problem in the hedonic, but also addresses the traditional problems with the classical repeat-sales model in terms of small sample sizes and sample selection bias, as we are effectively able to use all sales. Anothe...

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Section: Background and Literature Reviewmentioning

confidence: 99%

A new approach for constructing home price indices: The pseudo repeat sales model and its application in China

Guo

Zheng

Geltner

et al. 2014

Journal of Housing Economics

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“…Hypothetically removing both types of physical supply constraints, again according to our baseline estimate, the index series for LA is derived from a repeat-sales price index. Given that the hedonic index for the UK is based on a well specified model and a large sample and the underlying sample for the LA housing market is also large, the potential biases are likely small (see Case et al, 1991). Hansen (2009) also finds that the two methodologies yield similar price changes if the underlying samples are sufficiently large.…”

Section: Introductionmentioning

confidence: 99%

The Impact of Supply Constraints on House Prices in England

2013

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“…Moreover, the constant quality, assumption is very storong as houses undergo changes in characteristics over taime and a combined index calld hybrid index which combines advantages of hedonic and repeat sale index been developed and well estabished (Case and Quigley, 1995;Case, Pollakowski, and Wachter, 1991;Quigley, 1995;Englund, Quigley and Redf earn, 1998;and Hill et al, fothcoming focussed on explanations to regional price differences was made by Ozanne and Thibodeau (1983). Price differences have an income effect.…”

Section: House Price Index Methodology Reviewmentioning

confidence: 99%

Intra-Metropolitan House Price Movements: An Analysis of Stockholm 1981-1993

Tiwari¹,

Turner²

2000

SiRS, SRS

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The present paper highlights the importance of house price index methodology and relevance of studying price indices within a metropolitan region. Two approaches based on hedonic approach have been compared. Though the results are inconclusive as to whether explicit time variable hedonic approach is superior to cross section hedonic approach or vice versa but there are evidences that would suggest that cross section approach is better. The results are compared with indices developed by other methodologies like improved repeat sales method and official methodology of SCB. The index obtained by us are very similar to others but the quarterly price increases as calculated by us lags the other two. This paper further tries to explain the intra-metropolitan price variations based on population , employ ment and tenureship trends. A ripple effect is also noticed where the prices in one zone leads the others .

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On Choosing Among House Price Index Methodologies

Cited by 190 publications

References 10 publications

A new approach for constructing home price indices: The pseudo repeat sales model and its application in China

A new approach for constructing home price indices: The pseudo repeat sales model and its application in China

The Impact of Supply Constraints on House Prices in England

Intra-Metropolitan House Price Movements: An Analysis of Stockholm 1981-1993

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