Changing Tastes: Estimating Changing Attribute Prices in Hedonic and Repeat Sales Models

Changing Tastes: Estimating Changing Attribute Prices in Hedonic and Repeat Sales Models Repeat sales indices are commonly used to estimate the trend in house prices. Two assumptions are made when estimating these indices: 1) that the house characteristics are unchanged between observed sales and 2) that the underlying shadow prices for those attributes are constant or change proportionally. The second assumption is the focus of this paper. First, using data from the American Housing Survey, we show that certain attribute prices in Chicago changed idiosyncratically between 1985 and 2011. These results confirm earlier reports of changing tastes and attribute prices. We show that such changes can be approximated in a hedonic model with a low order polynomial functional form. We find that a simple extension of the standard repeat sales methodology can be used to test for and estimate changes in characteristic prices attributable to changing tastes. Our results are of interest to all users of repeat sales indices, but especially those portfolio investors interested in estimating current values of homes securing loans in their portfolio to help manage delinquencies and defaults. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Changing Tastes: Estimating Changing Attribute Prices in Hedonic and Repeat Sales Models

Loading next page...
 
/lp/springer_journal/changing-tastes-estimating-changing-attribute-prices-in-hedonic-and-wPK2aNFOaS
Publisher
Springer US
Copyright
Copyright © 2015 by Springer Science+Business Media New York
Subject
Economics; Regional/Spatial Science; Financial Services
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-015-9497-0
Publisher site
See Article on Publisher Site

Abstract

Repeat sales indices are commonly used to estimate the trend in house prices. Two assumptions are made when estimating these indices: 1) that the house characteristics are unchanged between observed sales and 2) that the underlying shadow prices for those attributes are constant or change proportionally. The second assumption is the focus of this paper. First, using data from the American Housing Survey, we show that certain attribute prices in Chicago changed idiosyncratically between 1985 and 2011. These results confirm earlier reports of changing tastes and attribute prices. We show that such changes can be approximated in a hedonic model with a low order polynomial functional form. We find that a simple extension of the standard repeat sales methodology can be used to test for and estimate changes in characteristic prices attributable to changing tastes. Our results are of interest to all users of repeat sales indices, but especially those portfolio investors interested in estimating current values of homes securing loans in their portfolio to help manage delinquencies and defaults.

Journal

The Journal of Real Estate Finance and EconomicsSpringer Journals

Published: Mar 7, 2015

References

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create lists to
organize your research

Export lists, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off