Selectivity, Quality Adjustment and Mean Reversion in the Measurement of House Values*

Selectivity, Quality Adjustment and Mean Reversion in the Measurement of House Values* This paper develops a model of price formation in the housing market which accounts for the non-random selection of those dwellings sold on the market from the stock of existing houses. The model we develop also accounts for changes in the quality of dwellings themselves and tests for mean reversion in individual house prices. The model is applied to a unique body of data representing all dwellings sold in Sweden's largest metropolitan area during the period 1982–1999. The analysis compares house price indices that account for selectivity, quality change and mean reversion with the conventional repeat sales models used to describe the course of metropolitan housing prices. We find that the repeat sales method yields systematically large biased estimates of the value of the housing stock. Our comparison suggests that the more general approach to the estimation of housing prices or housing wealth yields substantially improved estimates of the course of housing prices and housing wealth. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Selectivity, Quality Adjustment and Mean Reversion in the Measurement of House Values*

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/lp/springer_journal/selectivity-quality-adjustment-and-mean-reversion-in-the-measurement-KKkegNRuGY
Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2004 by Kluwer Academic Publishers
Subject
Economics; Regional/Spatial Science; Financial Services
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1023/B:REAL.0000011152.40485.12
Publisher site
See Article on Publisher Site

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