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Statistical Office of the European Communities, International Labour Office, International Monetary Fund, Organization for Economic Co-operation and Development, United Nations, and World Bank

The Basic Repeat Sales Model 6.1 The repeat sales method was initially proposed by Bailey, Muth and Nourse (1963) . They saw their procedure as a generalization of the chained matched model methodology applied by the pioneers in the construction of real estate price indices like Wyngarden (1927) and Wenzlick (1952) . The best-known repeat sales indices are the Standard and Poors’/Case-Shiller Home Price Indices in the US, which are computed for 20 cities (Standard and Poor’s, 2009). The Federal Housing Finance Agency (FHFA) also computes a repeat

Statistical Office of the European Communities, International Labour Office, International Monetary Fund, Organization for Economic Co-operation and Development, United Nations, and World Bank

Introduction 7.1 As was mentioned in previous chapters, the matched model methodology to construct price indices, where prices of identical items are compared over time, cannot be applied in the housing context. One of the reasons is the low incidence of re-sales and the resulting change in the composition of the properties sold. The repeat sales method, which was discussed in Chapter 6 , attempts to deal with the quality mix problem by looking at properties that were sold more than once over the sample period. However, using only repeat-sales data could

Statistical Office of the European Communities, International Labour Office, International Monetary Fund, Organization for Economic Co-operation and Development, United Nations, and World Bank

Introduction 11.1 The purpose of this chapter is to provide additional empirical examples dealing with the construction of house price indices based on the methods that were outlined in Chapters 5 - 9 . These are broadly defined as follows: measures of central tendency (mean or median), hedonic regression methods, repeat sales methods, and methods based on appraisal data. The following three sections of this chapter illustrate how the first three classes of methods can be implemented on very small data sets. Hopefully, working through these simple

Statistical Office of the European Communities, International Labour Office, International Monetary Fund, Organization for Economic Co-operation and Development, United Nations, and World Bank

RPPIs for various types of residential property. However, it is also the most data-intensive method. 1.13 The repeat sales method, reviewed in Chapter 6 , utilizes information on the same properties which have been sold more than once. Because only “matched models” are used, there is no change in the quality mix to control for. In its basic form, the only information required is price, sales date and address of the property. So the repeat sales method is much less data- intensive than hedonic methods. Also, the repeat sales method will automatically control for

Statistical Office of the European Communities, International Labour Office, International Monetary Fund, Organization for Economic Co-operation and Development, United Nations, and World Bank

hedonic regression method is generally the best technique for constructing a constant quality residential property price index. The imputations approach to hedonic quality (mix) adjustment has advantages over the time dummy approach. Stratified hedonic indices are preferred over a straightforward application of hedonic regression to the whole data set . Repeat Sales 12.29 The repeat sales method observes the price development of a specific house over a period of time by reference to the selling price each time it is sold. The price change of a selection of

Statistical Office of the European Communities, International Labour Office, International Monetary Fund, Organization for Economic Co-operation and Development, United Nations, and World Bank

, concrete or traditional materials; i.e., a shack or shanty), and other price determining characteristics such as the number of bedrooms, the number of bathrooms, a garage, a swimming pool, air conditioning, distance to amenities, etc. 3.20 Four main methods have been suggested in the literature to control for changes in the amounts of the property characteristics: stratification or mix adjustment, repeat sales methods, hedonic regression methods, and the use of property assessment information. Below, a brief overview of the four methods is provided. More details

Statistical Office of the European Communities, International Labour Office, International Monetary Fund, Organization for Economic Co-operation and Development, United Nations, and World Bank

dwelling. The index is likely to be biased (unless the age of the structure and type of dwelling sold is stable over time). This shortcoming is acknowledged by Statistics Norway. 10.19 An additional method used in, for example, the USA and Canada, is the repeat sales method (described in Chapter 6 ); i.e., the Case-Shiller home price index in the USA and the Teranet -National Bank House Price Index ™ in Canada. This approach matches pairs of sales of the same dwellings over time. It requires a huge database of transactions and is not used by any of the European

Statistical Office of the European Communities, International Labour Office, International Monetary Fund, Organization for Economic Co-operation and Development, United Nations, and World Bank

superlative TÖrnqvist index (which is revised). Users in the U,S, seem to have accepted multiple ndices in this context, ( 12 ) A related issue is that some of the methods for constructing an RPPI, such as the multiperiod time dummy hedonic method (see Chapter 5 ) and the repeat sales method ( Chapter 6 ) suffer from revision in the sense that previously computed figure will change when new data is added to the sample. In some cases, revised indices are published while in other cases, the rolling window technique with updating due to Shimizu, Nishimura and

Statistical Office of the European Communities, International Labour Office, International Monetary Fund, Organization for Economic Co-operation and Development, United Nations, and World Bank

price index methods as well, including hedonic and repeat sales methods (to be discussed in Chapters 5 and 6 ). Stratification 4.4 Post-stratification of a sample is a general technique for reducing sample selection bias. In the case of residential property price indices, stratification is the simplest tool for controlling for changes in the composition or “quality mix” of the properties sold. The method is therefore also known as mix adjustment. Stratification is also needed if users desire price indices for different housing market segments. 4

Statistical Office of the European Communities, International Labour Office, International Monetary Fund, Organization for Economic Co-operation and Development, United Nations, and World Bank

Abstract

For most citizens, buying a residential property (dwelling) is the most important transaction during their lifetime. Residential properties represent the most significant component of households’ expenses and, at the same time, their most valuable assets. The Residential Property Prices Indices (RPPIs) are index numbers measuring the rate at which the prices of residential properties are changing over time. RPPIs are key statistics not only for citizens and households across the world, but also for economic and monetary policy makers. Among their professional uses, they serve, for example, to monitor macroeconomic imbalances and risk exposure of the financial sector. This Handbook provides, for the first time, comprehensive guidelines for the compilation of RPPIs and explains in depth the methods and best practices used to calculate an RPPI. It also examines the underlying economic and statistical concepts and defines the principles guiding the methodological and practical choices for the compilation of the indices. The Handbook primarily addresses official statisticians in charge of producing residential property price indices; at the same time, it addresses the overall requirement on RPPIs by providing a harmonised methodological and practical framework to all parties interested in the compilation of such indices. The RPPIs Handbook has been written by leading academics in index number theory and by recognised experts in RPPIs compilation. Its development has been coordinated by Eurostat, the statistical office of the European Union, with the collaboration of the International Labour Organization (ILO), International Monetary Fund (IMF), Organisation for Economic Co-operation and Development (OECD), United Nations Economic Commission for Europe (UNECE) and the World Bank.