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An Evaluation of Hedonic Price Indexes for Thirty‐four Large SMSAs

Author

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  • Dixie M. Blackley
  • James R. Follain
  • Haeduck Lee

Abstract

The purpose of this paper is twofold. First, a set of price indexes are developed for thirty‐four metropolitan areas for the years 1975 and 1978. Indexes are also broken down by central city and suburb for twenty two of the metropolitan areas. These indexes measure variation in the price per unit of owner‐occupied housing stock and the price per unit of housing services of rental housing. Confidence intervals are constructed for the price indexes. It is found that the indexes are reasonably precise measures in that the typical ratio of the confidence interval to the predicted median rent or value is about 13%. Also, analysis of the confidence intervals indicates substantial and statistically significant variation in the price of housing stock and services among the metropolitan areas studied. One of the major benefits of this set of indexes is that it can be used to address one of the most important questions in real estate — Why do housing prices and rents vary among metropolitan areas and over time? Research projects are currently underway that use the data to address these two questions.

Suggested Citation

  • Dixie M. Blackley & James R. Follain & Haeduck Lee, 1986. "An Evaluation of Hedonic Price Indexes for Thirty‐four Large SMSAs," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 14(2), pages 179-205, June.
    • Handle: RePEc:bla:reesec:v:14:y:1986:i:2:p:179-205
    DOI: 10.1111/1540-6229.00382
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    Cited by:

    1. William H. Scott & Arthur L. Houston & A. Quang Do, 1993. "Inflation Risk, Payment Tilt, and the Design of Partially Indexed Affordable Mortgages," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 21(1), pages 1-25, March.
    2. Seow Eng Ong & Kim Hin David Ho & Chai Hoon Lim, 2003. "A Constant-quality Price Index for Resale Public Housing Flats in Singapore," Urban Studies, Urban Studies Journal Limited, vol. 40(13), pages 2705-2729, December.
    3. Arbel, Yuval & Ben-Shahar, Danny & Gabriel, Stuart & Tobol, Yossef, 2010. "The local cost of terror: Effects of the second Palestinian Intifada on Jerusalem house prices," Regional Science and Urban Economics, Elsevier, vol. 40(6), pages 415-426, November.
    4. Turgay Kerem Koramaz, 2013. "A Dualistic Manner In Spatial Analysis: Location And Sector Based Investigations For Housing Price Determinants," ERSA conference papers ersa13p1062, European Regional Science Association.
    5. Bun Lee & Eui-Chul Chung & Yong Kim, 2004. "Dwelling Age, Redevelopment, and Housing Prices: The Case of Apartment Complexes in Seoul," The Journal of Real Estate Finance and Economics, Springer, vol. 30(1), pages 55-80, October.
    6. Chunrong Ai & Jonathan Feinstein & Daniel L. McFadden & Henry Pollakowski, 1990. "The Dynamics of Housing Demand by the Elderly: User Cost Effects," NBER Chapters, in: Issues in the Economics of Aging, pages 33-88, National Bureau of Economic Research, Inc.
    7. Piermassimo Pavese, 2007. "Hedonic Housing Price Indices: The Turinese Experience," Rivista di Politica Economica, SIPI Spa, vol. 97(6), pages 113-148, November-.
    8. Carrillo, Paul E. & Early, Dirk W. & Olsen, Edgar O., 2014. "A panel of interarea price indices for all areas in the United States 1982–2012," Journal of Housing Economics, Elsevier, vol. 26(C), pages 81-93.
    9. Bloze, Gintautas & Skak, Morten, 2014. "Owning, letting and demanding second homes," Discussion Papers on Economics 1/2014, University of Southern Denmark, Department of Economics.

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