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The accuracy of long-term real estate valuations

Author

Listed:
  • Schulz, Rainer
  • Staiber, Markus
  • Wersing, Martin
  • Werwatz, Axel

Abstract

By using a unique data set of single-family house transactions, we examine the accuracy of the cost and sales comparison approach over different forecast horizons. We find that sales comparison values provide better long-term forecasts than cost values if the economic loss function is symmetric. A weighted average of both sales comparison value and cost value can reduce this loss even further. If the economic loss function is asymmetric, however, cost values might provide better long-term forecasts.

Suggested Citation

  • Schulz, Rainer & Staiber, Markus & Wersing, Martin & Werwatz, Axel, 2008. "The accuracy of long-term real estate valuations," SFB 649 Discussion Papers 2008-019, Humboldt University Berlin, Collaborative Research Center 649: Economic Risk.
    • Handle: RePEc:zbw:sfb649:sfb649dp2008-019
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    More about this item

    Keywords

    prediction accuracy; mortgage underwriting; risk management;
    All these keywords.

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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