The Evolution of House Price Distribution

Takaaki Ohnishi, Takayuki Mizuno, Chihiro Shimizu and Tsutomu Watanabe

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: Is the cross-sectional distribution of house prices close to a lognormal distribution, as is often assumed in empirical studies on house price indexes? How does the distribution evolve over time? To address these questions, we investigate the cross-sectional distribution of house prices in the Greater Tokyo Area. We find that house prices (Pi) are distributed with much fatter tails than a lognormal distribution and that the tail is quite close to that of a power-law distribution. We also find that house sizes (Si) follow an exponential distribution. These findings imply that size-adjusted house prices, defined by lnPi - aSi, should be normally distributed. We find that this is indeed the case for most of the sample period, but not the bubble era, during which the price distribution has a fat upper tail even after adjusting for size. The bubble was concentrated in particular areas in Tokyo, and this is the source of the fat upper tail.

Pages: 21 pages
Date: 2011-03
New Economics Papers: this item is included in nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:11019

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