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

Min Hwang and John M. Quigley ()
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Min Hwang: National University of Singapore

No 1046, Berkeley Program on Housing and Urban Policy, Working Paper Series from Berkeley Program on Housing and Urban Policy

Abstract: This paper develops a model of price formation in the housing market which accounts for non-random selection of those dwellings sold on the market from the stock of existing houses. The model 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.

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Journal Article: Selectivity, Quality Adjustment and Mean Reversion in the Measurement of House Values* (2004)
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