Measurement error in residential property valuation: An application of forecast combination

Dennis Glennon, Hua Kiefer and Tom Mayock

Journal of Housing Economics, 2018, vol. 41, issue C, 1-29

Abstract: In this study we use a large database of real estate transactions to assess the magnitude of measurement error associated with using popular house price indices (HPIs) to value individual properties. In the 4 large U.S. counties that we analyze, we find that the bias associated with using these HPIs to value individual homes increased from near zero in 2005 to between 26% and 113% in 2010. In the second part of the analysis, we use data from Florida to demonstrate that forecast combination methods can be used to improve the accuracy of property-level valuations, in some cases reducing the estimated bias by more than a factor of 3. We find that even the simplest forecast combination method – a simple average – has the potential to significantly improve value estimates.

Keywords: Housing valuation; Forecast combination; Measurement error (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhouse:v:41:y:2018:i:c:p:1-29

DOI: 10.1016/j.jhe.2018.02.002

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