Measuring Aggregate Housing Wealth: New Insights from an Automated Valuation Model

Joshua H. Gallin, Raven S. Molloy, Eric Nielsen, Paul A. Smith and Kamila Sommer
Additional contact information
Joshua H. Gallin: https://www.federalreserve.gov/econres/joshua-gallin.htm
Raven S. Molloy: https://www.federalreserve.gov/econres/raven-molloy.htm
Paul A. Smith: https://www.federalreserve.gov/econres/paul-a-smith.htm
Kamila Sommer: https://www.federalreserve.gov/econres/kamila-sommer.htm

No 2018-064, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We construct a new measure of aggregate U.S. housing wealth based on Zillow's Automated Valuation Model (AVM). AVMs offer advantages over other methods because they are based on recent market transaction prices, utilize large datasets which include property characteristics and local geographic variables, and are updated frequently with little lag. However, using Zillow's AVM to measure aggregate housing wealth requires overcoming several challenges related to the representativeness of the Zillow sample. We propose methods that address these challenges and generate a new estimate of aggregate U.S. housing wealth from 2001 to 2016. This new measure provides insights into some of the disadvantages of other approaches to measuring housing wealth. Specifically, with respect to the owner valuations typically used in survey data, it appears that homeowners were slow to recognize the drop in housing wealth during the financial crisis and that their estimates of this drop were unrealistically small. At the same time, repeat-sales price indexes appear to overstate the extent of the drop in value between 2006 and 2011 and overstate the recovery thereafter.

Keywords: Consumer economics and finance; Data collection and estimation; Flow of funds; Residential real estate (search for similar items in EconPapers)
JEL-codes: C82 E21 R31 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2018-09-06
New Economics Papers: this item is included in nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2018-64

DOI: 10.17016/FEDS.2018.064

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