House Price Changes and Idiosyncratic Risk: The Impact of Property Characteristics

Although the average change in house prices is related to changes in fundamentals or perhaps market-wide bubbles, not all houses in a market appreciate at the same rate. The primary focus of our study is to investigate the reasons for these variations in price changes among houses within a market. We draw on three theories for guidance, one related to the optimal search strategy for sellers of atypical dwellings, another focusing on the bargaining process between a seller and potential buyers and the third relying on the concept of land leverage. We hypothesize that houses will appreciate at different rates depending on the characteristics of the property and the change in the strength of the housing market. These hypotheses are supported using data from three New Zealand housing markets.     

Local House Price Diffusion

We contribute to the literature on house price diffusion by carrying out our analysis at three levels: CBSA (nationwide), town and census tract (Greater Boston Area). We estimate fixed‐effect models of house price growth on lagged growth (“Persistence”), nearby lagged growth (“Spillovers”) and Fundamentals growth. CBSA‐level Persistence and Spillover Effects are positive and significant. These large ripple/contagion effects likely contributed to the recent national‐level housing downturn. We find evidence of smaller town‐level Persistence and Spillover Effects. Hence, diffusion appears stronger across than within housing markets. Fundamentals and price expectations drive price diffusion, leaving room for bubbles from future price overoptimism.     

Measuring House Price Bubbles

Using data for six metropolitan housing markets in three countries, this article provides a comparison of methods used to measure house price bubbles. We use an asset pricing approach to identify bubble periods retrospectively and then compare those results with results produced by six other methods. We also apply the various methods recursively to assess their ability to identify bubbles as they form. In view of the complexity of the asset pricing approach, we conclude that a simple price–rent ratio measure is a reliable method both ex post and in real time. Our results have important policy implications because a reliable signal that a bubble is forming could be used to avoid further house price increases.     

Canadian Inter-City House Price Differentials

The purpose of this paper is to identify the sources of intercity house price differentials in Canada. The results indicate that demand factors are important explanatory variables; a 1% increase in the income of households raises house prices by 1.11%; higher rates of anticipated inflation result in higher house prices as households increase their demand for real assets such as housing during inflationary periods; and finally, the fraction of households that are non-family households is positively associated with house prices. These results are in agreement with those of other countries.     

The Influence of Reference Group House Size on House Price

This article examines the effect of a change in housing consumption of various reference groups on predicted own house price. I employ a spatial autoregressive model and find that an increase in average house size of the eight nearest neighbors and the largest houses in the district has a negative effect on predicted house price, whereas the effect of an increase in average house size of the further neighbors (9th through 16th neighbors) and the smallest houses in the district on predicted house price is positive. This suggests that the “envy effect” dominates with respect to the nearest and largest neighbors, whereas the “basking in the reflected glory” effect dominates with respect to the further smallest neighbors.     

Interest-Rate Volatility, Basis Risk and Heteroscedasticity in Hedging Mortgages

This paper investigates the validity of the OLS regression to estimate the hedge ratio for mortgages (GNMA) and provides alternative methodologies. In particular, this paper is concerned with the variance structure (conditional and unconditional heteroscedasticities) and the misspecification (nonlinearities) of the simple linear regression model for direct as well as cross-hedging. Using data on spot prices of GNMA and futures prices of GNMAs and T-bills for the period September 1979 to January 1985, we show that there exists significant heteroscedasticity particularly for cross-hedging, and nonlinearity between cash and futures prices for direct as well as cross-hedging. Alternative hedge ratio estimates are provided using the Box-Cox transformation model and an autoregressive conditional heteroscedastic (ARCH) Model.     

On Choosing Among House Price Index Methodologies

This paper compares housing price indices estimated using three models with several sets of property transaction data. The commonly used hedonic price model suffers from potential specification bias and inefficiency, while the weighted repeat-sales model presents potentially more serious bias and inefficiency problems. A hybrid model combining hedonic and repeat-sales equations avoids most of these sources of bias and inefficiency. This paper evaluates the performance of each type of model using a particularly rich local housing market database. The results, though ambiguous, appear to confirm the problems with the repeat sales model but suggest that systematic differences between repeat-transacting and single-transacting properties lead to bias in the hedonic and hybrid models as well.     

House Price Indexes: Issues and Results

AREUEA is pleased to acknowledge the support of the National Association of REALTORS for this special issue on house prices. We are particularly grateful to John Tuccillo, Senior Vice President and Chief Economist at NAR, for recognizing the importance of this emerging research area. The editors also acknowledge the support of their colleges at The Ohio State University and of the Homer Hoyt Institute.     

Dwelling Age Heteroskedasticity in Repeat Sales House Price Equations

Several authors have attributed the heteroskedasticity observed in repeat sales house price equations to the length of time between sales. Recently, Goodman and Thibodeau (1995) developed a theoretical model that relates heteroskedasticity in hedonic house price equations to dwelling age. Using data for nearly 2,000 repeat sales in Dallas, Texas, this research examines whether repeat sales heteroskedasticity is related to dwelling age, to the length of time between sales, or to both. An iterative generalized least squares procedure that explicitly models the residual variance is used to obtain robust parameter estimates and to increase the efficiency of the usual repeat sales price indices.     

石油期货市场套期保值与风险规避

套期保值是在现货市场和期货市场对同一种类的商品同时进行数量相等但方向相反的买卖活动,它能在一定程度上将商品价格锁定在期货合约的价格水平上,从而可以规避市场价格波动带来的风险。目前利用套期保值已成为国际石油公司规避经营风险通行的做法。但套期保值操作本身也存在经营风险,即基差风险。因此,国内石油公司既要积极认识套期保值业务的作用,逐步开展以套期保值为惟一目的的石油期货贸易,同时还必须加强风险意识和控制,加强对石油期货业务的管理与市场研究,并从体制上、制度上杜绝巨额损失现象的出现。     

A Note on the Bias in House Price Capitalization Models

Recent research efforts concerning the capitalization of low-rate, seller-supplied financing have employed hedonic pricing models that may produce biased estimates of the capitalization process. The bias results when properties sold with owner financing are included in the researcher's sample. This note discusses the nature of the bias and suggests a possible solution.     

A Varying Parameters Approach to Constructing House Price Indexes

Conventional housing price index models assume interperiodparameter stability and typically employ either repeat sales or hedonic methodologies. This paper introduces a method of index construction that combines multiple sales observations with single sale transactions while permitting characteristics prices from hedonic regressions to vary over time. A test for interperiod parameter stability is provided. Each period's data are arranged by location and repeat sales are matched by rows. This construction allows greater use of sample information and acknowledges the unique contribution of repeat sales to the estimation process. It also produces intertemporal error correlations that can be beneficially exploited by the seemingly unrelated regressions (SUH) technique. The paper also demonstrates a significance test for error correlation and discusses the treatment of unequal numbers of observations among index periods.     

A Semiparametric Method for Estimating Local House Price Indices

Spatial autoregressive hedonic models utilize house prices lagged in space and time to produce local house price indices, for example, the spatial and temporal autoregressive (STAR) model might be used this way. This paper complements these models with a semiparametric approach, the Local Regression Model (LRM). The greater flexibility of the LRM may allow it to identify space–time asymmetries missed by other models. The LRM is fitted to 49,511 sales from 1972Q1 to 1991Q2 in Fairfax County, Virginia. The local price indices display plausible and significant variations over space and time. The LRM price indices in selected neighborhoods are shown to differ significantly from those in some other neighborhoods. A new method for estimating standard errors addresses an overlooked problem common to all local price indices: how to evaluate the amount of noise in the estimates. Out-of-sample prediction errors demonstrate that LRM adds significant information to the hedonic model.     

House Price Expectations: Unbiasedness and Efficiency of Forecasters

The understanding of house price expectations formation is quite limited in the housing literature. This is the first article to rigorously test the rationality of expectations of house price change using survey data. Using a panel data set of the Wall Street Journal economic forecasting survey from 2007 through 2012, I test for unbiasedness and efficiency by implementing the econometric methodology proposed in Davies and Lahiri (1995) in the setting of a three‐dimensional panel data set. I find that, after controlling for aggregate shocks, nine of the 47 forecasters have statistically significant biases, and their biases are all negative, indicating that they persistently predict too high of a change in house prices. The hypothesis of efficiency cannot be rejected, suggesting lack of evidence for inefficient use of information. When the year 2012 is excluded, the unbiasedness test shows that 25 of the 47 forecasters systematically overpredicted house price changes. Again, the hypothesis of efficiency cannot be rejected.     

Price Premium and Foreclosure Risk

Many previous studies identify loan, property, borrower and environmental factors that impact the probability of foreclosure. Implicit in these studies is the assumption that the property was purchased at fair value. We question this assumption based on several empirical findings regarding property value uncertainty. In contrast to previous research, we explicitly quantify the price premium from a hedonic pricing model. Using a comprehensive database of real estate transactions in Singapore during 1989–2000, we document a price premium associated with properties that are subsequently foreclosed based on actual sales transactions. In addition, we find that the premium paid at purchase significantly increases the probability of foreclosure. These results are robust and continue to hold after controlling for other property-specific factors, time-varying macroeconomic conditions, alternative model specifications and definitions of price premium.     

On the Relation between Local Amenities and House Price Dynamics

This study explores the extent to which local amenities are related to house price volatility, returns and risk‐adjusted returns across 238 MSAs. We find strong evidence that high amenity areas experience greater price volatility. In regards to returns, high amenity areas experience greater (lower) real returns in appreciating (depreciating) markets. However, high amenity areas experience little to no abnormal risk‐adjusted returns. Results from the study are robust to an endogenous treatment of amenities and land supply elasticity. Overall, we conclude that the desirability of a metropolitan area is a significant channel through which land values drive house price dynamics.     

The Economic Implications of House Price Capitalization: A Synthesis

In this article, I synthesize an emerging literature that explores the conditions under which public and private investments and intergovernmental transfers are capitalized into local house prices and the broader economic implications of such capitalization. The main insights are: (1) house price capitalization is more pronounced in locations with strict regulatory and geographical supply constraints; (2) capitalization can induce the provision of durable local public goods and club goods; and (3) capitalization effects—which are habitually ignored by policy‐makers—have important adverse consequences for a wide range of policies such as intergovernmental aid and the mortgage interest deduction.     

Local House Price Dynamics: New Indices and Stylized Facts

We introduce the first publicly available data set of constant‐quality house price indices for counties, ZIP codes and census tracts in the United States, at an annual frequency, over a 40‐year period. Between 1990 and 2015, house price gradients within large cities steepen, documenting a reversal of decades of increasing relative desirability of suburban locations. Real house prices are more likely to be nonstationary near the centers of large cities. Within‐city differences in house price appreciation at the ZIP code level are, on average, about half of between‐city differences, though this ratio varies depending on the time period and city size.     

博弈论视角:中国商品期货市场价格风险的形成

期货市场历来就蕴涵着各种各样的风险,尤以价格风险为甚。正确认识和理解期货市场价格风险形成的根源,并采取有效的措施加以防范,成为整个期货市场风险控制的中心和重点。本文借鉴博弈论的理论知识,深入阐明了与期货价格风险形成密切相关的期货市场博弈主体之间的博弈行为。通过博弈主体之间的博弈分析,进一步揭示了期货市场价格风险形成的机制,为更加深入认识期货市场的价格风险和采取有效的风险控制措施提供帮助。