Sample Selection Bias and Repeat-Sales Index Estimates

Analysis of variations in house values among localities requires reliable house value indices. Gatzlaff and Haurin (1994) indicate that traditional hedonic house value index estimates, using only information from a sample of sold homes to estimate value movements for the entire housing stock, may be subject to substantial bias. This article extends previous work by adapting the censored sample procedure to the repeat-sales index estimation model. Using data from Dade County, Florida, a house value index constructed from a sample of homes selling more than once, rather than all houses in a locality, is found to be biased. The bias is shown to be highly correlated with changes in economic conditions.

[1]  Dale J. Poirier,et al.  Partial observability in bivariate probit models , 1980 .

[2]  D. Haurin,et al.  Sample Selection and Biases in Local House Value Indices , 1998 .

[3]  T. Lancaster,et al.  Stock and flow sampling , 1981 .

[4]  Jorge Martinez-Vazquez,et al.  Alternative value estimates of owner-occupied housing: Evidence on sample selection bias and systematic errors , 1986 .

[5]  David C. Ling,et al.  Measuring Changes in Local House Prices: An Empirical Investigation of Alternative Methodologies , 1994 .

[6]  G. M. Tallis.  The Moment Generating Function of the Truncated Multi‐Normal Distribution , 1961 .

[7]  Richard F. Muth,et al.  A Regression Method for Real Estate Price Index Construction , 1963 .

[8]  Bradford Case,et al.  On Choosing Among House Price Index Methodologies , 1991 .

[9]  Philip M. Lurie,et al.  Labor force earnings and college choice of young women: An examination of selectivity bias and comparative advantage , 1981 .

[10]  P. Dhrymes.  Limited dependent variables , 1986 .

[11]  John M. Quigley,et al.  The Dynamics of Real Estate Prices , 1991 .

[12]  Hedley Rees,et al.  Limited-Dependent and Qualitative Variables in Econometrics. , 1985 .

[13]  Donald R. Haurin,et al.  House Price Indexes: Issues and Results , 1991 .

[14]  R. Shiller,et al.  The Efficiency of the Market for Single-Family Homes , 1988 .

[15]  J. Heckman.  Sample selection bias as a specification error , 1979 .

[16]  J. Heckman.  Shadow prices, market wages, and labor supply , 1974 .

[17]  W. Greene.  Sample Selection Bias as a Specification Error: Comment , 1981 .

[18]  T. Thibodeau,et al.  The Relationship between Median and Constant Quality House Prices: Implications for Setting FHA Loan Limits , 1990 .

[19]  S. Rosen.  Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition , 1974, Journal of Political Economy.

[20]  The Baby Boom, the Baby Bust, and the Housing Market , 1989 .

[21]  Arthur J. Hosios,et al.  Measuring prices in resale housing markets in Canada: Evidence and implications* , 1991 .