Serial persistence and risk structure of local housing market

This paper investigated serial correlations and the risk structure of local house price movements for single family homes. It was found house price changes were strongly correlated over time, but the market risk structure (variance of price changes) was specific to location differences and varied largely depending on different measurement intervals. For the monthly measurement interval, the market risk was close to a linear form. However, measured quarterly, the market risk tended to follow a quadratic form for a shorter time period up to 8 quarters and after that, the actual risk form seemed to sit in between the linear and quadratic forms. These findings have important implications in developing a house price index based on the weighted repeated sales (WRS) method