Housing renovations and the quantile repeat sales price index

A median-based quantile estimator is less prone to the upward bias caused by unobserved renovations and missing “quality” variables when estimating appreciation rates using the repeat sales approach. As expected, the quantile estimator indicates lower appreciation rates for a sample of repeat sales of single-family homes in Chicago for 1993-2002. The quantile estimator is much less sensitive than the standard repeat sales estimator to the omission of observations for which building permits have been issued during this time. Thus, the quantile approach appears to be less prone to sample selection and missing-variable bias than the standard estimator.UnpublishedAlbrecht, James, Anders Bjorklund, and Susan Vroman, “Is There a Glass Ceiling in Sweden?,” Journal of Labor Economics 21 (2003), 145-177. Bailey, M.J., R.F. Muth, and H.O. Nourse, “A Regression Method for Real Estate Price Index Construction,” Journal of the American Statistical Association 58 (1963) 933-942. Bassett, Gilbert W., Jr., and Hsiu-Lang Chen, “Portfolio Style: Return-Based Attribution using Quantile Regression,” Empirical Economics 26 (2001), 293-305. Buchinsky, Moshe, “Changes in the U.S. Wage Structure 1963-1987: Application of Quantile Regression,” Econometrica 62 (1994), 405-58. Buchinsky, Moshe, “The Dynamics of Changes in the Female Wage Distribution in the USA: A Quantile Regression Approach,” Journal of Applied Econometrics 13 (1998a), 1-30. Buchinsky, Moshe, “Recent Advances in Quantile Regression Models: A Practical Guideline for Empirical Research,” Journal of Human Resources 33 (1998b), 88-126. Buchinsky, Moshe, “Quantile Regression with Sample Selection: Estimating Women’s Return to Education in the U.S.,” Empirical Economics 26 (2001), 87-113. Case, Bradford and John M. Quigley, “The Dynamics of Real Estate Prices,” Review of Economics and Statistics 73 (1991), 50-58. Case, Karl E. and Robert J. Shiller, “Prices of Single-Family Homes since 1970: New Indexes for Four Cities,” New England Economic Review (1987), 45-56. Case, Karl E. and Robert J. Shiller, “The Efficiency of the Market for Single-Family Homes,” American Economic Review 79 (1989), 125-137. Dimelis, Sophia and Helen Louri, “Foreign Ownership and Production Efficiency: A Quantile Regression Analysis,” Oxford Economic Papers 54 (2002), 449-469. Follain, James R. and Charles A. Calhoun, “Constructing Indices of the Price of Multifamily Properties using the 1991 Residential Finance Survey,” Journal of Real Estate Finance and Economics 14 (1997), 235-255. Garcia, Jaume, Pedro J. Hernandez, and Angel Lopez-Nicolas, “How Wide is the Gap? An Investigation of Gender Wage Differences Using Quantile Regression,” Empirical Economics 26 (2001), 149-167. Goetzmann, William N. and Matthew Spiegel, “Non-Temporal Components of Residential Real Estate Appreciation,” Review of Economics and Statistics 77 (1995), 199-206. Hartog, Joop, Pedro T. Pereira, and A. C. Jose, “Changing Returns to Education in Portugal during the 1980s and Early 1990s: OLS and Quantile Regression Estimators,” Applied Economics 33 (2001), 1027-1037. Kiel, Katherine A. and Jeffrey E. Zabel, “Evaluating the Usefulness of the American Housing Survey for Creating Housing Price Indices,” Journal of Real Estate Finance and Economics 14 (1997), 189-202. Koenker, Roger and Gilbert W. Bassett, Jr., “Regression Quantiles,” Econometrica 46 (1978), 33-50. Koenker, Roger and Kevin F. Hallock, “Quantile Regression,” Journal of Economic Perspectives 15 (2001), 143-156. Levin, Jesse, “For Whom the Reductions Count: A Quantile Regression Analysis of Class Size and Peer Effects on Scholastic Achievement,” Empirical Economics 26 (2001), 221-246. Mark, J.H. and M.A. Goldberg, “Alternative Housing Price Indices: An Evaluation,” AREUEA Journal 12 (1984), 30-49. Martins, Pedro S. and Pedro T. Pereira, “Does Education Reduce Wage Inequality? Quantile Regression Evidence from 16 Countries,” Labour Economics 11 (2004), 355-371. McMillen, Daniel P., “The Return of Centralization to Chicago: Using Repeat Sales to Identify Changes in House Price Distance Gradients,” Regional Science and Urban Economics 33 (2003), 287-304. Palmquist, R.B., “Alternative Techniques for Developing Real Estate Price Indexes,” Review of Economics and Statistics 66 (1980), 394-404. Thibodeau, Thomas G., “Housing Price Indexes from the 1973-83 SMSA Annual Housing Survey,” AREUEA Journal 17 (1989), 110-117. Thorsen, James A., “The Use of Least Median of Squares in the Estimation of Land Value Equations,” Journal of Real Estate Finance and Economics 8 (1994), 183-190