Appraisal-Based Methods

As was mentioned in previous chapters, the matched model methodology to construct price indices, where prices of identical items are compared over time, cannot be applied in the housing context. One of the reasons is the low incidence of re-sales and the resulting change in the composition of the properties sold. The repeat sales method, which was discussed in Chapter 6, attempts to deal with the quality mix problem by looking at properties that were sold more than once over the sample period. However, using only repeat-sales data could be very inefficient since all single sales observations are “thrown out” and could also lead to sample selection bias.