Abstract:
This paper documents two methods for calculating home price indices based on repeated sales of the same properties: (1) an estimation using instrumental variables employing the methodology of S&P/Case-Shiller; (2) a simple regression of the change in the selling price of an asset against the timing of the sales, using the methodology of Bailey, Muth and Nourse (1963). Additionally, the paper reviews the differences between the hedonic method, used by the Central Bureau of Statistics for calculating its home price index, and the repeated sales methodology, and presents the results of the different indices. Generally, the two approaches draw a very similar picture with regards to the evolution of the price level in Israel, especially starting in 2008. At monthly frequency the correlation between the rates of change of the indices is about 0.7.