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How does the CMHPI work?

April 26, 2017cmhpi

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How does the CMHPI work?

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The CMHPI uses a statistical method based entirely on “repeat transactions”. Any time a house’s value is observed twice over time (via either a sale or an appraisal), the change in the price contributes one observation of house price growth over that time period. The index is defined to be the statistically determined set of values that most closely fits many such repeated observations. Mathematically, this is equivalent to taking complicated weighted averages of all the observations of house price growth. For a more technical description of the method, please see the article from the Journal of Housing Research 6(3):389-418 (1995) titled “Conventional Mortgage Home Price Index1,” and the Journal of Housing Economics article “Estimating House Price Growth with Repeat Sales Data: What’s the Aim of the Game?,”.