The Improvement of Housing Appraisal Process with Street

Block Housing Price Index

Chung-Hsien Yang National Pingtung Institute of Commerce,

TaiwanSzu-Jung Huang

National Pingtung Institute of Commerce, Taiwan

The 2010 Eureape Real Estate Society Conference June. 25th 2010

What problems in Mass Appraisal?

•Poor attributes•Limited data records and update•Accuracy (still not great)•Limited type (typical only)•Limited Location

What problems in Location?

• Traditional location—county / district--Limited identify--Poor accuracy

• GIS location—(Xn,Yn) relationship

--Poor economics meaning--Sampling orient in location relationship

Solution in this paper

• Street Block (SB) Price factor--use the mean price in street block

(single or merge street blocks)--Modeling by sorting or

comparison the Street Blocks

Advantage in SB solution

• Smaller location from traditional

• Real and stable location relationship

• Clear economics meaning

• Easy to judge the location factor and comparison the samples’ relationship

The Data(1/2)• The transaction records of housing from

broker in Da-An district/Taipei/Taiwan• 2958 observations in 2006Q1~2008Q3

and 15% of market share in Da_An district• Building type: all is apartment house• Outliers detected (MRA model) and delete• 10% out-sample and 90% in-sample by

Quarterly district stratified random sampling

The Data(2/2)

• We follow Yang and Huang(2009) developed street block price index in Da_An district/Taipei city.

• We use MRA with street block dummy and 3 years panel data model.

• There are 47 blocks in the index.

Taipei city Taipei city (( 台北台北市市 ))

Daan district ( 大安區 )

MRT : Zhongxiao Fuxing( 忠孝復與 )MRT:Taipei main station( 台北車站 )

　 　 　 　 　 　 　 　105-117 100-105 96-100 91-95 86-90 81-85 76-80 70-75

Daan district ( 大安區 )

Describe the Data of Da-An/ Taipei

Variables Mean average STD Deviation

Total Price (US$) 436.2 K 245.0 K

Price per M sq 4.1 K 1.2 K

Building Area 106.2 M sq 51.0 M sq

Land Area 21.7 M sq 13.6 M sq

Floor no. 5.5F 5.2F

Total Floor 8.6F 4.5F

Building Age 23.7Y 9.8Y

The Model• The OLS form (semi-log)

TLXP)ln(P: total priceX: attributes of houseL: location or street block factorsT: Timing dummy variables

5 modelsModel Setting Description

Model1 no street block factor

Model2 L: street block price index

Model3 L: 21 dummies in 22 street blocks

Model4 L: 2 dummies in 3 parts from SBPI

Model5 L1: L in model3L2: L in model4

TLXP)ln(

TLXP)ln(

TLLXP 21)ln(

TLXP)ln(

TXP)ln(

The Variables• Attributes of house: building area, sq. term; building

age, sq. term; xth of floor, sq. term; total floor; building type; land area; MRT distance; car site dummy

• Time Dummy var. : 2006Q1~2008Q2=1, 2008Q3=0

Empirical process

• Sampling 100 times by quarterly for insample(90%) and outsample(10%)

• Run model1~model5 by various insample• Check HitRate(10%, 20% of bias) and

MAPE (mean absolute percentage error ) by various outsamples

• Test the difference of various models by t test.

Hitrate and MAPE

%100)%)1((ˆ)%)1((

nPaPPPaPcountHitRate

n

i i

ii

PPP

nMAPE

1

%100ˆ1

THE OUTPUT(1/4)(Hit Rate, 10% error)

Model HitRate

Paired t test (t value), *:

H0:

Mn-M1=0

(n~2,3,4,5)

H0:

M5-M2=0

H0:

M5-M3=0

H0:

M5-M4=0

1 45.00%

2 45.34% 2.43*

1.99*

3 45.58% 2.61*

1.214 45.41% 2.06*

1.67*5 45.76% 3.43**

THE OUTPUT(2/4)(Hit Rate, 20% error)

Model HitRate

Paired t test (t value)

H0:

Mn-M1=0

(n~2,3,4,5)

H0:

M5-M2=0

H0:

M5-M3=0

H0:

M5-M4=0

1 73.17%

2 74.23% 8.11**

11.62**

3 75.95% 13.71**

5.21**4 73.90% 4.37**

13.51**5 76.49% 14.48**

THE OUTPUT(3/4)(MAPE)

Model MAPE

Paired t test (t value)

H0:

Mn-M1=0

(n~2,3,4,5)

H0:

M5-M2=0

H0:

M5-M3=0

H0:

M5-M4=0

1 15.19%

2 15.03% -7.28**

-15.75**

3 14.59% -16.89**

-9.06**4 14.98% -9.48**

-17.92**5 14.47% -19.49**

THE OUTPUT(4/4) (MAPE, Hit Rate)

Building Area

ModelHitrate

(10%)

Paired

t test(t value)

Hitrate

(20%)

Paired

t test(t value)

MAPEPaired

t test(t value)

Under

54M2

1 42.33%12.62**

74.05%13.84**

15.36%-21.08**

5 53.54% 81.72% 12.31%

54M2~200M2

1 47.58%9.54**

77.55%21.49**

13.48%-25.78**

5 50.57% 82.04% 12.51%

Upper

200M2

1 47.62%-1.47

71.13%2.12*

15.79%1.06

5 45.44% 73.60% 16.21%

Conclusion• The Street Block Price factors has more

quality control and better accuracy than traditional Mass Appraisal.

• Both the relationship of street blocks in price and the level of street block price have improved for Mass Appraisal.

Thank You