Housing Prices in Tokyo: A Comparison of Hedonic and Repeat Sales Measures

Do indexes of house prices behave differently depending on the estimation method? If so, to what extent? To address these questions, we use a unique dataset that we compiled from individual listings in a widely circulated real estate advertisementmagazine. The dataset contains more than 470,000 listings of housing prices between 1986 and 2008, including the period of the housing bubble and its burst.We find that there exists a substantial discrepancy in terms of turning points between hedonic and repeat sales indexes, even though the hedonic index is adjusted for structural changes and the repeat sales index is adjusted in theway Case and Shiller suggested. Specifically, the repeat sales measure signals turning points later than the hedonic measure: for example, the hedonic measure of condominium prices bottomed out at the beginning of 2002, while the corresponding repeat sales measure exhibits a reversal only in the spring of 2004. This discrepancy cannot be fully removed even if we adjust the repeat sales index for depreciation.