List Price Information in Residential Appraisal and Underwriting

Abstract

This article examines the usefulness of listing prices as leading indicators of house values and as predictors of the direction of housing markets. With Multiple Listing Service data from a large metropolitan area, we create two price indexes, using first listing price and then selling price as the dependent variable in the hedonic regressions. The market is then geographically and categorically segmented, and Granger causality tests are performed to analyze the leading aspect of list prices in the list price-sales price relationship. We find that different segments of the market perform quite differently over the time period of our study, suggesting that for data-based appraisal purposes care is needed in determining the manner and level of aggregation. We also find, however, that market list prices continue to convey important information about subsequent selling prices in most market segments.