House price risk and the hedging benefits of home Ownership

M.I. Dröes; W.H.J. Hassink

doi:10.1016/j.jhe.2013.03.002

House price risk and the hedging benefits of home Ownership

M.I. Dröes, W.H.J. Hassink

Research output: Contribution to Journal › Article › Academic › peer-review

Abstract

Using a repeat-sales methodology, this paper finds that estimates of house price risk based on aggregate house price indices substantially underestimate the true size of house price risk. This is the result of the fact that aggregate house price indices average away the idiosyncratic volatility in house prices. Additional results show that the idiosyncratic risk exceeds the hedging benefits of home ownership. These results imply that for many home owners, owning a house may well add more price risk than it hedges away. These findings are based on a detailed dataset of individual housing transactions in the Netherlands. © 2013 Elsevier Inc.

Original language	English
Pages (from-to)	92-99
Number of pages	7
Journal	Journal of Housing Economics
Volume	22
Issue number	2
DOIs	https://doi.org/10.1016/j.jhe.2013.03.002
Publication status	Published - 2013

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title = "House price risk and the hedging benefits of home Ownership",

abstract = "Using a repeat-sales methodology, this paper finds that estimates of house price risk based on aggregate house price indices substantially underestimate the true size of house price risk. This is the result of the fact that aggregate house price indices average away the idiosyncratic volatility in house prices. Additional results show that the idiosyncratic risk exceeds the hedging benefits of home ownership. These results imply that for many home owners, owning a house may well add more price risk than it hedges away. These findings are based on a detailed dataset of individual housing transactions in the Netherlands. {\textcopyright} 2013 Elsevier Inc.",

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AB - Using a repeat-sales methodology, this paper finds that estimates of house price risk based on aggregate house price indices substantially underestimate the true size of house price risk. This is the result of the fact that aggregate house price indices average away the idiosyncratic volatility in house prices. Additional results show that the idiosyncratic risk exceeds the hedging benefits of home ownership. These results imply that for many home owners, owning a house may well add more price risk than it hedges away. These findings are based on a detailed dataset of individual housing transactions in the Netherlands. © 2013 Elsevier Inc.

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