A repeat sales index differs from a hedonic model in what respect?
Correct Answer
B) It measures price change on the same properties
Why this is correct: A repeat-sales index measures price changes by tracking the same properties sold multiple times, holding characteristics constant to isolate market movement. Why the other choices are wrong: It requires no transaction data to be computed is false; it requires multiple sales of the same properties. It applies only to newly constructed housing is incorrect; it can apply to any property type with repeat sales. It prices each characteristic of a property describes a hedonic model. Exam tip: Repeat-sales indexes track same properties; hedonic models use characteristics.
Why This Is the Correct Answer
A repeat sales index measures price change on the same properties across successive transactions, whereas a hedonic model estimates the contribution of individual property characteristics.
Why the Other Options Are Wrong
Option A: It requires no transaction data to be computed
A repeat sales index is built entirely from transaction data, requiring at least two sales of each property.
Option C: It applies only to newly constructed housing
The method applies to any property that has sold more than once and is in fact less applicable to new construction, which has no prior sale.
Option D: It prices each characteristic of a property
Pricing each characteristic is what a hedonic model does. That is the distinction being drawn, in reverse.
Same House Twice, or Many Houses Once
Same House Twice measures the market; Many Houses Once prices the features.
How to use: Match the method to the question: market movement over time, or the value of a specific attribute.
Exam Tip
Repeat sales ignore renovation between sales, which can attribute an improvement's effect to market appreciation.
Common Mistakes to Avoid
- -Reversing which method prices characteristics
- -Overlooking renovation bias in repeat sales data
- -Using a hedonic coefficient as a measure of market movement
Concept Deep Dive
Analysis
The two methods attack price measurement from opposite directions. A repeat sales index tracks properties that have sold more than once and measures how the price of the same physical asset changed between transactions, which automatically holds constant everything about the property that did not change — location, lot, layout, quality. That is its great strength as a measure of pure market movement. A hedonic model instead treats price as a function of characteristics and estimates the contribution of each: square footage, bedrooms, age, location factors, condition. It can price attributes and value properties that have never sold, which the repeat sales approach cannot. Each has a matching weakness. Repeat sales use only properties that transacted twice, a sample that may be unrepresentative and that ignores renovation between sales. Hedonic models depend heavily on specification and on the quality of the characteristic data. Appraisers meet both: repeat sales indices support market conditions adjustments, hedonic models support feature adjustments.
Background Knowledge
Repeat sales indices measure price change using properties sold more than once, holding physical characteristics constant. Hedonic models regress price on property characteristics to estimate the contribution of each.
Real-World Application
An appraiser cites a repeat sales index to support a market conditions adjustment and a hedonic model to support a size adjustment in the same report.
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