Testing Estimates of Housing Cost Differences Among US Metropolitan Areas

Easton, Todd

doi:10.2139/ssrn.2189629

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Testing Estimates of Housing Cost Differences Among US Metropolitan Areas

36 Pages Posted: 16 Dec 2012 Last revised: 26 Dec 2012

See all articles by Todd Easton

Todd Easton

University of Portland - Dr. Robert B. Pamplin, Jr. School of Business Administration

Date Written: December 13, 2012

Abstract

This paper investigates the accuracy of six measures of housing cost differences among US metropolitan areas. Using Census data from 177 metropolitan areas, it tests the measures in two ways. First, it tests the ability of changes in the measures to predict changes in the shelter component of the metropolitan CPI from 1990 to 2000. Second, it tests the ability of the measures themselves to predict a proxy in 2000. A measure based on Fair Market Rents calculated by HUD placed second on the first test, but did badly on the second. The housing component of the ACCRA index, a living cost measure frequently used by researchers, performed poorly on both tests. The top performer on both tests was a measure based on the average rent per room for a metropolitan area’s dwellings. Researchers wishing to control for living cost differences among places should consider including it in their living cost index.

Suggested Citation: Suggested Citation

Easton, Todd, Testing Estimates of Housing Cost Differences Among US Metropolitan Areas (December 13, 2012). Available at SSRN: https://ssrn.com/abstract=2189629 or http://dx.doi.org/10.2139/ssrn.2189629