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Durables and Owner-Occupied Housing in a Consumer Price Index

Durables and Owner-Occupied Housing in a Consumer Price Index

Chapter:
(p.445) 12 Durables and Owner-Occupied Housing in a Consumer Price Index
Source:
Price Index Concepts and Measurement
Author(s):
W. Erwin Diewert
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226148571.003.0013

This chapter provides a detailed review of alternative treatments of homeownership in a Consumer Price Index, discussing the advantages and disadvantages of several approaches to measuring homeowner costs. These include the acquisition price of housing units, per-period homeowner spending for mortgage interest and other periodic payments, user cost, and rental equivalence. The user cost and rental equivalence techniques are alternative flow-of-services approaches. The chapter records that a major difficulty associated with forming any housing price index is that units are unique and also depreciate over time, making it difficult to construct price indexes using a matched-model methodology. It discusses various methods for overcoming this difficulty.

Keywords:   homeownership, Consumer Price Index, costs, price index, user cost, rental equivalence

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