A simple example will illustrate why this is the case. With enough data points, over enough time, a regression model can be used to determine the relationship between each of these parameters and the value of a home.īecause a hedonic approach is based on a holistic view of all the data available, it is not inherently skewed by the mix shifting to larger (or smaller) properties. A home can be viewed, mathematically speaking, as a collection of parameters such as (beds=3, baths=2, garages=2, sqft=1800, lotsize=2500, neighborhood=Woodbridge, Irvine, CA, and so forth). The term "hedonic" refers to the concept that the value of a home can be determined by looking at the value of the constituent components of a home. A hedonic price index is a fundamentally different method for calculating home price trends.
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