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The Relationship between Median and Constant Quality House Prices: Implications for Setting FHA Loan Limits
Author(s) -
Hendershott Patric H.,
Thibodeau Thomas G.
Publication year - 1990
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00526
Subject(s) - house price , economics , loan , asset (computer security) , ceiling (cloud) , quality (philosophy) , monetary economics , econometrics , agricultural economics , financial economics , macroeconomics , geography , computer science , philosophy , computer security , epistemology , meteorology
This paper examines the relationship between the asset price of housing and median sales price. We demonstrate: (1) median house prices (as reported by the National Association of Realtors) overstate the increase in constant‐quality house prices by about 2% per year over the 1976–1985 period; and (2) regional differences in median house prices and their rates of increase, respectively, are systematically related to regional differences in real incomes and their rates of increase. We use these results to evaluate the recent proposal to raise the FHA maximum loan limit ceiling from the current ceiling of $124,750 to 95% of the area median house price.