Repeat-Sales Method

The repeat-sales method is a manner of calculating changes in the sales price of the same piece of real estate over specific periods of time. Housing market analysts use repeat sales to estimate changes in home prices over a period of months or years. Various housing price indexes use the repeat-sales method to provide information about the housing market to homebuyers and sellers, housing market investors, and those working in the housing and housing finance industries.

Not all housing price indexes are created equal. The housing market is considered to be one of the United States’ leading economic indicators – so it is important to accurately assess housing market trends.  The majority of housing price indexes track home prices in a specific region over a specific period of time. However, the manner in which the index is calculated can create structural problems where the index does not present an accurate picture of housing price trends.

Flawed calculations would include those that pick random samples of houses to track as all these homes may not be for sale or there structures and types could be very different. An index which tracked the median home price in a specific area – such as the National Association of Realtors (NAR) Median Index or the Census Bureau Median Index - would not identify changes to the structure of homes versus outside market factors which may affect price.   

The Repeat-Sales Method was adopted to overcome these structural issues as it was created to track the change in price of real estate between a current sale and any previous sale. An advantage of repeat-sales methods is that they calculate changes in home prices based on sales of the same property, so they avoid the problem of trying to account for price differences in homes with varying characteristics. Repeat-sales methods also offer a more accurate alternative to regression analysis or to calculating average sales price by geographic area. A shortcoming of repeat-sales methods is that they don’t account for homes that were sold only once during the reported time period. These sales are also meaningful indications of housing market activity.

Perhaps the most well-known housing index that uses the repeat-sales method is the Case-Shiller Index. It excludes new construction, condos and co-ops. It also excludes non-arms-length transactions, such as home sales between family members at below-market prices. It does include foreclosure sales.

Other indexes that use the repeat-sales method are the Federal Housing Finance Agency’s (FHFA) monthly House Price Index, which is based on Fannie Mae and Freddie Mac’s data on single-family home sale prices and refinance appraisals; and CoreLogic’s LoanPerformance Home Price Index, which covers a broader geographic area than the Case-Shiller or FHFA indexes.

Canada’s major home price index, the National Composite House Price Index, also uses the repeat-sales method. Indexes such as these typically report changes in home prices from the previous month, quarter and year. Increasing home prices indicate increasing demand, while decreasing prices indicate decreasing demand.