Data processing: financial – business practice – management – or co – Automated electrical financial or business practice or...
Reexamination Certificate
1998-07-15
2002-06-04
Millin, V. (Department: 2164)
Data processing: financial, business practice, management, or co
Automated electrical financial or business practice or...
C705S014270, C705S035000, C705S037000
Reexamination Certificate
active
06401070
ABSTRACT:
BACKGROUND OF THE INVENTION
A. Field of the Invention
The present invention relates generally to estimating property values, and more particularly, to providing property value estimates based on a repeat sales model.
B. Description of the Prior Art
Financial institutions and businesses involved with sales of property have long tried to estimate values of property accurately. Accurate estimation serves many important purposes. For example, financial institutions use property value estimates as one of the key factors in approving mortgage applications for real estate sales. Relying on the soundness of the estimate, financial institutions accept the risk of lending large sums of money and typically attach the property as security for the transaction. Accordingly, the accuracy of estimated value of the real estate entity is critical.
There are several ways of forecasting house prices. See, for example, J. M. Abraham and W. S. Schauman's article, “Measuring House Price Inflation,” Secondary Mortgage Markets (Winter 1990/91), which is incorporated herein by reference, for various different approaches using an overall price index of the real estate market at issue, such as the median sale price index (essentially a median average of all the properties sold in a market) and the hedonic index (calculating the house price increases by estimating and tracking the average prices of various features of a house, such as the square footage and the presence or absence of the garage).
One such technique is referred to as the repeat sales approach. The data used in the repeat sales model comprise successive selling prices and the sale dates for the same property. In essence, this approach finds the average rate of property appreciation in each period that gives the best statistical fit to all the overlapping holding periods. By using the same house for both prices, the repeat sales model eliminates the bias in price changes that are not due to the true house price change, but due to external factors such as consumer trends for bigger houses.
This basic repeat sales model can be improved by the use of data from refinance transactions, in addition to data from purchase transactions, in forming repeat sales forecasts, thereby increasing the size of the estimation sample and the timeliness of the evaluation sample. However, the conventional repeat sales model treated the data from refinance and purchase transactions identically, and the potential gains of a larger sample size were outweighed by a transaction type bias introduced into the forecasts. In short, the absence of an adequate control for transaction type could cause the forecasts of the repeat transactions model to exhibit material bias, thereby reducing their usefulness for business purposes.
Another shortcoming with the conventional repeat sales method is that the price index used was estimated discretely, as a series of numbers which represent constant house price levels at particular time intervals (typically quarters). This method produces counter-intuitive results: first, house price appreciation is constant during the discrete intervals (here represented as quarters); and second, there are ‘jumps’ in the appreciation at the end of each quarter, and thus, the path of house price appreciation is not continuous.
SUMMARY OF THE INVENTION
In accordance with the purpose of the invention, as embodied and broadly described herein, the invention comprises: accessing, for a plurality of properties in a database, a set of property value data corresponding to each of the plurality of properties, wherein each property has two or more property value data, each property value data derived from a refinance or a purchase transaction; and determining, based on the set of property value data for the plurality of properties, a time-varying price index corresponding to the overall change over time of the values of the plurality of properties, wherein the price index takes into account a transaction type bias between the property value data derived from refinance transactions and the property value data derived from purchase transactions.
In another aspect, the invention comprises: means for accessing, for a plurality of properties in a database, a set of property value data corresponding to each of the plurality of properties, wherein each property has two or more property value data, each property value data derived from a refinance or a purchase transaction; and means for determining, based on the set of property value data for the plurality of properties, a time-varying price index corresponding to the overall change over time of the values of the plurality of properties, wherein the price index takes into account a transaction type bias between the property value data derived from refinance transactions and the property value data derived from purchase transactions.
In a further aspect of the invention the invention comprises an article of manufacture capable of configuring a data processor to estimate the value of a real estate property, the article comprising program code to cause the data processor to perform the steps of: accessing, for a plurality of properties in a database, a set of property value data corresponding to each of the plurality of properties, wherein each property has two or more property value data, each property value data derived from a refinance or a purchase transaction; and determining, based on the set of property value data for the plurality of properties, a time-varying price index corresponding to the overall change over time of the values of the plurality of properties, wherein the price index takes into account a transaction type bias between the property value data derived from refinance transactions and the property value data derived from purchase transactions.
It is to be understood that both the foregoing general description and the following detailed description are exemplary and explanatory only and are not restrictive of the invention, as claimed.
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McManus Douglas A.
Mumey Sol T.
Freddie Mac
Millin V.
Patel Jagdish N
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