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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
Chapter. 28570 words.
Subjects: Econometrics and Mathematical Economics
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