Median and stratified median indices are simple to calculate and provide the price of the middle ranking property observed to sell in a given measurement period. The stratified median index that CoreLogic produces for houses groups suburbs by their long-term price to land size ratio. The stratified median index that CoreLogic produces for units and apartments, groups suburbs by their long-term median transaction price. The strata definitions used to classify properties into subsets are based on price, geography, land size, and interactions of these variables. Unique price series are created for these subsets which are then aggregated to estimate suburb-adjusted price movements in the overall market.
Stratification is a process for creating subsets of houses which are qualitatively similar.
The second class of indices CoreLogic have produced are based on a median and “stratified” median price series. Another important advantage of a hedonic imputation index is that its calculation frequency can be daily and that it tracks the value of an entire portfolio of property, not just the prices of properties observed to sell in a given period.
The hedonic method has the advantage that it utilises attribute (or characteristic) information of each dwelling to mitigate biases that are otherwise prevalent in median and repeat sales property price indices. This index utilises comprehensive information on the attributes and characteristics of residential properties (such as location, land size, and bedrooms) to measure “quality-adjusted” changes in property value over time and to also impute the value of dwellings having a certain set of characteristics (but no current sales price) by observing the sales prices and characteristics of other dwellings which have recently been observed as selling. The CoreLogic Home Value Index is a hedonic model. The first class of index, known as the “hedonic” model, had not been commercially produced in Australia prior its introduction by CoreLogic.
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