Housing Depreciation Revisited: Hedonic Price Modeling Versus Assessor Estimates

Abstract Age and condition driven rates of structural depreciation for single-family housing based on hedonic price modeling representing the perceptions of home buyers/sellers are compared to tax assessor depreciation estimates for 47,000 homes in Sarpy County Nebraska. A hedonic price model with age specified as linear generated depreciation rates 11% below assessor rates with differences ranging from 43% lower to 13% higher across four classes of home values. A quadratic-age specification generated depreciation 39% above assessor rates with a range of 15% to 162% higher. A third model, with both quadratic-age and age-condition interaction variables, generated depreciation 27% higher than assessor rates with a range of 8% to 128%. If the goal of hedonic-based housing depreciation modeling is to converge with assessor-derived depreciation estimates based on widely used proprietary cost estimation software and data, then a linear model specification with respect to home age is recommended. Regardless of f...