In our previous article, we explained how Hedonic Value Indices (HVIs) such as those published by CoreLogic, can measure changes in property market values, despite only a small number of houses having recent sale prices.
From that article, you’ll remember that the accuracy of a HVI relies upon details about property quality – bedroom counts, bathroom counts, land size, construction date, are all things that HVIs use to better provide context for sales that have taken place.
In other words, a house selling for double the local median, probably has much better features than other houses nearby. Knowing this, we don’t conclude that the value of the entire area has doubled. Since we’ve accounted for the higher quality of that property, we know it was an outlier, and we can produce a more accurate estimate of market change.