On the uncertainty of real estate price predictions

Uncertainty quantification associated with real estate appraisal has largely been overlooked in the literature. In this paper, we address this gap by analysing the uncertainty in automated property valuations using conformal prediction, a distribution-free procedure for constructing prediction intervals with valid coverage in finite samples. Through an empirical study of property prices in the San Francisco Bay Area, we find that prediction intervals obtained using conformal quantile regression have exact coverage. In contrast, prediction intervals obtained from non-conformal quantile regressions severely undercover the data. Furthermore, we show that the intervals adapt to various characteristics of the dwellings, which is crucial given the heterogeneous nature of real estate data. Indeed, we observe that larger and older properties, those in both low and high-income neighbourhoods, as well as those on the market for less than one year are more challenging to evaluate.

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Publication Details

Journal
Journal of Property Research
Published
2024-09-22
DOI
https://doi.org/10.1080/09599916.2024.2403998
Citations
2
Primary Topic
Housing Market and Economics
Type
article
Field-Weighted Citation Impact
2.26
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article

On the uncertainty of real estate price predictions

João A. Bastos, Jeanne Paquette
2 citations
Journal of Property Research
Housing Market and Economics
2.26
article

On the uncertainty of real estate price predictions

João A. Bastos, Jeanne Paquette
article en
2 citations

Abstract

Uncertainty quantification associated with real estate appraisal has largely been overlooked in the literature. In this paper, we address this gap by analysing the uncertainty in automated property valuations using conformal prediction, a distribution-free procedure for constructing prediction intervals with valid coverage in finite samples. Through an empirical study of property prices in the San Francisco Bay Area, we find that prediction intervals obtained using conformal quantile regression have exact coverage. In contrast, prediction intervals obtained from non-conformal quantile regressions severely undercover the data. Furthermore, we show that the intervals adapt to various characteristics of the dwellings, which is crucial given the heterogeneous nature of real estate data. Indeed, we observe that larger and older properties, those in both low and high-income neighbourhoods, as well as those on the market for less than one year are more challenging to evaluate.

Journal of Property ResearchVol. 42(1)
University of Lisbon (PT)
Decent work and economic growth
Openalex Percentile: Top 8%
Housing Market and Economics
2.26
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