Home-value insurance and idiosyncratic risks of residential property prices

Authors

  • Alfred Larm Teye TU Delft, Architecture and the Built Environment

DOI:

https://doi.org/10.7480/abe.2018.3.3574

Abstract

The recent Global Financial Crisis has reawakened home-owners to the need for protecting their home-equities from possible future house price decline. This paper re-examines the Shiller and Weiss (1999) home-value insurance scheme and proposes a modification that eliminates a large proportion of the idiosyncratic sale price risks of residential properties. Using data between 1995 and 2014 for Amsterdam, the proposed insurance policy shows a higher pay-out efficiency, a higher loss coverage and a greater pay-out probability than the original Shiller and Weiss (1999) scheme. The new home-value insurance policy thus provides better protection for the property sale price risks.

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Published

2018-12-20