Age, Time, Vintage, and Price Indexes: Measuring the Depreciation Pattern of Houses

Age, time and vintage are key determinants of house prices, yet they cannot be included together linearly or as dichotomous variables in hedonic regressions as construction time + age of house = sale time. We introduce a method where the estimates of the age, time and vintage effects on prices are obtained in a flexible manner, without requiring us to specify a pre-determined functional form for either of these variables. Applying our method to Dutch data, we find that the estimated depreciation pattern over the life of houses does not follow the functional forms typically specified for the age of houses in hedonic regressions.