The Accuracy of Long-term Real Estate Valuations

By using a unique data set of single-family house transactions, we examine theaccuracy of the cost and sales comparison approach over different forecast horizons. We find that sales comparison values provide better long-term forecaststhan cost values if the economic loss function is symmetric. A weighted averageof both sales comparison value and cost value can reduce this loss even further.If the economic loss function is asymmetric, however, cost values might providebetter long-term forecasts.