The Rose-Colored Glasses of Homeowners

Cruijsen, Carin van der; Jansen, David‐Jan; Rooij, Maarten van

doi:10.2139/ssrn.2437350

Cited by 10 publications

(2 citation statements)

References 38 publications

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“…This finding suggests that seniors with high LTVs may overvalue their property, even after controlling for changes in house prices in the locality. Evidence for this effect was found using Dutch data (Van der Cruijsen, Jansen and van Rooij ). However, the greater the LTV, the more recently a mortgage on the property has been originated, perhaps due to refinancing.…”

Section: Theoretical Expectationsmentioning

confidence: 89%

“…Henriques () compares changes in SCF home self‐valuation data (purchase price and current estimated value) to the CoreLogic house price index and, in a descriptive analysis of trends, finds that homeowners’ estimates of house value rose more during the housing boom and declined less during the subsequent bust . Van der Cruijsen, Jansen and van Rooij () find that the Dutch overestimate house prices compared to changes in regional price indexes. Wang () uses a similar method with the Panel Study of Income Dynamics (PSID) and Federal Housing Finance Agency's (FHFA) price index to compute homeowners’ errors.…”

Section: Literature On Self‐assessment Of Home Valuesmentioning

confidence: 99%

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The Accuracy of Senior Households’ Estimates of Home Values: Application to the Reverse Mortgage Decision

Haurin

Moulton

Shi

2017

Real Estate Economics

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Using a unique data set of more than 14,000 senior homeowners in the United States, this study compares self‐assessed home values to arm's length contemporaneous appraisals. In a sample of seniors who received counseling for a reverse mortgage, the absolute value of the assessment error averages 18.9% of appraised value and it is biased upwards by 13.4%. When adjusted to reflect the general population of seniors, the size and bias of the average error fall to 16.1% and 4.2%. Both the bias and the size of the error tend to be lower for households with higher income and credit scores but it is greater for black households. In our sample period of 2009–2011, house prices were falling. The greater the rate of price reduction, the greater is the upward bias and size of the assessment error. When seniors who applied for a reverse mortgage learn that they overvalued their home, their probability of closing the loan falls.

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Section: Theoretical Expectationsmentioning

confidence: 89%

Section: Literature On Self‐assessment Of Home Valuesmentioning

confidence: 99%

The Accuracy of Senior Households’ Estimates of Home Values: Application to the Reverse Mortgage Decision

Haurin

Moulton

Shi

2017

Real Estate Economics

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Tracking Home-Owners’ Sentiments: Subjective Indices and Convergent Validity

Waltl

Lepinteur

2023

J Real Estate Finan Econ

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Surveys regularly ask home-owners to guess what their property might be worth in the current housing market. We develop suitable statistical techniques to construct hedonic and repeat-sales style house price indices from these owner-estimated values (OEVs). The resulting series are then linked to a large set of quality-adjusted residential property price indices estimated from transaction data allowing us to perform a variety of convergent validity tests. Based on results for 20 countries, several decades and different OEV elicitation techniques, we conclude that the “wisdom of the home-owner crowd” is sufficient to study objective house price dynamics. Yet, surveys fail to accurately measure house price levels.

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How well do individuals predict the selling prices of their homes?

Benı́tez-Silva

Eren

Heiland

et al. 2015

Journal of Housing Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in August 2009Hugo Benítez-Silva acknowledges the financial support of the National Institute on Aging through grant number 5 P01 AG022481-04 for a related project; and, along with Frank Heiland, thanks the Michigan Retirement Research Center for its support on a related project. Sergi Jiménez-Martín acknowledges the financial support of the Spanish Ministry of Education through project number SEJ2005-08783-C04-01. Any remaining errors are the authors'.The Levy Economics Institute Working Paper Collection presents research in progress by Levy Institute scholars and conference participants. The purpose of the series is to disseminate ideas to and elicit comments from academics and professionals.The Levy Economics Institute of Bard College, founded in 1986, is a nonprofit, nonpartisan, independently funded research organization devoted to public service. Through scholarship and economic research it generates viable, effective public policy responses to important economic problems that profoundly affect the quality of life in the United States and abroad. More importantly, we are the first to establish a strong correlation between accuracy and the economic conditions at the time of the property's purchase. While most individuals overestimate the value of their property, those who buy during more difficult economic times tend to be more accurate, in some cases even underestimating the value of their house. We find a surprisingly strong, likely permanent, and in many cases long-lived effect of the initial conditions surrounding the purchase of properties, and on how individuals value them. This cyclicality of the overestimation of house prices provides some explanation for the difficulties currently faced by many homeowners, who were expecting large appreciations in home value to rescue them in case of increases in interest rates, which could jeopardize their ability to live up to their financial commitments.

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The Rose-Colored Glasses of Homeowners

Cited by 10 publications

References 38 publications

The Accuracy of Senior Households’ Estimates of Home Values: Application to the Reverse Mortgage Decision

The Accuracy of Senior Households’ Estimates of Home Values: Application to the Reverse Mortgage Decision

Tracking Home-Owners’ Sentiments: Subjective Indices and Convergent Validity

How well do individuals predict the selling prices of their homes?

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