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Are homeowners in denial about their house values? comparing owner perceptions with transaction-based indexes

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  • Alice M. Henriques
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    Abstract

    The boom and bust of the housing market has been a prominent feature of the household financial landscape in recent years. The exact magnitude of the house price swings depends on whether you ask homeowners how much their houses are worth at two points in time or use the change in a transaction-based house price index (HPI). During the boom, owner-reported values rose much more rapidly than the HPI, and after the bust, owner-reported values fell slightly less than the HPI. Individual homeowner "errors" are estimated to explain about one-third of the different in aggregate changes in the housing stock as measured by the Survey of Consumer Finances and CoreLogic national HPI. In a panel of homeowners surveyed during the housing downturn, owner-reported changes in value do not systematically diverge from local house price index changes.

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    Bibliographic Info

    Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2013-79.

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    Date of creation: 2013
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    Handle: RePEc:fip:fedgfe:2013-79

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    1. Gatzlaff, Dean H & Haurin, Donald R, 1997. "Sample Selection Bias and Repeat-Sales Index Estimates," The Journal of Real Estate Finance and Economics, Springer, vol. 14(1-2), pages 33-50, Jan.-Marc.
    2. David Genesove & Christopher Mayer, . "Loss Aversion and Seller Behavior: Evidence from the Housing Market," Zell/Lurie Center Working Papers 323, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
    3. Hugo Benítez-Silva & Selcuk Eren & Frank Heiland & Sergi Jiménez-Martín, 2008. "How Well do Individuals Predict the Selling Prices of their Homes?," Working Papers 2008-10, FEDEA.
    4. Edward L. Glaeser & Joshua D. Gottlieb & Joseph Gyourko, 2012. "Can Cheap Credit Explain the Housing Boom?," NBER Chapters, in: Housing and the Financial Crisis, pages 301-359 National Bureau of Economic Research, Inc.
    5. Robert J. Shiller, 1991. "Arithmetic Repeat Sales Price Estimators," Cowles Foundation Discussion Papers 971, Cowles Foundation for Research in Economics, Yale University.
    6. Goodman, John Jr. & Ittner, John B., 1992. "The accuracy of home owners' estimates of house value," Journal of Housing Economics, Elsevier, vol. 2(4), pages 339-357, December.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Are homeowners delusional about the value of their home?
      by Economic Logician in Economic Logic, Too on 2014-01-07 15:45:00

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