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The Rose†Tinted Spectacles of Homeowners

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  • Carin van der Cruijsen
  • David†Jan Jansen
  • Maarten van Rooij

Abstract

Based on annual household surveys between 2011 and 2014 and additional evidence from a customized survey in 2013, we document that a sizable group of homeowners in the Netherlands has a rosy picture of the value of their house. Even homeowners who are arguably well informed tend to overestimate the value of their house. Multivariate regression analyses suggest that this overestimation is positively related to the mortgage loan†to†value ratio and the tenure of the owner†occupier. Moreover, homeowners tend to overestimate the value of the house when the actual value falls below the purchase price of the house. We discuss rational interpretations of these findings as well as psychological explanations such as loss aversion or an endowment effect.

Suggested Citation

  • Carin van der Cruijsen & David†Jan Jansen & Maarten van Rooij, 2018. "The Rose†Tinted Spectacles of Homeowners," Journal of Consumer Affairs, Wiley Blackwell, vol. 52(1), pages 61-87, March.
    • Handle: RePEc:bla:jconsa:v:52:y:2018:i:1:p:61-87
    DOI: 10.1111/joca.12134
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    Cited by:

    1. Carin van der Cruijsen & Marie-Claire Broekhoff, 2024. "Gender gaps in the world of payments," Working Papers 805, DNB.
    2. Gallin, Joshua & Molloy, Raven & Nielsen, Eric & Smith, Paul & Sommer, Kamila, 2021. "Measuring aggregate housing wealth: New insights from machine learning ☆," Journal of Housing Economics, Elsevier, vol. 51(C).
    3. Stijn Dreesen & Sven Damen, 2023. "The accuracy of homeowners’ valuations in the twenty-first century," Empirical Economics, Springer, vol. 65(1), pages 513-566, July.
    4. Suari-Andreu, Eduard, 2021. "Housing and household consumption: An investigation of the wealth and collateral effects," Journal of Housing Economics, Elsevier, vol. 54(C).
    5. Lee, Seungyoon, 2023. "House prices, homeownership, and household consumption: Evidence from household panel data in Korea," Economic Modelling, Elsevier, vol. 126(C).
    6. Dorinth van Dijk, 2019. "Local Constant-Quality Housing Market Liquidity Indices," DNB Working Papers 637, Netherlands Central Bank, Research Department.

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