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Under What Circumstances do First-time Homebuyers Overpay? – An Empirical Analysis Using Mortgage and Appraisal Data

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  • Jessica Shui

    (Federal Housing Finance Agency)

  • Shriya Murthy

    (Federal Housing Finance Agency)

Abstract

In this paper, we study whether first-time homebuyers overpay for their homes and whether the magnitude of overpayment varies with the diligence of appraisers involved. We present a robust result that: 1) First-time homebuyers sort into cheaper houses. 2) Once observed and unobserved house characteristics are controlled for, they pay a premium compared to their more experienced counter parts. Our analysis additionally suggests that certain appraisals and appraisers might be able to mitigate this overpayment, though the underlying channel remains unclear. This research is among the first to contribute both theoretically and empirically to the existing literature on first-time homebuyers.

Suggested Citation

  • Jessica Shui & Shriya Murthy, 2017. "Under What Circumstances do First-time Homebuyers Overpay? – An Empirical Analysis Using Mortgage and Appraisal Data," FHFA Staff Working Papers 17-03, Federal Housing Finance Agency.
    • Handle: RePEc:hfa:wpaper:17-03
    DOI: 10.1080/10835547.2019.12091518
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    Cited by:

    1. Jessica Shui & Shriya Murthy, 2018. "Are Appraisal Management Companies Value-Adding? – Stylized Facts from AMC and Non-AMC Appraisals," FHFA Staff Working Papers 18-01, Federal Housing Finance Agency.

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    More about this item

    Keywords

    first-time homebuyer; overpayment; appraisal; appraiser; renegotiation; repeat-sales approach;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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