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

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dc.contributor.author Benítez-Silva, Hugo
dc.contributor.author Eren, Selcuk
dc.contributor.author Heiland, Frank
dc.contributor.author Jiménez-Martín, Sergi
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
dc.date.accessioned 2017-07-26T10:50:25Z
dc.date.available 2017-07-26T10:50:25Z
dc.date.issued 2008-02-01
dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1065
dc.identifier.uri http://hdl.handle.net/10230/961
dc.description.abstract Self-reported home values are widely used as a measure of housing wealth by researchers employing a variety of data sets and studying a number of different individual and household level decisions. The accuracy of this measure is an open empirical question, and requires some type of market assessment of the values reported. In this research, we study the predictive power of self-reported housing wealth when estimating sales prices utilizing the Health and Retirement Study. We find that homeowners, on average, overestimate the value of their properties by between 5% and 10%. More importantly, we are the first to document a strong correlation between accuracy and the economic conditions at the time of the purchase of the property (measured by the prevalent interest rate, the growth of household income, and the growth of median housing prices). While most individuals overestimate the value of their properties, those who bought during more difficult economic times tend to be more accurate, and in some cases even underestimate the value of their house. These results establish a surprisingly strong, likely permanent, and in many cases long-lived, effect of the initial conditions surrounding the purchases of properties, on how individuals value them. This cyclicality of the overestimation of house prices can provide some explanations 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.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 1065
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.title How well do individuals predict the selling prices of their homes?
dc.type info:eu-repo/semantics/workingPaper
dc.date.modified 2017-07-23T02:56:59Z
dc.subject.keyword self-reported housing values
dc.subject.keyword housing prices
dc.subject.keyword instrumental variables
dc.subject.keyword sample selection
dc.subject.keyword business cycle
dc.subject.keyword interest rates
dc.subject.keyword health and retirement study
dc.subject.keyword Microeconomics
dc.rights.accessRights info:eu-repo/semantics/openAccess


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