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

33 Pages Posted: 14 Apr 2017 Last revised: 18 Apr 2018

See all articles by Donald R. Haurin

Donald R. Haurin

Ohio State University (OSU) - Economics

Stephanie Moulton

Ohio State University- John Glenn College of Public Affairs

Wei Shi

Ohio State University (OSU) - Economics

Date Written: March 29, 2017

Abstract

Using a unique dataset of more than 14,000 senior homeowners in the U.S., 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 percent of appraised value and it is biased upwards by 13.4 percent. When adjusted to reflect the general population of seniors, the size and bias of the average error fall to 16.1 and 4.2 percent. 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 2009-11, 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.

Keywords: Self-Assessed House Value, Senior Homeowners, Assessment Errors, Debt Management, Reverse Mortgages, Nominal Loss Denial

JEL Classification: R21, G12, D03, E21

Suggested Citation

Haurin, Donald R. and Moulton, Stephanie and Shi, Wei, The Accuracy of Senior Households' Estimates of Home Values: Application to the Reverse Mortgage Decision (March 29, 2017). Available at SSRN: https://ssrn.com/abstract=2951351 or http://dx.doi.org/10.2139/ssrn.2951351

Donald R. Haurin (Contact Author)

Ohio State University (OSU) - Economics ( email )

154 N. Oval Mall
1010G Derby Hall
Columbus, OH 43210-1172
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614-292-9530 (Fax)

Stephanie Moulton

Ohio State University- John Glenn College of Public Affairs ( email )

110 Page Hall
1810 College Road
Columbus, OH 43210
United States

Wei Shi

Ohio State University (OSU) - Economics ( email )

410 Arps Hall
1945 North High Street
Columbus, OH 43210
United States

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