Self‐Reported vs. Market Estimated House Values: Are Homeowners Misinformed or are They Purposely Misreporting?

34 Pages Posted: 5 Jun 2018

See all articles by Jung Hyun Choi

Jung Hyun Choi

The Urban Institute

Gary Painter

University of Southern California - Sol Price School of Public Policy

Date Written: Summer 2018

Abstract

Extant research finds significant gaps between a homeowner's self‐reported house value and market estimates, and that the gap is largest for underwater homeowners. Prior studies, however, have largely overlooked the possibility that homeowners’ self‐reported house value may be more accurate due to private information. Previous research has also neglected the possibility that there could be discordance between what homeowners know and what they report as their house value. Using the Panel Study of Income Dynamics, this study examines how the choices of households reveal their knowledge of the true home value. In so doing, we find that that post move housing choices reveal that market estimates are accurate assessments of the housing value. Further, we find evidence that these underwater homeowners are aware of the actual house value, but are reporting them incorrectly. The results show that misreporting underwater homeowners are as likely to be late on their mortgage payments as homeowners that are reporting negative equity. Underwater homeowners’ reluctance to admit their losses accords with the theory of loss aversion.

Suggested Citation

Choi, Jung Hyun and Painter, Gary, Self‐Reported vs. Market Estimated House Values: Are Homeowners Misinformed or are They Purposely Misreporting? (Summer 2018). Real Estate Economics, Vol. 46, Issue 2, pp. 487-520, 2018, Available at SSRN: https://ssrn.com/abstract=3189530 or http://dx.doi.org/10.1111/1540-6229.12199

Jung Hyun Choi (Contact Author)

The Urban Institute ( email )

2100 M Street, NW
Washington, DC 20037
United States

Gary Painter

University of Southern California - Sol Price School of Public Policy ( email )

Los Angeles, CA 90089-0626
United States
213-740-8754 (Phone)
213-740-0001 (Fax)

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