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.
Journal of Consumer Affairs – Wiley
Published: Jan 1, 2018
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