Real Estate Economics Journal Recognizes Professors Sewin Chan and Ingrid Gould Ellen for "Best Paper" of 2016
A study by NYU Wagner professors Sewin Chan and Ingrid Gould Ellen, and NYU Furman Center post-doctorate research fellow Samuel Dastrop, has been named Best Paper of 2016 by the American Real Estate and Urban Economics Association, publisher of the quarterly journal Real Estate Economics.
The paper, “Do Homeowners Mark to Market? A Comparison of Self-Reported and Estimated Market Home Values During the Housing Boom and Bust,” offers robust evidence across two different data sets that households tend to overestimate the value of their homes following a housing bust.
The authors write that “many homeowners do not fully understand, or have not fully accepted, the degree to which the market suggests that their homes have lost value.”
Homeowners may have an aversion to loss or be slow to perceive a change in market conditions. Whatever the reason for their behavioral response, during downturns homeowners hold out for a price well above the market estimate, even including “underwater” borrowers. Over time, but slowly, they align their perceptions with reality, the data show.