# **2. Review of the Literature**

Most of the literature on the accuracy of homeowner self-assessed housing values concentrates on the United States and compares self-assessed home values found in surveys with external information from professional appraisers, market transactions, tax assessments, other surveys, and so on. In their seminal paper, Kish and Lansing (1954) compare the homeowner estimates in the 1950 Survey of Consumer Finances and estimates of professional appraisers who were asked to evaluate the same properties. They found a large bias between the homeowner and professional evaluations, but, on average, the bias was negligible. Using a similar approach and similar data, Kain and Quigley (1972) find comparable results. By contrast, Ihlanfeldt and Martinez-Vazquez (1986) find that the owner estimates tend to be higher than the appraised values.

In a rare study on a developing country, Gonzalez-Navarro and Quintana-Domeque (2009) compare data from a household survey and appraisals of the same homes by a real estate agent in the city of Acayucan, Veracruz, central Mexico. They find large variability in the bias between homeowner and professional appraisal valuations. Only 11 percent of the estimates of survey respondents were within 10 percent of the appraiser values; 25 percent of the respondents believed their homes were worth at most 70 percent of the appraised values; and 35 percent of the respondents believed their homes were worth at least 150 percent of the appraised values. The length of tenure appears positively correlated with the bias: owners with long tenure overestimated the values of their homes, while families with tenure of less than two years seem to have reasonably accurate and unbiased estimates of the values of their homes.

Recent contributions exploiting data on housing transactions include Bigelow, Ifft, and Kuethe (2020), Chan, Dastrup, and Ellen (2016), and Corradin, Fillat, and Vergara-Alert (2017). Bigelow, Ifft, and Kuethe (2020) concentrate on farmland owners in New York State. They advocate comparisons across both self-estimates and market transactions because of key differences in the way farmers and market participants perceive the value of farmland. They point to the importance of taking into account the level of activity or thickness of the market, where thickness refers to a level of transactions that is above the median. For instance, landowners in thick markets seem generally to overestimate the value of their land. Comparing self-reported valuations and market selling prices by zip code over time (1984–2013 in Corradin, Fillat, and Vergara-Alert 2017, and 1997–2011 in Chan, Dastrup, and Ellen 2016), Corradin, Fillat, and Vergara-Alert (2017) and Chan, Dastrup, and Ellen (2016) reach a similar conclusion: the average value of housing price misperception is countercyclical if this value is compared with the housing market cycle. Tur-Sinai, Fleishman, and Romanov (2020) conduct a similar exercise on Israeli data at the census tract level. They investigate the bias size of subjective valuations against transaction prices across a distribution of dwelling prices and find that the effect of the bias is opposite at the opposite ends of the distribution. Homeowners living in the most inexpensive dwellings tend to give upward-biased estimates, while homeowners living in the most expensive dwellings tend to understate the values of their homes.

Other approaches compare information found in different surveys. Several authors compare the approach to homeowner dwellings adopted by the U.S. Bureau of Labor Statistics for the CPI with the approach adopted by the Bureau of Economic Analysis for personal consumption expenditures. While the CPI calculations of the former rely on self-reported homeowner estimates, the latter uses rent-to-value ratios. Lebow and Rudd (2003), for instance, suggest that homeowners may give quite inaccurate estimates of the rent values of their homes, and this may create large biases in the computation of the CPI given the large weight attached to the imputed rent category. Garner et al. (2006) find that, in 1992, the estimates of dwelling services of renters and owners 4