Association for Public Policy Analysis & Management

Research on house price expectations has been limited by a lack of data which have meaningful cross-sectional variation in home purchase and refinance experiences across respondents. The National Survey of Mortgage Originations fills this gap and allows for the exploration of whether members of different economic subgroups exhibit different levels of knowledge of house price changes in their local areas and whether they have different levels of capacity to anticipate future price changes as a result. This paper finds that first-time homebuyers, a demographic group considered potentially vulnerable during the origination process, are consistently more aware of recent and impending house price trends than repeat purchasers. This paper also shows that borrowers with lower income have less awareness about price trends than borrowers with higher income and less-educated borrowers have less awareness about price trends than borrowers with higher level of education. Additionally, this paper provides evidence that expectations of future house price changes in consumers’ local markets have informational value for estimating future house prices beyond the value provided by local economic data. This paper is a starting point for understanding whether consumers who are less knowledgeable about house prices in their area may make poorer decisions regarding their mortgage or home purchase and may require more support or protection as a result.