RISMEDIA, Tuesday, June 02, 2015— Encouraged by strong price increases and hot sales this spring, increasing numbers of owners are listing their homes for sale. But chances are good that millions of owners are making wrong assumptions about the value of their homes, according to two new studies.

Wrong valuation assumptions can lead to bad decisions about whether to sell, when to sell and how to price a property.  The result could be delays in selling and lowering the price below the amount needed to pay off the existing mortgage plus closing costs and make the down payment on a new one. For buyers, bad information can lead to overpaying for a house on the verge of a value decline or losing a house by making an ill-advised offer.

Owners Overvalue by Eight Percent

A new study scheduled for publication by the Journal of Housing Economics by economists at CUNY and the City of New York found that homeowners overprice their homes by an average of 8 percent.  Those who bought during times of appreciating prices such as the 2004-2006 housing boom tend to overestimate their value even more, as high as 12 percent.  Owners who bought during the boom are inflating the value of their homes an average of $26,328 on a median priced existing home ($219,400).

“Many buyers during the housing boom in the early 2000s took on large and risky financial commitments facilitated by relaxed borrowing standards and the belief that house prices would continue to appreciate. These commitments made them more dependent on price appreciation to build equity. When the (thin) equity cushions quickly evaporated during the recent housing bust, refinancing mortgaged homes became very difficult and often impossible for these individuals,” wrote the authors.