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Under What Circumstances do First-time Homebuyers Overpay? – An Empirical Analysis Using Mortgage and Appraisal Data

Jessica Shui and Shriya Murthy

No 17-03, FHFA Staff Working Papers from Federal Housing Finance Agency

Abstract: In this paper, we study whether first-time homebuyers overpay for their homes and whether the magnitude of overpayment varies with the diligence of appraisers involved. We present a robust result that: 1) First-time homebuyers sort into cheaper houses. 2) Once observed and unobserved house characteristics are controlled for, they pay a premium compared to their more experienced counter parts. Our analysis additionally suggests that certain appraisals and appraisers might be able to mitigate this overpayment, though the underlying channel remains unclear. This research is among the first to contribute both theoretically and empirically to the existing literature on first-time homebuyers.

Keywords: first-time homebuyer; overpayment; appraisal; appraiser; renegotiation; repeat-sales approach (search for similar items in EconPapers)
JEL-codes: C33 D83 G21 G23 L85 R3 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2017-04
New Economics Papers: this item is included in nep-ure
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Forthcoming in the Journal of Real Estate Research

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DOI: 10.5555/0896-5803.41.1.107

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