Home price beliefs: Evidence from Australia

New facts are documented about self-assessed home valuations using household panel data and a near-census of home sale prices. Between 2002 and 2012, homeowners' display a small positive bias of around 1% in estimating the market value of their homes, although there is considerable dispersion in beliefs and prices. Household characteristics, including age, tenure, and income and local area characteristics, such as unemployment, are associated with differences between beliefs and prices. The extent of overvaluation is positively associated with household spending, leverage and risky-asset holdings. Over the housing cycle, homeowner valuations appear less volatile than sale prices and are backward-looking; homeowners also learn from past 'errors'. These facts support recent literature on the importance of belief formation for household decision-making.