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Households mis-remember cost of home

Friday, March 21 11:34:39

The Central Bank today publishes new research that shows that people tend to get the price that they paid for their homes wrong.

The research, based on a combination of prudential data and a representative survey, highlights the differences between the prices actually paid for house purchase and the price households remember paying.

The study examines the implications this discrepancy has for estimates of the housing wealth effect which use the recall price as an indicator of housing wealth as opposed to the actual price.

The research paper found that, if the recall price was used as an indicator of housing wealth, the estimated wealth effect would be 70 per cent less than that estimated with the actual price.

It also found that the scale of the error appears to be a function of both market conditions and individual household characteristics.