Working Paper

What Is My Home Worth?

Abstract: Economic models often assume that agents always know the market value of their assets. We use residential property tax assessment as a laboratory to test this assumption for housing. We first show that assessed market value (AMV) is a noisy proxy for transaction-based market value (TMV). Innovations in AMV are less volatile than, are weakly correlated with, and lag innovations in TMV. An AMV-based, national-level house price index has shallower troughs and shorter peaks than its TMV-based counterpart. We merge in anonymized credit bureau data to test whether homeowners use AMVs, as signals of housing wealth, to make consumption decisions. Using local mass reassessments as an instrument, we find that AMV changes causally affect the likelihood that households take out a new home equity line of credit (HELOC) with a similar economic magnitude as TMV changes. A partial equilibrium calibration exercise suggests that innovations in AMV can explain approximately 1% of annual HELOC origination. Overall, our results suggest that homeowners do not fully know the value of their homes.

JEL Classification: E2; G4; G5; R2;

https://doi.org/10.21799/frbp.wp.2025.40

Bibliographic Information

Provider: Federal Reserve Bank of Philadelphia

Part of Series: Working Papers

Publication Date: 2025-12-22

Number: 25-40