Perceptions and Expectations of Mortgage Borrowers: New Evidence from the National Survey of Mortgage Originations

Chad Redmer
United States Naval Academy

The views expressed in this paper are those of the author and should not be attributed to the United States Naval Academy or Department of Defense. This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.

Research on house price expectations has been limited by a lack of data which have meaningful cross-sectional variation in home purchase and refinance experiences across respondents. The National Survey of Mortgage Originations (NSMO) fills this gap and allows for the exploration of whether members of different demographic groups exhibit different levels of knowledge of house price changes in their local areas and whether they have different levels of capacity to anticipate future price changes as a result. This study finds that first-time homebuyers, a demographic group considered potentially vulnerable during the origination process, are consistently more aware of recent and impending house price trends than repeat purchasers. This study also shows that borrowers with lower incomes have less awareness about price trends than borrowers with higher incomes, and less-educated borrowers have less awareness about price trends than borrowers with higher levels of education. Additionally, this article provides evidence that expectations of future house price changes in consumers’ local markets have informational value for estimating future house prices beyond the value provided by local economic data. This study provides a basis for understanding whether consumers who are less knowledgeable about house prices in their area may make poorer decisions regarding their mortgage or home purchase and may require more support or protection as a result.