We humans seem to have a problem understanding value. Last week, Mark Thoma alerted us to a fascinating Scientific American article on how we may want to blame our ventromedial prefrontal cortex (VMPFC) for our inability to battle the "money illusion" that makes us think something is worth more than it really is. And today, economists Hugo Benítez-Silva , Selcuk Eren , Frank Heiland , and Sergi Jiménez-Martín write at Vox that we consistently overestimate the value of our houses by 5 to 10%. And, they write, "Overly optimistic expectations about the evolution of house prices may have planted the seed of the current mortgage crisis in the US." Homeowners, it seems, routinely overestimate the capital gains they expect from sale of their homes, so they report a skewed estimated value. But, the authors found, the problem is much greater if the homeowners purchased their homes during strong economic periods. There appears to be a strong inverse relationship between interest rates and the value estimation: Given the characteristics of our data on house purchases and house sales, we observe properties purchased as early as 1955 until 2000. This information enables us to explore whether the timing of the purchase and the market conditions at that time could have lasting effects on the accuracy of the individual in reporting the value of their homes. We document a strong correlation between the evolution of our accuracy estimates over time and the business cycle. In periods of high interest rates and declining incomes, the buyers are likely to have lower appreciation expectations due to the declining housing prices (see Figures 1 and 2 below), and end up assessing, on average, more accurately the value of their homes, and even in some cases underestimating it. Figure 1 . Interest rates and home sales in the US, 1960-2007 Figure 2 . Home sales and home prices in the US, 1968-2007 Read How well do individuals predict the selling price of their homes? here .