Owners think their homes are worth an average of 1.70% more than appraisers do, according to Quicken Loans’ National Home Price Perception Index (HPPI) out Tuesday. This marks the first time in seven months that the gap between the two opinions of value narrowed.
Despite differing opinions in appraisals, home values continue to rise across the country. Quicken Loans’ National Home Value Index (HVI) showed appraisals rose an average of 1.25% from May to June and increased 5.35% year-over-year.
Quicken said owners are still estimating their homes at higher values than the appraisal, although the spread is now slightly narrower. Nationally, appraisals were an average of 1.70%t lower than what homeowners thought they would be, as measured by the HPPI. This is compared to June when estimates were 1.93% higher. There is a wide range of perceptions across the country. The Midwestern and Eastern regions kept with the national trend of a lower appraiser opinion. On the flip side, the Western markets were more likely to have owners underestimate their home value.
“While a 1% or 2% difference in home value opinions may not seem like a lot, it could be enough to derail a mortgage,” said Quicken Loans Executive Vice President of Capital Markets, Bill Banfield. “A homeowner could be forced to bring more cash to closing in order to make a mortgage work if the appraisal is lower than expected. On the other hand, if an appraisal comes in higher, they could be surprised with more equity than they had planned. Either way, if owners are aware of their local markets it will lead to smoother mortgage transactions.”
The only region that didn’t show a monthly increase in appraisal values was the Northeast, with a 1.18% drop. However, all regions showed annual gains, ranging from 2.17% in the Northeast to a 6.12% increase in the West.
“As we get later into the spring and summer selling season there are less and less homes available for sale, driving prices higher,” Banfield said. “What’s clear is that the demand for housing is strong in much of the country. With interest rates remaining historically low, this could be the time for a homeowner to move on to the new construction home they had their eye on. If they do so, it would open home options for first time home buyers entering the market. The additional inventory could lead to more balanced prices, moving away from the spike in annual growth we have seen lately.”
