Reality Bites: Homeowners Still Overestimate Appraised Values

Homeowners are still overestimating the value of their home, according to a new report from Quicken Loans that revealed appraiser valuations were 1.95% lower than what homeowners estimated in April.

The gap between perceptions vs. reality has narrowed since March, when the appraiser opinions of value were 2.17% lower than homeowner expectations, as measured by Quicken’s national Home Price Perception Index (HPPI).

“The HPPI is in a healthy trend, nationally,” said Bob Walters, chief economist at Quicken Loans. “While everyone wants their appraisals to come back showing more equity than anticipated, like some homeowners in the West, the discrepancy we are seeing now won’t likely derail a mortgage transaction.”

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When broken down by geographic region, homeowners in the Midwest and Northeast are more likely to think their homes are worth even more than the average 1.95%.

In the Midwest, appraiser values were 2.11% lower than homeowners’ perceptions, while in the Northeast, valuations were on average 2.13% lower than what homeowners expected during the month of April, according to the HPPI. Meanwhile, homeowners in the West over estimated their home values by 1.66%, whereas those in the South overestimated appraiser valuations by 1.95%.

For the past year, aside from a few fluctuations, homeowners have been overestimating the value of their homes by about 2%, when compared to the appraiser’s value, according to the HPPI.

Even though homeowners are still perceiving their homes to be worth more than they actually are, home values are increasing annually, according to Quicken Loans’ national Home Value Index (HVI).

Since April 2015, home values have seen an increase of 3.79%. The West had the largest year-over-year growth with an increase of 4.86%, the index found.

“The steady annual increase in home values shows sustainable growth and an improving economy,” said Walters. “We always look for gains to be similar to inflationary growth while avoiding the hikes that could lead to bubble fears. We are currently in that range, which should come as a more comforting sign to many homeowners.”

Written by Alana Stramowski

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  • Of course homeowners overestimate their property, but 1.5% isn’t really all that much. I have people telling that their property is worth 20% or more of what it is really worth. Websites such as Zillow.com make informed guesses, but even they cannot be taken too literally. I have seen Zillow off by more than $50k. However, when all is said and done, if the prospective borrower understands that the appraisal is the final decision and is willing to keep their hopes and dreams within that amount, then they will probably not be too disappointed. I often tell people that it is best to think “low.” It is always better to find out that the appraisal (and subsequent HECM proceeds) came in higher than you expected than to find the opposite.

    Frank J. Kautz, II
    Staff Attorney

    Community Service Network, Inc.
    52 Broadway
    Stoneham, MA 02180
    (781) 438-1977
    (781) 438-6037 fax
    FrankKautz@csninc.org

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