Homeowners and Appraisers Grew Further Apart in June

by Kevin Graham of Quicken Loans

The gap between homeowners’ expectations and appraisers’ opinions grew slightly in June, as appraised values were 1.93% lower than homeowner expectations. In comparison, the difference was 1.89% in May.

Home values were up 0.84% since last month. This is a 4.47% rise since June of last year.

Home Price Perception Index (HPPI)

Although a 1.93% difference in the opinions of homeowners and appraisers is certainly not a huge gap by any measure, it does represent a widening of the gap month to month, with May coming in at 1.89% lower than expected nationwide.

Quicken Loans Chief Economist Bob Walters said even small differences in opinion potentially have a huge impact by the time buyers and homeowners reach the closing table.

“Perception is everything. It can make or break a home sale or mortgage refinance,” said Walters. “That’s why it’s so important for homeowners to realize how they perceive their home’s value could vary widely from how an appraiser views it. If the estimate is lower by just a few percentage points, the buyer could need to bring as much as another several thousand dollars to the table to avoid having to restructure the loan.”

If you take a look at the regional differences, the West remains closest to equilibrium, with the residents rating their homes just 1.70% higher than appraisers. In the South, the difference was 1.90%, followed by the Midwest at 2.02%. The Northeast brings up the rear, with homeowners overestimating their property values by 2.14%.

If you look at metropolitan areas, homeowners in Denver have the most undervalued homes, with appraisers reading home values 3.23% higher than homeowners. Philadelphia may be the home of the Flyers, but its residents really need to ground their appraisal expectations, as they’re valuing their homes 3.40% higher than appraisers do. Sunny San Diego wins the prize for closest to the bull’s-eye, undervaluing their homes by just 0.11%.

Home Value Index (HVI)

Home values continued their rising trend in June, up 0.84%. In the past year, values have been up 4.47%.

Walters said nationwide value trends are definitely affecting local opinions.

“Nationally, home value increases are well within the healthy range,” said Walters. “Although, the variances across the country can influence owners’ perception. Owners in the West, where appraised values are rising more quickly, tend to underestimate their home’s value. The opposite is true for those in the Northeast, with appraised values showing slower growth.”

The West leads the way again in terms of price appreciation, up to 1.45% for the month and 5.84% on the year. The Midwest played runner-up, rising 0.87% in June and 3.57% annually. The South came next, rising 0.66% month-to-month and 4.62% on the year. Finally the Northeast was up 0.17%, with a modest 2.07% yearly price growth.