Gap between appraisals and perceived values narrows for second month

The average difference between the appraised value of a home and the value expected by the homeowner narrowed for the second month in a row, according to the retail mortgage lender Quicken Loan. However, homeowners were still more likely than not to overestimate the value of their property.

According to Quicken Loans' latest Home Price Perception Index, the average appraisal in July came in 1.55 percent below a homeowner's expectation. The average appraisal was 1.7 percent lower than expected in June, and this result marked the first time in seven months that the gap between appraised values and expectations narrowed.

The difference was greatest in the Northeast, where the typical appraisal was 1.73 percent less than expected. Appraisals were 1.68 percent less than expected in the Midwest, 1.53 percent lower in the South, and 1.3 percent lower in the West.

Quicken Loans also looks at value perceptions in 27 major cities in the United States. Appraisals were lower than expected in 12 cities and higher than expected in 15; in 13 cities, the average appraisal was within 1 percent of a homeowner's estimate.

Appraisals were most likely to exceed expectations in Dallas, where the average appraised value was 2.83 percent higher than expected. Appraised values were also 2.6 percent higher than expected in Denver and 2 percent higher in Seattle. By contrast, the average appraisal was 3.04 percent lower than expected in both Philadelphia and Baltimore and 2.65 percent lower in Chicago.

"Our hope is that this index is eye-opening for homeowners," said Bill Banfield, executive vice president of capital markets at Quicken Loans. "Their home equity could be thousands of dollars higher, or lower, than they realize. If they are aware of the perceived trends in their area it could help them better prepare for their home purchase or refinance."

Quicken Loans also issues monthly updates to its Home Value Index, which was up 0.33 percent from the previous month and 4.21 percent from the previous year to 103.78. A figure of 100 indicates values equal to those in January 2005.

These values had a regional difference as well. The Northeast had the strongest growth from June at 1.6 percent, but the weakest year-over-year growth at 2.65 percent. The Home Value Index for the region stood at 98.36.

In the West, the index grew 5.64 percent from July 2016 and 0.28 percent from June to 125.17. The figure for the South was 105.93, up 0.67 percent from the previous month and 4.34 percent from the previous year. The Midwest's Home Value Index was 86.54, an increase of 0.23 percent from June and 3.63 percent from July 2016.

"The regional differences in home value growth mirror the perception difference across the country," said Banfield. "Areas with slower growth were more likely to have owners overestimating their home value, and areas with much stronger growth had higher appraisals than owners realized they would be. With home values constantly changing, and the rates of change varying across the country, this is one more way to show how important it is for homeowners to stay aware of their local housing market."

Quicken Loans' Home Price Perception Index derives from its database of refinance mortgages, where a homeowner estimates the value of their property and receives an appraisal later on. The Home Value Index is based on appraised values in both purchase and refinance mortgages.

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