Home value perceptions hold steady in September

Homeowners typically had a fairly accurate idea of how much their property was worth in September, according to the latest Home Price Perception Index from Quicken Loans.

The figure, updated monthly, found that the average home appraisal was 0.29 percent lower than the homeowner's estimate. This was consistent with the August analysis, which found the typical appraisal coming in 0.28 percent less than expected. It was a significant year-over-year improvement, as the average appraisal in September 2017 fell 1.14 percent short of expectations.

The average appraisal was lower than a homeowner's estimate in all four geographic regions identified by Quicken Loans, although each region was within half a percentage point of the appraised value. The typical appraisal was 0.38 percent less than expected in the Northeast, 0.35 percent lower in the Midwest, 0.31 percent lower in the South, and 0.12 percent lower in the West.

"A wide gap between the estimated home value and the appraised value can cause a mortgage to be reworked or, in some cases, scrapped altogether," said Bill Banfield, executive vice president of capital markets at Quicken Loans. "All the more reason for homeowners to be realistic when their mortgage banker asks them what they think their home is worth when they start the financing process. Our hope is that the HPPI data on past neighbor transactions can help a homeowner better estimate the value of their home in order to set their financing up for success."

In addition to the national and regional figures, Quicken Loans looks at value perceptions in 27 major metropolitan areas. Appraisals exceeded expectations in 21 markets, led by Boston, where the typical appraisal was 2.95 percent more than a homeowner's estimate.

Other metro areas where the average appraisal was higher than expected included Denver (2.64 percent), San Jose, Calif. (2.39 percent), and Seattle (2.38 percent). Appraisals were most likely to fall short of expectations in Chicago (1.95 percent on average), Baltimore (1.38 percent) and Cleveland (1 percent).

Quicken Loans also updated its Home Value Index, which stood at 110.38 for the month. A figure of 100 indicates values equal to those in January 2005. September's index was up 0.35 percent from August and 5.69 percent from September 2017.

The West was the only region with some decline in home values, with its index of 136.24 marking a drop of 0.56 percent. However, it was still a year-over-year increase of 6.36 percent.

The Home Value Index in the Northeast rose 1.33 percent from the previous month and 4.22 percent from the previous year to 102.84. The figure inched up .03 percent from August to 111.32 in the South, but this region had the strongest annual growth at 7.06 percent. In the Midwest, the figure of 90.71 marked an increase of 0.65 percent from August and 3.97 percent from September 2017.

"Rapid price increases that have spanned more than half a decade have started to affect affordability as average wage increases struggle to keep up," said Banfield. "While home values are still rising, especially with solid annual jumps, a slowdown in monthly growth is expected to allow the market balance with more moderate inflation."

The Home Price Perception Index is based on refinance mortgages, comparing a homeowner's initial estimate of their property's value on the application to an appraisal performed later in the process. The Home Value Index is based on appraisal data from both refinance and purchase mortgages.

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