Homeowner perceptions about 0.5 percent lower than appraisals

Homeowners continued to have a fairly reliable idea of the value of their property in October, according to the most recent update of the retail mortgage lender Quicken Loans' National Home Price Perception Index. Home values stayed relatively unchanged from the previous month, but showed strong annual gains.

The average appraisal fell 0.45 percent below a homeowner's estimate, down from 0.49 percent in September and the third straight month where estimates grew closer to appraisals. However, it increased from a gap of 0.28 percent in October 2018.

This trend showed little variation across the United States. The average appraisal was 0.52 percent less than expected in the Midwest, 0.47 percent lower in the South, 0.4 percent lower in the Northeast, and 0.39 percent lower in the West.

Quicken Loans also regularly looks at value perceptions in 27 major metropolitan areas. Appraisals were less than expected in 14 cities and greater than expected in 13 cities. The average appraisal was 1.4 percent more than expected in Charlotte, N.C.; 1.37 percent higher in Boston; and 0.75 percent higher in Minneapolis. It was 1.64 percent below expectations in Chicago, 1.28 percent lower in Philadelphia, and 1.19 percent lower in Cleveland.

"With such a small difference between appraised values and estimated values, homeowners are less likely to run into snags in the mortgage process when refinancing or buying a new home," said Bill Banfield, executive vice president of capital markets for Quicken Loans.

Quicken Loans' Home Value Index stood at 117.53 in October, inching down 0.04 percent from September but a year-over-year increase of 7.07 percent. A figure of 100 indicates values equal to those in January 2005.

The Northeast was the only region with some monthly growth in values, with its index of 107.58 representing an increase of 0.08 percent from September. This was also up 5.11 percent on an annual basis.

In the West, the index fell 0.75 percent from the previous month but grew 6.07 percent from the previous year to 142.67. The Midwest had an index of 95.84, down 0.64 percent from September but up 5.6 percent from October 2018. The index of 115.89 in the South represented a monthly decrease of 0.16 percent but an annual gain of 3.77 percent.

"The leveling off we saw in October is actually a welcome sign, especially to first-time homebuyers who are focused on affordability," said Banfield. "An ideal economic equilibrium would be steadily increasing home values that keep pace with inflation and wage growth. This year's lower interest rates and the moderating level of home prices has improved affordability despite a low supply of homes for sale."

Quicken Loans' Home Price Perception Index is based on a national database of refinance mortgages, where a homeowner estimates the value of their residence and an appraised value is determined later in the process. The Home Value Index is based on both refinance and purchase mortgages.

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