Owners Blow Home Valuations

For the seventh consecutive month, the gap has widened between what home owners say their home is worth compared to what appraisers say, according to Quicken Loans’ August 2015 Home Price Perception Index.

Home owner estimates now stand 2.65 percent higher than appraiser opinions, the largest gap in more than a year, according to the index.

“The perception trend of most of this year suggests home owners may be assuming that home values have been in a steady, linear path upward,” says Bob Walters, Quicken Loans chief economist. “In reality, home values have remained mostly flat this year, and this false assumption may be leaving home owners disappointed when their appraisals come in.”

The opinion gulf was most pronounced in the Northeast, where homeowners felt their properties were worth 2.78% more than those making the appraisals. That was the general direction of things, with homeowners off by 2.70% in the South, 2.35% in the Midwest and 2.32% in the West.

In the metro areas, properties in San Jose, CA continue to be the most undervalued, with appraisals coming in at 5.83% above homeowner estimates. Philadelphia sat at the other side of the spectrum with estimates that were above actual value by 3.31%. Minneapolis scored a near bull’s-eye with homeowner opinions coming in just 0.01% above those of appraisers.

Homeowner perceptions of property value continued to be out of step with appraisers in August. The gap of 2.65% was wider than in July, when homeowners felt their properties were worth 2.33% more than appraisers did. It’s the seventh straight month that the chasm has grown bigger.

Bob Walters, chief economist at Quicken Loans, said people may be misinterpreting the direction of the market at this point.

“While the month-to-month number is interesting to examine, it is not the single most important factor of the HPPI report,” Walters said. “Instead, the focus should be on the trend, the direction it’s heading and how fast. The perception trend of most of this year suggests homeowners may be assuming that home values have been in a steady, linear path upward. In reality, home values have remained mostly flat this year, and this false assumption may be leaving homeowners disappointed when their appraisals come in.”

Turning now to the regional data, the opinion gulf was most pronounced in the Northeast, where homeowners felt their properties were worth 2.78% more than those making the appraisals. That was the general direction of things, with homeowners off by 2.70% in the South, 2.35% in the Midwest and 2.32% in the West.

In the metro areas, properties in San Jose, CA continue to be the most undervalued, with appraisals coming in at 5.83% above homeowner estimates. Philadelphia sat at the other side of the spectrum with estimates that were above actual value by 3.31%. Minneapolis scored a near bull’s-eye with homeowner opinions coming in just 0.01% above those of appraisers.

Home values were about as close to flat as it gets in August, dropping a very slight 0.05% for the month. Despite the decrease, values are up 3.24% for the year.

Walters said that a slowing in home value increases could actually be a good thing for some.

“The Northeast region stands out in the latest HVI findings,” he said. “It is the only region with a drop in home values in August. Moderating home values are a welcome sign to buyers, and could be especially enticing to those looking to purchase their first home.”

The Northeast did see its value drop, falling 0.87% from July. All the other regions saw gains, however slight. The West was up 0.11%, followed by the South at 0.14%. The Midwest led the pack with a 0.41% value increase.

On a yearly basis, the Northeast is down 0.39%. The West is up 4.47% annually followed by the South at 4.02% and the Midwest at 2.12%.