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What Is Impacting Appraisal Values?

An increasing number of homeowners and appraisers are finding themselves agreeing on the value of a home, according to Quicken Loans' latest Home Price Perception Index (HPPI), which found that home value perceptions remained stable in September.

The monthly study, which looks at the difference between appraisers’ and homeowners’ opinions of home values and compares the estimate that the homeowner supplies on a refinance mortgage application to the appraisal that is performed later in the mortgage process found that appraised values were 0.29 percent lower than homeowners' estimates in September.

The HPPI has remained steady since August when appraisals were 0.28 percent lower than homeowner estimates. On a year over year basis, Quicken Loans said that the gap had narrowed considerably. In September 2017, the HPPI had recorded that appraiser values on homes were 1.14 percent lower than what homeowners believed was the correct value. In fact, the study indicated that in September this year, the number of metro areas where appraisals were more likely to be lower than expected has dropped by 40 percent in the last year.

“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, EVP 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.”

However, Quicken Loans' Home Value Index (HVI), which gauges home value trends based solely on appraisal data from home purchases and mortgage refinances slowed in September on a month-over-month basis. The HVI indicated that the average appraisal value rose 0.35 percent since August, it was less than half of the growth rate recorded at that time.  On an annual basis, the index saw a 5.69 percent jump in September compared with an increase of 5.79 percent in August.

Listing the factors that were softening this growth, Banfield said that rapid price increases for more than five years had started to impact affordability as the average wage increases struggled to keep up with the soaring home prices.

“While home values are still rising, especially with solid annual jumps, a slowdown in monthly growth is expected to allow the market balance with the more moderate inflation,” Banfield said.