Appraising Appraisals

Homeowners may be overvaluing their homes compared to appraisals, according to the Quicken Loans’ National Home Price Perception Index (HPPI) for March 2019. THe HPPI stated that the average appraisal was 0.78 percent lower than homeowners expected, widening the gap between homeowners and appraisers more than 50 percent since February.

“This month’s fluctuation in the HPPI was driven more by a dip in home values than a change in the owners’ viewpoint. Homeowners are often reluctant to believe their house has lowered in value, even at a slight monthly fluctuation,” said Bill Banfield, EVP of Capital Markets at Quicken Loans. “Depending on the area, appraised values are either growing at a much more measured pace, or have taken a step back from their meteoric rise. Homeowners are usually slower to realize change—in either direction—than the appraisers who study the market on a daily basis. This can lead to a slight widening of the perception gap when there is a turn in the market.”

Overall, appraisal values dipped in March month over month. Quicken’s National Home Value Index (HVI) reported appraisal values dipped 0.20 percent from February to March. Regionally, the West saw the biggest increase in home values, up by 0.79 percent. The annual growth ranged from a 2.19 percent year-over-year increase in appraisal values in the West, to a 4.11 percent annual rise the Midwest. According to Quicken, these increases are more modest than we have seen over the last few years, but more in line with inflation and wage growth.

“Some of the rampant buyer demand that we’ve seen over the last few years has subsided because of the affordability issues many areas are having, driven by a lack of availability,” said Banfield. “Would-be buyers have decided to sit on the sidelines to see if more home inventory becomes available at the price-points where they’re shopping. The entire housing industry is watching to see what will happen in the coming months—whether owners and builders will provide the home inventory the buyers have been waiting for, amid the recent drop in interest rates.”