Detroit-based Quicken Loans, the 50-state home mortgage lender, recently introduced two new proprietary indexes: the Quicken Loans Home Value Index (HVI) which takes the most accurate look at home value trends and the Quicken Loans Home Price Perception Index (HPPI) which measures the difference between appraisers’ home value opinions and the opinions of homeowners and homebuyers across the country.
The HVI and HPPI examine the data by including a national composite, four regional areas and 27 major metro areas. Both reports will be released on the second Tuesday of every month going forward.
As the second largest retail mortgage lender, Quicken Loans is uniquely positioned to provide these indexes which compile and curate data on millions of home purchase and refinance appraisals. In addition, the lender’s mortgage activity across all 3,000+ U.S. counties provides a balanced cross-section of the country’s housing markets with a credible look into all major U.S. housing markets.
“Our position as a large and unique 50-state retail lender allows us to access this highly valuable data and create the Quicken Loans HVI and HPPI, which provides insight and perspective never seen before,” explained Quicken Loans Chief Economist Bob Walters.
The HVI and HPPI are different from all other indices currently on the market for the following reasons:
There is no lag time. Some indices take as many as two months to report data. The HVI and HPPI will release the monthly data on the second Tuesday of the following month and will report on activity that has occurred as recently as the end of the prior calendar month.
The reports are based on appraisals used to make actual lending decisions. Both indexes are based on home appraisals, the single most important piece of information for both purchase and refinance mortgages. These are the first indexes to include home values from refinances, adding significantly more and deeper home value information than indexes that are only based on home sales.
HPPI is unprecedented. The financial calendar is full of important information, but never before has a report examined the perception gap between appraisers’ opinions and the opinions of homeowners and homebuyers about the value of a property.
The HVI examines trends in home values by comparing current appraisals to where the local market was in January 2005, the start of the HVI. Through the HVI, homeowners, homebuyers and housing market analysts can get a real-time view of where home values are headed using real appraisal data from both refinances and home purchases.
Quicken Loans records refinancing homeowners’ estimate of the value of their home at time of application as well as the agreed upon purchase price of homebuyers and home sellers. The company then compiles and compares these home value estimates to the actual appraised values of the properties that are received a short time later in the mortgage process. The gap between these two values is presented in the HPPI.
“When you pair the HVI and HPPI, you get a glimpse into the housing market that has never been available before,” Walters added. “You see the relationship that actual and perceived value play in the mortgage and housing industries, and how the human psyche influences the decisions consumers make when valuing their home. This information is extremely valuable to those looking to refinance, buy or sell a home, as well as many professional analysts and reporters who follow the U.S. housing markets.”
Looking at the gap in home values as judged by homeowners and appraisers, it is clear to see just how significantly consumers overvalued their homes during the 2008/2009 downturn, one of the worst housing market in decades. This over-estimation of home values caused millions of mortgage applications industrywide to be restructured or denied.
“Perception is not always reality when it comes to home prices,” Walters said. “The Quicken Loans Home Price Perception Index very clearly shows that consumers tend to overestimate the value of their home in economic downturns and, conversely, undervalue their homes and understate home price appreciation when markets rebound.”
The current trend shows just that. Consumers have been undervaluing their homes since late 2013. In September 2014 homeowners’ estimated home values were lower than appraiser estimates by 1.62 percent, according to the national Quicken Loans Home Price Perception Index. Homeowners undervalued their homes by 1.82 percent in August 2014. However, a year ago, in September 2013, homeowners slightly overvalued their home by 0.2 percent.
Using Quicken Loans’ proprietary mortgage data, the HVI and HPPI provide a national composite, as well as market-level data for 27 metropolitan areas and four geographic regions.
*A positive value represents appraiser opinions that are higher than homeowner perceptions. A negative value represents appraiser opinions that are lower than homeowner perceptions.
The Quicken Loans Home Value Index and Home Price Perception Index will be issued at 10 a.m. on the second Tuesday of each month. All reports, with downloadable graphs, are available on the Quicken Loans Press Room.