Quicken Loans recently announced appraisals across the country were an average of 1.56 percent lower than what refinancing homeowners expected in August, according to the company’s national Home Price Perception Index (HPPI).
The Quicken Loans Home Value Index (HVI), which measures home value changes exclusively through appraisals, moved higher yet in August. Home values increased 1.73 percent over the previous month, while jumping 8.13 percent higher than August 2015, according to the national HVI.
The trend of owners overestimating their home’s value when refinancing continued in August, with appraisals falling 1.56 percent lower than owners’ expectations in the national HPPI. However, the gap between valuation opinions of appraisers and owners edged closer to equilibrium since last month when appraisals were 1.69 percent lower than expected. Despite the nationwide trend, appraised values were higher than owners’ estimates in nearly half of the metro areas examined by the study. The report varied nationally with some areas, including Minneapolis, showing nearly identical estimates and values; while many western cities reported higher appraisals, like Denver where home values were as much as 3 percent higher than expected.
“While a one and a half percent difference may not seem like a big disparity of home value opinions, the gap could cause problems, especially in areas with an even wider difference,” says Quicken Loans Chief Economist Bob Walters. “In some portions of the Midwest, where appraisals are averaging 2-3 percent less than what was expected, this will often lead to restructuring a refinance or the homeowner needing to bring a few more thousand dollars to the closing table.”
Home values continued the upward climb in the last full month of summer, as competition for available housing was fierce. Appraisals showed average home values increased 1.73 percent since July and grew 8.13 percent year-over year, according to the national HVI. In a reversal of the prevailing trend, the West trailed the other regions in home value growth with a 0.74 percent increase. The Midwest had the largest growth with a 2.45 percent month-over-month gain.
“Competition in the housing market has been especially hot this summer, causing home values to climb,” says Walters. “This spike can concern some buyers, as the increases are outpacing inflation and wage increases, leading to affordability problems in some of the hottest markets. However, the pace of home value increases will likely slow as we move into the colder months and there is more balance between buyers and sellers.”
For more information, visit www.QuickenLoans.com/Indexes.