Homeowner, Appraiser Value Gap Widens for First Time in 6 Months

What homeowners think their houses are worth and what they’re actually worth are slightly off nationally, and the gap between owner estimates and real appraisals widened in February for first time in six months, according to the latest Home Price Perception Index from Quicken Loans.

The latest HPPI, which compares actual appraised values to what refinancing homeowners estimated their home was worth at the beginning of the mortgage process,  showed that while home values increased 1.51 percent in February and rose 3.89 percent year-over-year, appraised values were almost 2 percent lower than homeowner expectations nationally. That gap was more than twice that in the West, particularly in San Jose, where appraisals were 4.35 percent higher than expected. Denver and San Francisco also saw more than 3 percent homeowner overestimation.

The balance comes from the other side of the country, where borrowers more noticeably undervalued their homes. Philadelphia led this side of the coin, as homeowners there undervalued their properties by 3.64 percent. Neighboring Baltimore also saw an appraisal gap in their favor by more than 3 percent. The closest appraisal-to-value numbers came from homeowners in Miami, who valued their properties a mere 0.13 percent above what they’re worth on the market.

Quicken Loans’ chief economist Bob Walters said that despite the new numbers, there’s no cause for concern here. “While it is always disappointing for homeowners to learn they don’t have quite the home equity they expected, the national HPPI is still within a normal range,” Walters said. “In an ever-changing real estate market, home values fluctuate and these changes are most quickly realized by appraisers who are evaluating local sales every single day.”

Walters also said that the general lack of inventory still affects home values “as eager buyers compete for a small selection of homes. This can be seen as home values jump in the Midwest right as the harsh winter hits, keeping some from listing their home,” he said.

However, with a generally sound market in play, and as more homeowners gain equity, the number of homeowners able to sell their homes and buy new ones increases.

“We’re seeing the benefits of this virtuous cycle in rising home prices which is also being greatly aided by historically low mortgage rates,” he said.

Click here to view the full report.