How similar are appraised home values and house prices, and how do the two affect one another? Federal Housing Finance Agency (FHFA) data suggests that using changes in appraisal values to predict future changes in home prices might not work, and that, in fact, “the signal goes the other way.”
While both appraised values and home prices have shot up since 2013, the increase in appraised values has not kept pace with house-price growth. One FHFA economist is using new datasets to determine just what that means for the market and federal housing policy discussion.
FHFA Senior Economist Justin Contat drew his conclusions about appraisals and actual values using the FHFA’s recently published UAD Aggregate Statistics Data Files and Dashboards, which, according to the agency, is the nation's first publicly available dataset of aggregate statistics on appraisal records.
Contat says an analysis of the new datasets combined with FHFA’s Home Price Index (HPI) numbers reveal that past home prices are used to set and adjust the latest appraisal values, rather than the other way around.
“Additionally, we see that appraisal values tend not to adjust up or down as much as house price measures,” he added.
Contat’s analysis, which can be read in full on the FHFA blog, also examines appraisals’ correlation with actual home values at a local level.
“The gap between the appraisal value index and HPI varies quite a bit across states and time,” the economist reports.
For example, “both Georgia and Montana have similarly large cumulative appreciations since 2013. However, the appraisal index has grown much slower in Georgia than in Montana. Meanwhile, New York has relatively modest gains for both HPI and appraisals.”
Combining the new data sets with existing FHFA sets such as the HPI allows analysts to explore new relationships with publicly available aggregate data, Contat notes. His series of insight-providing blog posts are aimed at illustrating how the new data collections can be an effective tool to “harness useful information for policy-relevant discussions.”
Contat adds that the new aggregate statistics collection is being used to establish better understanding about fair lending, appraisal values, and sizes of homes.
He notes that although FHFA analysis only examines trends for single-family homes that have been purchased using a conventional, conforming mortgage, future work could incorporate valuations for different property types, refinances, or other mortgage market segments.
The full analysis, graphs and other insights from FHFA economists can be found at FHFA.gov/media/blog.