Homeowners are overestimating the value of their homes. Appraisals across the country were an average 1.56 percent lower than what refinancing homeowners expected in August, even as actual home values increased 1.73 percent for the month, according QuickenLoans’ latest national Home Price Perception Index report.
However, the gap between perception and reality in overvaluing homes shrunk in August, compared to July, when almost 1.7 percent of homeowners overvalued their homes.
“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,” said Quicken Loans chief economist Bob Walters. “In some portions of the Midwest, where appraisals are averaging 2 to 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.”
The numbers in the report varied widely, with some areas, such as Minneapolis, showing nearly identical estimates and values. Meanwhile, many western cities reported higher appraisals than expected by homeowners. In Denver, for example, home values were as much as 3 percent higher than expected
Home values continued the upward climb in the last full month of summer, as competition for available housing was fierce, the report stated. Appraisals showed average home values increased 1.73 percent since July and 8.13 percent year-over year.
“In a reversal of the prevailing trend, the West trailed the other regions in home value growth with a 0.74 percent increase,” according to the report.
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,” Walters said. “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.”