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Quicken Loans: Homes aren't worth as much as owners think

Do homeowners have a good grasp on the value of their own homes? A new report from Quicken Loans suggests the answer is a resounding "no."

WomanWithCalculatorThe average appraisal in March was 0.78 percent lower than homeowners expected, according to the latest data from Quicken’s National Home Price Perception Index.

The price-perception gap widened more than 50 percent compared to February, suggesting that sellers may be slightly overvaluing their homes as the spring buying season heats up. Homeowners aren’t necessarily changing their valuations of their homes, according to Bill Banfield, executive vice president of capital markets for Quicken Loans. Rather, home-price growth is decelerating and seller perceptions simply haven't caught up, according to Banfield.

“Homeowners are often reluctant to believe their house has lowered in value, even at a slight monthly fluctuation,” Banfield said. “Depending on the area, appraised values are either growing at a much more measured pace, or have taken a step back from their meteoric rise. Homeowners are usually slower to realize change — in either direction — than the appraisers who study the market on a daily basis. This can lead to a slight widening of the perception gap when there is a turn in the market.”

Indeed, appraised home values dipped 0.2 percent from February to March. Although appraised values continue to grow on an annual basis, March’s growth rate of 3.37 percent is down from February’s 5.47 percent figure. Buyers are increasingly taking a wait-and-see approach, easing home-price inflation and slowing the growth of appraised values.

“Some of the rampant buyer demand that we’ve seen over the last few years has subsided because of the affordability issues many areas are having, driven by a lack of availability,” Banfield said. “Would-be buyers have decided to sit on the sidelines to see if more home inventory becomes available at the price points where they’re shopping. The entire housing industry is watching to see what will happen in the coming months — whether owners and builders will provide the home inventory the buyers have been waiting for, amid the recent drop in interest rates.”

The gap between owner perception and appraised value is widest in the Midwest. An average homeowner in Chicago, for example, expected nearly 2 percent more value than their appraisal yielded. In Boston, however, appraised values are more than 2 percent higher than owner estimates — the largest positive perception gap in the country.


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