Homeowners consistently overestimate value of their homes

by Ryan Smith18 Apr 2016
Homeowners may be in denial about the actual value of their homes, according to a new study.

Although home values continued to rise in March – creeping up 0.29% since February and 4.77% year over year, according to the Quicken Loans Home Value Index – homeowners seemed to think their homes were worth more than they actually were.

According to the latest data from the Quicken Loans Home Price Perception Index, home values in March, as determined by appraisers, were an average of 2.17% lower than what homeowners expected. That’s a wider spread than in February, when appraisals were an average of 1.99% lower than what homeowners expected. And the widening gap between homeowner expectation and appraised value seems to be a continuing trend; in January, homeowners estimated their homes’ value at an average of 1.75% above appraisal.

That gap is just a national average, however – the HPPI varies widely across different regions of the country, according to Quicken loans. Many areas in the West region saw home values appraised above what owners expected, while all metro areas in the Midwest showed appraisals lower than homeowner estimates.

“The varying HPPI values across the country illustrates the importance of examining the market at the local level,” said Bob Walters, Quicken Loans chief economist. “If homeowners are eyeing that new home being built across town, they could be pleasantly surprised how much their home will sell for – or in some instances their equity may not take them as far as they think – depending on what area of the country they’re in.

“It’s not always easy for homeowners to keep their finger on the pulse of their equity,” Walters added. “This data shows homes have continued to increase in value since the depths experienced after the last recession. Those increases mean far fewer Americans have negative equity in their homes. This increases their mobility and is a positive development for all segments of the housing market.”

Poll

Should CFPB have more supervision over credit agencies?