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.”


  • by Mars | 4/18/2016 11:32:12 AM

    Homeowners are hearing that the market is increasing, when it is not, in this area. In addition, they equate cost with value. Two very different things. Also, it becomes and "I want" situation, whereby the homeowner is selling based upon a predetermined number that they WANT. Many real estate agents will take any listing at any price, with the feeling that when it doesn't sell, the homeowner will lower the price. On refi's, many borrowers attempt to influence. Many agents do not know what a COMP consists of. One gave me COMPS in 3 competitive neighborhoods. That's fine. However, not one of them were a closed sale. ALL were active listings? How do these people stay in the business? Realtors make statements as though they were facts, when it is their opinion with nothing to back it up. How can you have a contract price of $400,000 when every closed sale within the last 3 months was at $380,000, when the subject is exactly like them, when there are NO closed sales at or above $400,000? It is a huge problem.

  • by Cheryl M | 4/18/2016 12:01:41 PM

    Very Very true, Agents do give a false sense of what a "real" home value is. There are very few agents out there that actually dish it out "as it is" And when a home doesn't sell at that over inflated price homeowners become angry and then more often than not...deals fall through. Finally, we have hvc the round robin of a True Appraisal. WOW, then when a homeowner's home doesn't appraise for what that Agent said it would HOLY COW here go...you know what hits the fan then. How about educate not manipulate our homeowners/clients. Seems the mortgage industry is over regulated, maybe some of that should be distributed evenly to Agents on some of these issues.

  • by Miller's Daughter | 4/18/2016 12:55:31 PM

    Commercial is no different, maybe even a little tougher, when "what is a comp" is thrown into the mix. Medical office versus general office, QSR versus general retail, ST credit NNN retail vs. less than credit NNN retail, . . .


Should CFPB have more supervision over credit agencies?