There are several important economic predictors for tracking the real estate market. One of the more unique ones is Quicken Loans’ National Home Price Perception Index, better known as the HPPI.
The HPPI charts and calculates the difference between what homeowners think their house is worth versus professional appraisers actually estimate. Quicken gets their data from the mortgage refinance process, when homeowners have to list an estimate as to what they think their home is worth upon application. Later on in the mortgage process, an appraisal is recorded.
So how has the HPPI been performing as of late? For the six months prior to December 2016, the index was equalizing as the estimates of homeowners and appraisers were getting closer and closer to even. But with the most recent data set released last week, we now have two consecutive months where the estimate gap is widening.
On average, homeowners expected an appraisal value 1.47 percent higher than the final estimates of professionals during the mortgage process. According to the National HPPI, the value homeowners estimated at the beginning of the refinance process was an average of 1.47 percent lower than the value assigned by appraisers.
Even though the composite value dropped, there continues to be variation across the country. Home appraisals in many of the western cities are outpacing owner expectations. In Denver, for example, appraised values were 2.98 percent higher than homeowners expected. Conversely, estimates from those in some of the eastern cities were higher than appraised values. This included Philadelphia, where appraisals were 2.94 percent lower than homeowners estimated.
Appraisal values in January stayed mostly flat, slipping only 0.34 percent last month according to Quicken Loans’ Home Value Index (HVI). When viewed annually, appraised values continue to rise, increasing 3.93 percent year-over-year.
“Having a good understanding of the conditions in their local housing market can be a valuable tool for consumers as they prepare for the home buying or mortgage process,” said Bob Walters, Quicken Loans Chief Economist. “Accurate expectations at the onset of the mortgage process, not only makes it smoother, but can prevent unexpected changes in the amount of funds to bring to the closing table if the appraised value comes in lower than initially estimated.”
Home values have leveled off as the winter months carry forward. According to the National HVI, the average appraisal dipped a modest 0.34 percent from December to January. From an annual perspective, home values have risen 3.93 percent. Regionally, appraised values in the Northeast dropped the most month-to-month, but the main storyline continues to be robust annual growth in the West, while the Midwest lags behind.
“Tight inventory has been a key contributing factor to the year-over-year growth in home values,” said Walters. “This steady growth could very well lead to more availability, driving homeowners to consider cashing in on their growing equity by putting their home on the market. When this happens, it will open up new opportunities for eager buyers.”
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