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Homeowners And Appraisers Come Closer And Home Values Are Again On the Rise

Kevin Graham3-Minute Read
December 16, 2020

In the most recently released data from Rocket Companies, homeowners and appraisers were once again seen to be coming closer in their home valuations. At a national level, homeowners undervalued their homes by 1.01%, which is down from 1.11% in November. Market conditions mean it’s a great time to buy or refi if you’re ready.

Meanwhile, home values were up 1.96% for the month of November and 4.86% compared to the same time a year ago.

Home Price Perception Index (HPPI)

HPPI Chart

Our HPPI tracks homeowner expectation of what values are in refinance transactions compared with actual appraised values. We track this nationally, at a regional level and in 27 major metropolitan areas.

This can be important because if home values come in below homeowner expectations, clients may have to bring more money to the table or restructure the deal in order to meet their goals. Recently, the trend has been more toward pleasant surprises, but it’s always important to have realistic expectations regarding home value.

At the regional level, homeowners in the West were closest to the actual appraised values, having underestimated their home’s worth by 0.97%. This is down from a gap of 1.08% in October. Meanwhile, in the South, homeowners undervalued homes by 1.01%, falling from 1.1% the prior month.

In the Northeast, appraisals came in 1.03% above expectations. This is a narrowing of the difference from 1.09% in November. This matches the situation in the Midwest, where the gap narrowed by 0.01% in November.

HPPI Map

Pulling a few key points out of the metro data, all the cities looked at undervalued their homes. The smallest difference was in Chicago, where appraisals came in 0.09% above expectation. On the other end of things was Kansas City, where homes came in an average of 1.67% above homeowner estimates last month.

There are also signs that homeowners have a fairly good idea of home value in many areas. In 13 of the cities in our sample, the difference between homeowner estimates and appraised values was within 0.5%.

Bill Banfield, Executive Vice President of Capital Markets at Quicken Loans®, says homeowners have a real opportunity right now.

“Between equity continuing to rise at a pace faster than they expect and mortgage rates hovering right around record lows, homeowners looking to refi are getting an early gift this holiday season,” Banfield says.

Home Value Index (HVI)

Home values in our index were up 1.96% in November and 4.86% on the year. This paints a picture of rising property values. However, it should always be noted that real estate value is a function of where you are.

There’s no better illustration of this than the monthly fluctuations in the regional data seen here. Leading the way was the South, with property values up 4.87% in November and 8.75% since the same time a year ago. In the Midwest, values were up 1.19% and 5.38% since last November.

Meanwhile, home values in the Northeast were down 0.26%, but they’ve risen 4.55% in the last 12 months. In the West, values are still up 5.62% year-over-year despite having fallen 0.72% in November.

Despite regional fluctuations, you really get a sense that this is a hot housing market. There’s a challenge these market conditions can create.

On one hand, if you’re looking to refi right now, it’s hard to imagine a better time. At the same time, prospective home buyers may need to adjust what homes are in their budget if prices continue to rise at this pace.

Explaining Our Numbers

You might be wondering how we get to our numbers, and it’s a fair question. Let’s start with HPPI and then move on to HVI.

For every refinance transaction, we ask our clients to give us an estimated value of their home. This serves as a starting point for our team of Home Loan Experts to see what goals our clients might be able to achieve with a refinance.

Of course, during the process we get an official home valuation on which to base the final math for the loan. From these two data points, we can make a comparison using the following equation.

When this equation returns a positive number, it means that values are coming in higher than homeowner estimates. If the number is negative, homeowners in the given area are overvaluing their homes, at least from a monetary perspective.

In order to model out our HVI, we make use of appraisal data while also taking into account things like acreage, square footage and when a home was built to come up with a model that reports on values at a national and regional level.

If you’re interested in refinancing a home or purchasing one before prices rise, you can get started online with our friends at Rocket Mortgage®.

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    Kevin Graham

    Kevin Graham is a Senior Blog Writer for Quicken Loans. He specializes in economics, mortgage qualification and personal finance topics. As someone with cerebral palsy spastic quadriplegia that requires the use of a wheelchair, he also takes on articles around modifying your home for physical challenges and smart home tech. Kevin has a BA in Journalism from Oakland University. Prior to joining Quicken Loans, he freelanced for various newspapers in the Metro Detroit area.