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National Data Shows Homes Are Worth More Than Homeowners Think

Kevin Graham3-Minute Read
November 20, 2020

Homeowners and appraisers were further apart, but the really good news is that homes are actually worth more than homeowners think on a nationwide basis at the end of October, with appraisals coming in 1.11% higher than homeowner estimates.

We’ll get into the data, how it was calculated and why it matters below. For now, what you need to know is that across all 27 cities we looked at, home values are coming in higher than homeowners anticipate.

Home Price Perception Index (HPPI)

Homeowner estimates chart

Data gathered by Rocket Companies shows that on a national basis, home values are 1.11% above where homeowners estimate them to be. This represents a 0.34% increase in the gap from September.

Quicken Loans® Executive Vice President of Capital Markets Bill Banfield says the data points to a clear picture if you’re a homeowner.

“Homeowners have more equity in their homes then they think they do at the moment,” he says. “Particularly if you’re looking to refinance, that’s a pleasant surprise and something anyone looking to utilize their home equity should be happy about.”

Breaking down the regional numbers, the biggest monthly difference was in the South where home values came in 1.1% above homeowner estimates. This is an increase in the gap of 0.3% for the month. What’s more, things have totally flipped from last year when estimates came in 0.47% above actual appraised values.

It’s really interesting that there’s been about the same level of flip from estimates coming in above appraised values to now coming in below the value set by appraisers. When you look at the data, the magnitude of the regional flip between this year and last is within 0.1% resulting in a remarkably uniform change of around 1.5%

map of the perception of home value

At the city level, appraisal values are coming in higher than homeowner estimates in each area. The range spans from Kansas City, Missouri, which has values 1.69% higher than homeowner estimates, to Detroit, where home values are 0.15% above the estimations of local homeowners.

In all but eight cities, the monthly difference between homeowners and appraisers increased. The biggest of these increases was again in Kansas City, where the gap widened by 0.24%. Meanwhile, Cleveland was on the other end of the spectrum with the difference between homeowner estimate and appraiser opinion closing by 0.05%.

Cleveland has the biggest yearly change in terms of expectations compared with appraised value. Last year, homeowners believed their home was worth 1.19% more than it was. Now, appraisals are coming in 0.97% higher than their expectations. That’s a swing of 2.16%. Philadelphia also has a swing of 2.11% in the same direction.

It’s worth noting that trends do vary by location. There are six cities in which appraisers and homeowners have come closer to agreement compared to last year at the same time. The most notable of these areas are Seattle and San Francisco, where the gap has closed by 0.2% and 0.23%, respectively.

The Calculations

To come up with these numbers, we gather homeowner estimates and appraisal data for refinance transactions. In a refinance transaction, we ask our clients to give us an estimate of what they think their home is worth. This gives our clients and the Home Loan Experts they work with a basis to start from when determining what they might be able to accomplish by refinancing.

Later in the process, every home is given an official valuation to determine how much the home is actually worth. This gives us both of the inputs we need for the following formula:

(Appraised Value - Homeowner’s Estimated Value) / (Appraised Value)

A positive value indicates that home values are coming in higher than homeowner expectations. A negative value means that homeowner estimates were higher than the actual evaluation.

Why Does This Matter?

When someone is looking to refinance, a surprise in the wrong direction could mean the difference between being able to close or not. While it’s nice if the appraisal comes in better than you expect, an appraisal coming in lower could jeopardize your financial goals.

If the appraisal comes in lower, a homeowner has a couple of alternatives. They can either try to restructure the transaction or bring more money to the closing table in order to have enough equity to qualify. There are times when neither option will be a possibility.

Having a realistic idea of home values helps avoid these types of unwelcome surprises happening at the last minute and that’s why it’s helpful for homeowners to stay in tune with their local market if they think they might refinance in the near future.

Do you think you might be ready to get started? You can check out your refinancing options online with 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.