It’s a matter of perception. Homeowners and appraisers continued to disagree over home values although the difference was narrower this time in July per Quicken Loans’ HPPI. Still, there was an increase in home values across the U.S. as confirmed by Quicken’s separate HVI.
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The National Home Price Perception Index
For the month of July, the disparity between a homeowner’s perception of value and appraiser’s value was 1.55% as measured by Quicken’s National Home Price Perception Index (HPPI).
Essentially, homeowners perceived their home values to be 1.55% higher than appraisers did in July. This gap in terms of value perception was narrower when compared with 1.70% recorded in June.
Even when homeowners and appraisers continue to spar over home values, Quicken pointed out that values of homes in the U.S. have been on the rise.
The National Home Value Index
Unlike the HPPI which measures the difference or spread in the perception of home value between appraisers and homeowners, the HVI or Home Value Index is solely based on appraised values of homes.
For the month of July, home values increased on a nationwide basis by 0.33% on an average.
The year-over-year rise in national home values was even greater at 4.21%. This was evident in the gains posted by all the four geographic regions of the U.S. during the month of July compared with a month and a year ago.
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- The West’s HVI was 125.17, a 0.28% increase from June 2017, and a 5.64% increase from July 2017.
- The South’s HVI was 105.93, a 0.67% month-over-month change and a 4.34% year-over-year change.
- The Midwest’s HVI was 86.54, a 0.23% month-over-month change and a 3.63% year-over-year change.
- The Northeast’s HVI was 98.36, a 1.60% month-over-month change and a 2.65% year-over-year change.
The positive results according to Quicken indicate that appraised values of the property are higher than homeowners’ perceived values of the property.
Of Home Values and Appraisals
Quicken’s Executive Vice President of Capital Markets Bill Banfield iterated the importance of a home’s appraisal in the loan application process for these reasons:
- It lets you know if you have equity in your home and
- It confirms whether that equity is enough for you to refinance or sell.
For refinancers, a low appraisal can be disastrous especially if they plan to take out cash. Lenders generally require 80% to 85% loan-to-value ratio for cash-out refinances.
There are many ways to boost your home’s value. For one, you can make improvements to your home to increase its value come appraisal time such as additional bathrooms or bedrooms. Mortgages like FHA 203k can be a good source of funds for these improvements.
Another way is to put a larger down payment when you bought the home. This serves as your initial equity in your home. But a considerable down payment is not a readily available option as it can be a struggle to save for one.
You also have to make your mortgage payments every month. Don’t skip or miss any payment because it will only make you delinquent and hold up the growth of your equity.
It also matters if home prices are appreciating. This way, your home value could go up without you doing anything. But relying on such can be tricky, unpredictable even as we are talking about laws of supply and demand in real estate markets, particularly your locale.
“With home values constantly changing, and the rates of change varying across the country, this is one more way to show how important it is for homeowners to stay aware of their local housing market,” Mr. Banfield added.
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Justin McHood is a managing partner at Suited Connector and has been recognized by national media outlets as a financial expert for more than a decade.
