Evaluating Valuations: The Growing Gap Between Homeowners & Appraisers

Home Value
It was not that many years ago when the overriding question pertaining to US home valuations was most often ‘how low would they go?’

During, and immediately after the Great Recession, millions of American homeowners found themselves helplessly watching as the value of their homes—in many cases, their greatest family asset—endured a seemingly endless decline in value.

Over the course of the last several years, much has changed in the American housing sector. In multiple markets nationwide, the housing industry has recovered most, if not all, of its market value—so much so, that concerns are now being raised in several metropolitan centers about the lack of affordable housing.

The dramatic drop—and in many cases, rebound—of America’s housing prices has resulted in raising the profile of many collateral issues; among those is the long-standing issue of accurate home valuation; simply put, quite often Americans selling their homes find themselves at odds with those tasked with appraising the same properties.

While there have always been reasons for disagreements between appraisers and homeowners, the remarkably steep decline—followed by an often equally remarkable recovery—of the housing sector in many cities nationwide has exacerbated the long-standing challenge of bridging the gap between appraisers, and those hoping to sell their homes.

Recent survey results appear to indicate that the gap between homeowner perceptions–and appraisers’ views of home values–has continued to widen as the housing sector continues to recover.

According to the Quicken Loans’ National Homeowners Price Perception Index, (HPPI) in April, appraised home values nationwide were 1.9% lower than that of homeowners’ perceived values of those same homes. This marked the fifth consecutive month that the gap between appraisers and homeowners’ estimates of home values has widened.

Meanwhile, the Quicken Loans survey also found that their National Home Value Index (HVI)—a measurement of home value change based solely on appraisals, recorded a 1.06 percent increase in home values in April. On an annual basis, the HVI indicated an annual increase in home values of 5.08 percent on a year-over-year basis.

But as the value of American homes continues to rise, so too does the disparity between the actual, appraised value of homes and the perceived value of those same homes by the people who own them. The survey found that owners’ estimates of home values exceeded that of appraisers by 1.9 percent in April, compared to 1.77 percent a month earlier—marking the fourth consecutive month the gap between the two values continued to widen.

Regional differences also come into play when both appraisers and homeowners seek to value homes. The study found that appraisals of home values were higher than expected in the Western US, while appraisals were more likely to be lower than estimated by owners in the Midwest and Eastern US markets.

The Quicken Loans’ survey also contained some good news for homeowners considering selling their homes: according to the survey, home value growth continued—and accelerated—during April. The National HVI survey indicated that while all regions experienced some growth, home values in the Western US were rising faster than those in the East. According to the survey, home values experienced an annual growth of 3.54 percent in the Northeastern US, while home values rose by an impressive 6.52 percent year-over-year in the Western US.

Based on recent results, it’s reasonable to assume that if current trends continue, the number of disagreements between homeowners and appraisers over home valuations will also continue to grow.

The good news, however, is that at least some solace can likely be taken from the fact that these disagreements will be about a rising—rather than declining—home market value.