New York City homeowners are becoming increasingly removed from the true value of their properties, according to the Quicken Loans Home Price Perception Index (HPPI).
Although national appraiser value versus homeowner perception is still within normal variance at -2.14 percent, the growing year-over-year trend indicates a wider gap of opinion as compared to last February.
NYC had a much closer consensus, with assessments that came in only 0.86 percent less than homeowner value in Feb 2015.
Why do homeowners see more value than appraisers?
“I think what’s notable, is that versus a year ago, the optimism by homeowners — they think the value is worth more. Inside of a couple percent, I wouldn’t read too much into that, but if that trend continued, then I’d ask the question again: Why do the homeowners see it more than appraisers, and why would that be trending higher?” said Bob Walters, chief economist at Quicken Loans.
[graphiq id=”bo4kGfQMW3z” title=”U.S. Homeownership Rate (Seasonally Adjusted)” width=”600″ height=”593″ url=”https://w.graphiq.com/w/bo4kGfQMW3z” link=”http://places.findthehome.com” link_text=”U.S. Homeownership Rate (Seasonally Adjusted) | FindTheHome”]
Home values across NYC grew 8.9 percent over the past year to reach $612,400, according to Zillow’s Home Value Index. The rise in property prices may be cause for delay in the general public’s awareness, creating a wider gap between appraisers and homeowners.
Or, an overly confident public could be overestimating based on the home value growth throughout the nation. The synchronization is fluctuating but not a cause for concern yet, according to the experts at Quicken Loans.
“Oftentimes what we find is that homeowners are behind appraisers. If homes are appreciating rapidly, appraisers tend to be ahead because they are seeing more recent comps or activity, whereas [with] homeowners, it takes a while – the backyard barbecue conversations start to take place,” Walters said.
“Appraisers tend to lead. In New York, even though small, homeowners are slightly more optimistic. Homeowners tend to think that they see the positives in their homes. To see a systemic bias in normal times is not that unusual.”
NYC indicative of national trends
NYC’s numbers are comparable to national HPPI trends. Appraised values were nearly 2 percent lower than homeowners’ beliefs nationally, according to the study. While the gap was tapering over the past five months across the U.S., it slightly expanded in February. The month prior, appraiser opinions were 1.75 percent lower than homeowner expectations.
“For a homeowner to say ‘I think my house is worth $300,000,’ and the appraiser to say it is worth $305,000 — that is within the realm of difference of opinion. They are not going to nail it to the penny,” Walters said.
Correspondingly, national home values rose 1.51 percent monthly and 3.89 percent year-over-year.
West led appraisal-over-estimate values
The West led the study in highest appraisal values over homeowner estimates. San Jose had a positive differentiation of 4.35 percent, which was a drop from 6.52 percent one year ago. Denver appraisal values were 3.77 percent higher than homeowner estimates, representative of a slight dip from 4.12 percent in Feb 2015. San Francisco came in at no. 3 with 3.17 percent from 4.78 percent last year.
“For the guys in the middle, home prices are appreciating on a predictable path. It’s when you see deviations of that, is when they are surprised. San Jose is going through the roof, and homeowners are surprised they are increasing as much as they are,” Walters said.
Inside the range of ‘normal’
Philadelphia homeowners estimated their home values 3.71 percent higher than appraisers — greater than the 1.65 percent overestimate gap from last year. In Baltimore, homeowners also overvalued their homes by 3.02 percent, which is higher than last year when they assumed properties were worth .52 percent more than appraisal worth. Chicago homeowners projected homes 2.99 percent higher, an increase from a miscalculate of .16 percent in Feb 2015.
“Homeowners in New York feel their houses are worth more, but you’re inside that range of what would be considered normal. I think this is a good sign, in that it shows we don’t have an overheated or troublesome market. We’re largely on the same page between buyer and appraiser, and that’s generally a good thing,” Walters said.
