Homeowners consistently believe that their homes are worth more than they really are, and the margin between homeowner estimates and appraiser opinions is growing.
That’s the conclusion of Quicken Loans’ monthly national Home Price Perception Index, which was released July 22 with figures for June. This is the fifth straight month that homeowners have overestimated their home values, but economists say this actually points to the stabilization of the real estate market.
“Over the last five months we’ve seen homeowners continually value their homes higher than appraisers,” Bob Walters, chief economist for Quicken Loans, said in a news release. “While each local market has a different story to tell, a large part of this perception gap is likely due to the normalization of home prices. After about a year of home values trending upward, it takes some time for many homeowners to realize home values are stabilizing in their neighborhoods.”
The latest report found that appraiser opinions were 1.4% lower than homeowner estimates, the widest margin in the past five months.
National home values did edge slightly higher in June, with a 0.74% gain. That represents a 4.38% year-over-year gain. Only in one region, the South, did home values dip, and even there only by 0.09%.
“Home prices seem to be a bit frozen for the time being — validating that we are in a market that is well into the stabilization cycle,” Walters explained. What’s the next sign that should point to a fully recovered housing market? “The real test for home price solidity will be when inventory increases to a level of equilibrium between supply and demand,” according to Walters.
Of course, property values can be malleable; landscaping alone, for example, can add between 7% and 15% to a home’s value. But homeowners can also frequently overestimate value because of sentimental attachments that influence their perception of the property, or because of a general sense — albeit an unsupported one — that home values should continually rise over time.