WASHINGTON (12/29/14)--Conventional wisdom might say that homeowners tend to overvalue the price of their homes, but recent research has found that in most cases the opposite is true.
Statistical analyses from Quicken Loans, the nation's second-largest mortgage lender, find that on average homeowners underestimate the value of their homes by 1.6% when compared with appraisers' valuations (Daily Pilot Dec. 21).
"Appraisers are looking at the market all the time," said Bob Walters, chief economist for Quicken Loans, who added that homeowners who are only interested in refinancing, rather than selling, are less likely to stay on top of current home valuations.
Using its new home price perception index, which relies on a database of more than 50,000 new applications for mortgage refinancings per month, Quicken found in November that three-quarters of the major metropolitan areas in the United States had lower estimates of home values from homeowners than appraised values.
The majority of regions did not see wide gaps between appraiser and homeowner estimates--most shortfalls were between $2,000 and $4,000 on a $200,000 home--but several metros did see considerable differences in opinion.
In San Jose, homeowners lowballed their own homes' prices by 6% compared with appraiser estimates. With a median sale price of $860,000, that translates to a $51,600 error.
Refinancing applicants in Los Angeles, meanwhile, underestimated values by 3.8% on average; Seattle homeowners came in 2.8% below appraisers' estimates; Miami 2.3% and in Boston 2.2%.
On the other hand, several metros saw homeowners overestimating the value of their homes as well.
In Philadelphia, homeowners estimated 1.6% over appraiser estimates, while Charlotte, N.C., homeowners were 1.3% too high, and Chicago 0.3%.
In either case, the gap between homeowner expectations and the appraiser's final number appears to be narrowing, likely because of new tools available to consumers.
"Today's homeowners have access to numerous (online) valuation tools and multiple listing service systems that they didn't have" until recently, Gary Crabtree, appraisal expert, told the Daily Pilot. The result: They "tend to more closely track the market conditions in their neighborhood."