Quicken Loans, the second largest mortgage lender in the nation, maintains an exclusive statistic that monitors the gap between homeowner and appraiser perception of value. The Home Price Perception Index (HPPI) gives those in the real estate marketplace a glimpse at how much appraisers think homes are worth compared to subjective homeowner valuations.
Nationally, the gap between homeowner and appraiser perceptions is widening. In April 2015, the national index was -0.69 percent, and just one month later the index stood at -1.15 percent. The expanding gap is quite pronounced. This is the first time in 22 months that homeowner opinion of value exceeds appraiser opinion by at least one percentage point.
Charlotte Different Than Other Major Markets
Despite these nationwide calculations, Charlotte is one of the relatively few major metropolitan markets in which a negative value is reported. That is, on average, Charlotte homeowners believe their homes are worth more than appraisers do, and the gap is increasing. For May 2015, Charlotte’s HPPI stood at -2.11 percent, up from -1.94 percent in April 2015.. Interestingly, one year ago, Charlotte’s HPPI was positive, at +1.29 percent.
Therefore, in a year’s time, the perception of value has reversed course. Where local homeowners once believed their homes were worth less than appraisers did, these Charlotte-area property owners now frequently believe that their homes are worth more than appraisers do.
Why does the HPPI matter?
When homeowners believe their residences have relatively more value, challenges may appear for buyers and agents alike. At the outset, an agent may have some convincing to do when it comes to establishing a listing price agreeable to the seller.
Also, it is possible that discounts are less likely in a market populated by highly confident sellers. At times, such sellers may even lose out on pending deals when they hold out for unrealistic prices.
Variations In Major Markets
There are major markets around the country where the situation is the opposite. For example, in San Francisco, Denver, Houston, and Dallas, the local HPPI exceeds +3 percent. In those markets, sellers are often pleasantly surprised by just how much their properties are worth.
In Denver, where the May HPPI stood at +4.15 percent, a homeowner believing a property was worth $200,000 would find that it is appraised at more than $208,000, on average. By contrast, in Charlotte, with a May HPPI of -2.11 percent, that same $200,000 home would be appraised at less than $196,000, on average.
The disparity in the HPPI from one metro market to another highlights the fact that the idea of a national housing market is pretty much a myth. Rather, it is important to gauge seller perceptions in each specific market. For example, the experience of sellers, buyers and agents alike maybe quite different in a market like San Jose, California, where the HPPI exceeds six percent. In such a market, sellers are often pleasantly surprised by the appraised value of their properties. By contrast, Charlotte sellers are somewhat more likely to be underwhelmed by appraisers’ valuations.