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Home values fell 1.1% in May based on appraisals, according to data released by Quicken Loans®. Values are still up 3.5% year-over-year.

The good news is that homeowner perceptions are a little more in step with the opinions of appraisers. The average appraisal came in 0.79% below homeowner estimates, but this is an improvement from the 0.87% gap in April.

Home Price Perception Index (HPPI)

While there’s a small difference between homeowner estimates and appraised values, the minimal gap doesn’t leave much room for homeowners to be shocked. This allows both home buyers and current owners to be confident in values when applying for financing.

Quicken Loans Executive Vice President of Capital Markets Bill Banfield said that the market is in a really good place in terms of avoiding surprises when it comes to mortgage evaluation.

“An appraisal can cause a variety of emotions from curiosity of the value, to frustration if it comes in too low, and even surprise if the appraised value shows more equity than the homeowner realized,” said Banfield. “Luckily there weren’t a lot of frustrated homeowners in May since the HPPI values across the country are in a relatively tight band, showing that appraisals are not likely to cause much of a disruption in the mortgage process. This is, however, a reminder to homeowners that they should always keep an eye on the home sales around them to get a realistic gauge of their home value before estimating what it could be.”

Regionally, the difference between homeowner perceptions and appraised values doesn’t vary much. In the West, homeowners overvalued their homes by 0.74%. In the South, the difference was 0.76%, followed by the Midwest, which inflated home values by 0.8%. The Northeast trails all regions, overestimating home values by 0.89%.

Turning to data at the metro level, Charlotte, North Carolina, has overtaken Boston as the hottest housing market in this index, with home values coming in 1.99% higher than what homeowners expected. Philadelphia is on the other end of the spectrum, overestimating home value by 1.74%. Phoenix and Washington are closest to actual appraised values, with homeowners in the Phoenix market getting a 0.01% higher appraised value than they expect, and homeowners in the nation’s capital overvaluing their homes by the same amount.

Home Value Index (HVI)

While values fell in May, they’re still up by 3.5% year-over-year. Three of four regions saw values dip, with only the Midwest seeing a rise in appraised values.

Banfield said that particularly in the Midwest, the housing market is beginning to heat up along with the weather.

“Winter’s long hibernation is definitely over for Midwest home buyers. They’re hitting the streets and competing for a persistently low home inventory which is leading to appraisal value spikes,” Banfield said. “The annual increase is a very positive sign, showing the growth is more than just seasonality.”

The best-performing market on both a monthly and an annual basis in May was America’s heartland in the Midwest where values were up 0.47% for the month and have risen 4.68% for the year. Meanwhile, the West was down 1.74% monthly, but had still gone up 3.52% on the year in May. In the South, values dropped 0.72% in May, but they were up 3.28% on the year. The Northeast has fallen back to a point where prices are basically flat in the region, rising just 0.07% annually and down 0.38% on a monthly basis.

If you’re in the market to buy or refinance a home, both the trend toward higher values on a national basis and rates that have gone down recently mean it’s a great time to apply. If you have questions, you can leave them for us in the comments below.

The Quicken Loans Home Price Perception and Home Value Indexes are released on the second Tuesday of each month on the Quicken Loans Press Room.

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