Quicken Loans LogoAppraisals that come in lower than expected are some of the most common causes for mortgages to be restructured or denied.

How do appraisers view of homes in your area? Are appraisers and homeowners closer in their estimation of home values, or are they getting farther apart?

These are some of the questions we were looking to answer when we created the Quicken Loans Home Value Index (HVI) and the Quicken Loans Home Price Perception Index (HPPI). The HVI takes the most accurate look at home value trends, while the HPPI measures the difference between appraisers’ home value opinions and the opinions of homeowners and home buyers across the country.

How does it work?

The HVI examines trends in home values by comparing current appraisals to where the local market was in January 2005 (when HVI started). This is the first home value index to include home values from refinances, which adds significantly more in-depth home value information than indexes based solely on home sales. Through the HVI, homeowners, home buyers and housing market analysts can get a real-time view of where home values are headed using appraisal data from both refinances and home purchases.

When clients refinance, we record the estimated value of their home at the time of their application, as well as the agreed-upon purchase price of home buyers and home sellers. Next, we compile and compare these home value estimates to the actual appraised values of properties that are received a short time later in the mortgage process. The gap between these two values is presented in the HPPI.

Why Quicken Loans?

As the second-largest retail mortgage lender, we’re uniquely positioned to provide these indexes, which compile and curate data on millions of home purchase and refinance appraisals. In addition, our mortgage activity across all 3,000+ U.S. counties provides a balanced cross section of the country’s housing markets, with a credible look into all major U.S. housing markets.

“Our position as a large and unique 50-state retail lender allows us to access this highly valuable data and create the Quicken Loans HVI and HPPI, which provide insight and perspective never seen before,” explained our very own chief economist, Bob Walters.

What does the HPPI tell us?

After looking at the gap in home values as perceived by homeowners and appraisers, it became apparent that consumers significantly overestimated the value of their homes during the 2008 and 2009 downturns. This time period became one of the worst housing markets in decades, and caused millions of mortgage applications industry-wide to be restructured or denied.

Two New Monthly Indexes by Quicken Loans

“Perception is not always reality when it comes to home prices,” Walters said. “The Quicken Loans Home Price Perception Index very clearly shows that consumers tend to overestimate the value of their home in economic downturns and, conversely, undervalue their homes and understate home price appreciation when markets rebound.”

It is our hope that consumers will look to the HVI to see where home values in their area are heading, and use the HPPI to better understand the difference in opinions about home values.

For more detailed information about these new indexes and more information on how they benefit you, check out the original press release here!

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