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Home Prices Climb, Appraisal Perceptions Decline

Phil Hall
Aug 10, 2016

Home prices continued their ascent in most metro areas during the second quarter, according to new data from the National Association of Realtors (NAR).

In an analysis of 178 metro areas, 148 (or 83 percent) showed year-over-year increases in the median existing single-family home price, with 25 metro areas registering double-digit increases. Twenty-nine areas recorded lower median prices from a year earlier.

And for the first time ever, one market—San Jose—registered a median single-family home price above $1 million. In addition to San Jose, the most expensive housing markets in the second quarter based on the median existing single-family price were San Francisco ($885,600), California’s Anaheim-Santa Ana metro market ($742,200), urban Honolulu ($725,200) and San Diego ($589,900). In contrast, the five lowest-cost metro areas in the second quarter were Ohio’s Youngstown-Warren-Boardman metro market ($85,400), Cumberland, Md. ($94,900), Decatur, Ill. ($95,600), Binghamton, N.Y. ($105,500) and Rockford, Ill. ($109,000).

“Steadily improving local job markets and mortgage rates teetering close to all-time lows brought buyers out in force in many large and middle-tier cities,” said NAR Chief Economist Lawrence Yun. “However, with homebuilding activity still failing to keep up with demand and not enough current homeowners putting their home up for sale, prices continued their strong ascent–and in many markets at a rate well above income growth.”

While home prices were on the rise, homeowner appraisal expectations were not. According to Quicken Loans’ National Home Price Perception Index (HPPI), appraised values were 1.69 percent lower than homeowners estimated in July, even though home values increased 1.43 percent last month and were up 6.24 percent from July 2015. Appraised values were higher than homeowners estimated in major Western cities including Denver (3.10 percent), San Jose (2.52 percent) and San Francisco (2.36 percent).

“One of the most important things for consumers to take away from the HPPI is just how regionalized housing truly is,” said Quicken Loans Chief Economist Bob Walters. “While those on the West coast are being surprised by their high appraisals, homeowners in the Northeast and Midwest are more likely to be shocked by their low values. If homeowners keep an eye on local home sales, they can be better aware of their current home value and not be shocked when they go to sell or refinance.”

But despite rising home prices and declining appraisal perceptions, people are still buying houses. The Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending Aug. 5 found the Market Composite Index increased 7.1 percent on a seasonally adjusted basis and increased seven percent on an unadjusted basis from one week earlier.

The seasonally adjusted Purchase Index increased three percent from one week earlier, while the unadjusted Purchase Index increased two percent compared with the previous week and was 13 percent higher than the same week one year ago. But the refinance market saw more activity than the purchase market: The Refinance Index increased 10 percent from the previous week, while the Government Refinance index was up 27 percent and the Conventional Refinance Index was up six percent from one week earlier. The refinance share of mortgage activity increased to 62.4 percent of total applications from 60.7 percent the previous week. 

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