Home Appraisal Perceptions Hold Steady; Bidding Wars at 10-Year Low

Quicken Loans, Detroit, said home value perceptions held stead in October, with owner expectations just a half-percent higher than appraisals.

A separate report from Redfin, Seattle, said just 10 percent of offers written by Redfin agents on behalf of their homebuying customers nationwide faced a bidding war in October, down from 39 percent a year earlier to a 10-year-low.

The Quicken National Home Price Perception Index showed appraisals at an average of 0.45% lower than what homeowners expected; it also show the gap between the average owner estimate and appraiser opinion narrowed each of the past three months. Appraisals in all the metro areas measured were less than 2% lower, or higher, than expected, ranging from an average of 1.64% lower than expected in Chicago, to appraisals an average of 1.40% higher than what the homeowners estimated.

Bill Banfield, Executive Vice President of Capital Market for Quicken Loans, said there is a “spectrum of home value perception” across the country, but most homeowners are not likely to be shocked by their appraisal. “While most areas in the have not hit equilibrium for home price perception, there is stability in much of the country,” he said. “With such a small difference between appraised values and estimated values, homeowners are less likely to run into snags in the mortgage process when refinancing or buying a new home.”

Quicken also noted homeowners are keeping pace of home values even as they rise, as shown by the Quicken Loans Home Value Index. Quicken said despite home values being essentially stagnant, dipping 0.04% from September to October, the annual measure shows appraisals rose 7.07% since October 2018.

At a regional level, the West saw the largest monthly drop, falling 0.75% since September, but rising 6.07% year-over year. The Northeast was the only area with a bump in value, with appraisals rising a nascent 0.08% in October. At an annual level, the South lagged the country with a 3.77% increase year-over-year.

“The leveling off we saw in October is actually a welcome sign, especially to first time homebuyers who are focused on affordability,” Banfield said. “An ideal economic equilibrium would be steadily increasing home values that keep pace with inflation and wage growth. This year’s lower interest rates and the moderating level of home prices has improved affordability despite low a low supply of homes for sale.”

Meanwhile, Redfin reported just 10 percent of offers faced a bidding war in October, down from 39 percent a year earlier to a 10-year-low. However, the report suggested slow mortgage rates and a lack of homes for sale point to a likely return of bidding wars next year.

Of the top five markets where bidding wars were most common in October, four were in California: San Francisco (34.8%), San Jose (20.5%), San Diego (15.6%) and Los Angeles (13.7%). On the East Coast, in Philadelphia, 13.8 percent of offers faced bidding wars. The rate of bidding wars in San Francisco and San Jose hit new highs for the year in October, a month when competition typically cools. That said, both markets’ bidding war rates were still well below last year’s levels of 58.1 percent and 64.9 percent, respectively.

Kalena Mashing, a Redfin agent in Palo Alto, Calif., said if 2019’s big tech stock IPOs such as Uber, Lyft and Slack had been as hot as many expected earlier in the year, it’s likely the market in the Bay Area would be a lot more competitive right now. “There was a lot of hype earlier this year in the Bay Area around some big IPOs,” she said. “But we haven’t seen that hype translate into a hot market, regardless of how well the IPOs did. Really, it’s not the IPO money making the market hot, it’s the perception that the IPO money could make the market hot that has really driven the local housing market this year.”

This unseasonal uptick in competition in the Bay Area may be a sign of things to come elsewhere, said Redfin chief economist Daryl Fairweather. “Right now, there are fewer homes for sale than we usually see this time of year, and sales are picking up thanks in part to low mortgage interest rates,” she said. “All of the pieces are in place for bidding wars to become more common and for the housing market to shift back toward the seller’s favor next year. Now may be the last chance in the foreseeable future for buyers to win a home without facing a bidding war.”

Redfin said Seattle had a bidding war rate of just 8.8 percent, below the national level and barely above the 10-year low set in July, despite being one of the most competitive markets a year ago, along with San Francisco and San Jose.

The report can be accessed at https://www.redfin.com/blog/october-2019-real-estate-bidding-wars.