I’m confused again…
According to recent research done by Fannie Mae, many homeowners underestimate the equity they currently have in their home. As a result, these homeowners are less likely to refinance, take out home equity loans, or sell their home (Equity). This is not good for the housing market.
On the other hand, a study done by Quicken Loans reveals that many borrowers overestimate the value of the home they are purchasing, or refinancing. In fact, in June the home values assigned by appraisers were almost 2% less than what consumers thought (Optimism). This is also in not good for the housing market or lenders.
So which is true? What are homes really worth today?
The fact is, depending on the area both may be true. According to Quicken Loans Chief Economist Bob Walters, home values nationally are well within the healthy range. However, variances across the country can effect a consumer’s perception of value. It seems that owners in the West, where values are increasing, tend to underestimate values. Those in Northeast, where values show a slower growth, do just the opposite.
So, it appears we have a dilemma. Some people aren’t refinancing or moving up because they believe the value of their home won’t support the financing needed, while others are expecting more money based on a perceived higher value for the home they are buying or refinancing. Both cause challenges for lenders.
Lenders and their originators need to be well versed not only in the products, services, and rates that they offer but also knowledgeable of the nuances affecting the home values in the areas they lend. Lending in one state, or area, may be completely different than in another. Depending on market conditions values may vary which will have a definite impact on how much of a loan the consumer may obtain.
An educated consumer is your best borrower. This knowledge and information must be communicated to the consumers. This will help them to make informed decisions about the purchase or refinance of a home while saving time and explanation as to why a property did not appraise at a value needed to support intended financing.
It’s much better to deal with any potential value issues right up front when there is plenty of time to explore options available to meet the consumer’s needs.