Homeowners Overestimate Home Value as much as 150%
If you’re considering selling your home, you’re probably wondering how much it has appreciated since you bought it. According to a survey conducted by Rocket Homes, which polled 2,058 homeowners, if you were to guess, the accuracy of that guess probably depends on how long you’ve owned your home. (Learn more about the survey’s methodology.)
When someone buys a home—probably the biggest investment of their lives—they naturally expect that the house will build equity and grow in value. It’s a reasonable expectation to have, after all. Still, the rate at which that value builds depends on several factors: location, neighborhood comps, the home’s age and condition, updates and upgrades, and the state of the current market, to name a few.
Before you read on, guess your home’s current value compared to when you bought it, then continue on, and see if you match the conclusions outlined in the survey results.
Now, let’s break down the findings.
Length of Home Ownership Determines Owner’s Estimates of Home Value
In brief, he Rocket Homes survey discovered that the more realistic estimates of appreciating home value typically belong to those who have owned their homes for 1-2 years, with the least realistic estimates coming from those who’ve owned less than a year. (Side note: We would never recommend selling your home less than a year after buying. However, we know that sometimes, there’s no getting around it.) Regardless of your situation, staying on top of how your home is increasing in value is important.
The graph below shows the percentages of homeowners’ overestimates when anticipating home value appreciation.
Those who owned less than one year estimated the increased value of their home at 10.2%, but the real appreciation rate was only 4.1%—a whopping 150.8% overestimation (based on when the survey was completed). On the other hand, those who bought their homes 7-10 years prior estimated a 33.7% increase, with the real appreciation value at 46.6%—a 27.7% underestimation. Homeowners who bought 1-2 years before the survey had the most accurate estimations, overestimating by only 19.4% (which is still a lot).
What Factors Influence Owner Estimates of Home Appreciation?
As mentioned above, the economic period during which people purchased homes is one factor that impacts their home appreciation value estimates. Remember that this study was conducted around 2020, so the market impacts around that time also impacted the homeowners’ perspectives.
Less than 1 Year – 150.8%
So, why the higher overestimations from those who have owned less than one year? Typically home buyers do not regret their purchases. After all, this was – the one – the home they picked above all others they considered. They have a tendency to overestimate its worth over all others, and probably are riding some positive satisfaction from closing the sale and getting the terms they negotiated.
1-2 Years – 19.4%
Seller’s estimate of their recently acquired home is still way to high, but has tempered a lot since the original vast overestimate.
3-6 Years – 30.9%
Perhaps the home sellers have really settled into their new place and believe enough real estate market time has passed for them to receive much more equity then they actually have.
Interestingly, of all the groups polled, this one underestimated their home’s value. It is possible that these longer-term home owners have stopped keeping such a close eye on the real estate market and therefore have lost some perspective on how much their home had continued to appreciate year over year.
Home Value Appreciation Expectations vs. Reality
The table below shows the differences, in percentages, between the expected and real home appreciation values by the four designated groups.
To get even more specific, the table below shows how each group of those polled estimated their expected sales price, compared to their purchase price, in dollar amounts.
|Less than 1 year||1-2 years||3-6 years||7-10 years||More than 10 years|
|Sale Price Estimate||$338,594||$432,448||$432,448||$543,789||$425,158|
In the end, the survey found that most homeowners generally have a fair idea of their home’s appreciation even when somewhat over-optimistic.
How to Accurately Estimate Your Home’s Current Value
Now that you see how homeowners can skew their perception of a home’s value, let’s discuss how to actually tell your home’s value. Of course, the most accurate way to discover your home’s value is to talk to a real estate agent and have them conduct a comparative market analysis, which you can discuss with our team. However, there are some options available for the average homeowner to find out an approximate estimate of their home’s current value.
First, checking nearby homes in the area can be a great way to assess the market value of your home. While it’s unlikely any of these homes are exact comparisons, they are a good starting point to help you figure out where your home falls on the price scale. You should check homes sold in the last six months in your area, and see how many have comparable floor plan and amenities to your home. Even if you don’t find an exact match, these act as a reputable guide to your home’s true value.
There are also online home assessment tools to help you get a better idea of your home’s value. We recommend checking Portlandhomesforsale.com for recent sales in your neighborhood. While websites like Rocket Mortgage offer comparison tools to help you assess your home’s value, you can easily use other search tools to find nearby homes sold for a similar price.
Of course, bear in mind that while online tools can be useful, nothing compares to having a professional realtor determine your home’s value for you. Not only can they offer price comparisons, but they have access to more home sale data, allowing for a more accurate comparison.
What Impacts Home Value
Several factors impact the value of your home, some you can control, and some (like location) that you cannot. The most impactful parts of home value include the following:
- Size and condition
- School district and amenities
- Read our article on how school rating affect home values.
- Comparable homes
- Market conditions
- Follow our monthly reports on the greater Portland real estate market.
Factors like the size and condition of your home are somewhat within your control, and can be impact by additions, upgrades, and add-ons to your home in the last few years. The other factors, like location, school districts, amenities, market conditions, and comparable homes, are all outside of your control, but do influence how much your home is worth. For example, a home closer to a highly rated school will sell for more, on average, than the same home in a different school district. Similarly, if your home is near a college, hospital, fire station, or other amenity, it may be worth more than a home further from these essential services.
Since this is a lot to calculate on your own, it’s best to work with a real estate professional to determine nearby comparable homes and overall factors that impact your property.
Thinking of Selling Your Home and Curious about Its Current Value?
One of the best first steps anyone can take when thinking of selling their home is to contact an experienced licensed real estate agent. Not only will they help you determine the current value of your home, but they will also help you through every step of the process. There’s a lot to think about when putting your home on the market, and we’d love to help you on your real estate journey. Call our top 1% seller’s team today at 503-714-1111 or chat with the bot on this site. And if you also plan to buy another home in the Portland metro area, our top 1% buyer’s team is also ready and waiting to serve you.
November 3, 2023