Home-price growth is cooling, leading to appraisal challenges
Cleveland-based
Corporate
Settlement
Solutions
(CSS)
released
an
analysis
Thursday
that
highlights
a
growing
gap
between
appraised
home
values
and
sale
prices.
Across
the
19
East
Coast
and
Midwest
states
in
which
CSS
operates,
appraisals
were
higher
than
sale
prices
in
57%
of
transactions
during
the
second
half
of
2024.
That
share
was
up
from
53%
in
the
second
half
of
2023
and
51%
in
the
first
half
of
2024.
Properties
are
deemed
“over-appraised“
if
the
appraised
value
is
$2,500
or
more
than
the
sale
price.
Conversely,
they
are
considered
“under-appraised“
if
the
sale
price
is
$2,500
or
more
than
the
appraised
value.
“Over
the
past
four
years,
home
prices
have
increased
significantly
in
many
markets,
but
recently
the
rate
of
growth
has
begun
to
slow.
These
are
just
two
of
the
challenges
appraisers
face
in
the
current
mortgage
market,”
Ashley
Jelinek,
CEO
of
CSS,
said
in
a
statement.
“We
launched
our
Appraisal
Price-Gap
Analysis
last
year
to
help
the
market,
as
a
whole,
understand
the
delta
between
appraisals
and
sale
prices.
Accurate,
market-centric
valuations
are
key
to
a
healthy
mortgage
market,
so
it
will
be
interesting
to
see
how
well
appraised
values
align
with
market-driven
sales
prices
throughout
2025
as
the
housing
market
continues
to
find
its
new
normal.”
According
to
the
most
recent
data
from
the
S&P
CoreLogic
Case-Shiller
Home
Price
Index,
U.S.
home
prices
rose
by
3.6%
year
over
year
in
October
2024.
That’s
down
from
a
three-year
average
growth
rate
of
5.8%
and
a
five-year
average
growth
rate
of
8.9%.
From
July
through
December
of
last
year,
57%
of
appraisals
conducted
by
CSS
came
in
higher
than
the
sale
price.
Another
36%
fell
within
$2,500
of
the
sale
price,
meaning
they
were
neither
undervalued
or
overvalued.
Only
8%
were
considered
under-appraised,
down
from
12%
in
the
second
half
of
2023.
Under-appraisals
are
relatively
rare
and
can
upend
a
real
estate
transaction
if
the
buyer
and
seller
need
to
renegotiate
the
sale
price,
or
the
buyer
needs
to
come
up
with
more
cash
to
close.
CSS
noted
that
the
average
over-appraisal
was
4%
more
than
the
sale
price
in
these
states,
while
the
average
under-appraisal
was
6%.
The
share
of
properties
that
were
under-appraised
shrank
from
8%
while
the
share
that
were
over-appraised
was
unchanged
compared
to
the
second
half
of
2023.
Among
the
states
in
the
CSS
footprint,
Pennsylvania
had
the
highest
share
of
properties
with
over-appraised
values
at
76%.
It
was
followed
by
Kentucky
(63%),
Virginia
(61%),
West
Virginia
(60%)
and
Florida
(55%).
At
the
other
end
of
the
spectrum,
only
38%
of
properties
were
over-appraised
in
New
Jersey.
Under-appraisals
were
most
common
in
Indiana,
where
this
occurred
on
17%
of
transactions
with
an
average
under-appraised
value
of
6%.
Pennsylvania
and
Florida
each
had
under-appraisal
shares
of
10%.
In
Virginia,
however,
virtually
none
of
the
appraisals
conducted
in
the
second
half
of
2024
were
considered
under-appraised.
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