Home values crawl month-over-month, could unlock spring lending swell

While home prices continued the gradual annual growth in February, its plateaued monthly progression could open a big spring for mortgage lending, according to Quicken Loans.

The Home Value Index — based on data from home purchases and mortgage refinances — grew 5.47% year-over-year but only moved up 0.05% from January.

"Home values are still making modest annual gains, despite being practically stagnant when measured monthly. What everyone has their eye on is what will happen as the spring selling season kicks off," Bill Banfield, executive vice president of capital markets at Quicken Loans, said in a press release.

"Home prices, and in turn home values, are mostly driven by the balance of how many homes are on the market and the volume of buyers vying for them. Most of the industry is expecting the demand will remain high, like in years past, but what remains to be seen is how many owners will choose to list their home — creating availability for both first time and move up buyers," Banfield continued.

Regionally, the West posted the largest year-over-year home value increases, jumping 5.6%. The South followed at 5.28%, the Northeast was next at 4.8% and the Midwest rounded out the foursome with a 3.72% gain. The Northeast had the biggest month-over-month increase at 0.5% while the South decreased the most with a -0.56% monthly change.

Appraisal values averaged 0.5% lower than homeowners' estimates in February, a widening gap over the past four months, according to Quicken's latest Home Price Perception Index.

The fading confidence in the housing market is part of what's driving that appraisal divergence. However, hope springs eternal for lenders as the home buying season approaches.

"Even though home value perceptions are declining at a national level, the majority of metro areas are getting appraisals at, or above, what the homeowner expected," Banfield continued.

"This is particularly exciting news at a time when we are seeing heightened interest in cash out refinances. More and more, owners are choosing to invest in their home by making improvements instead of moving. If appraisals are higher than expected an owner could find it more comfortable to do those home improvements they always had in the back of their mind."