Zillow has my home valued at $20K more than I paid for it in July 2004. That is ridiculous. I know it will never sell for that. The range is $472K to $587K which is so wide that it is meaningless.

A formula-based valuation program can produce an illogical result, due to application of its rules without human oversight and correction, in a given case. My home is 4,300 sq. ft, 5 br, 6 baths, on 1/2 acre, in a comfortable L.A. suburb. Houses on adjacent sides are smaller models, built by the same builder, of the same vintage, and neither remodeled and updated, which mine was in the `90s. The neighboring houses are valued about $100,000 more than mine, and the same comps would apply in terms of recent sales. There is one big difference which I believe shows the weakness of automatic application of programmed formulas: I have owned my house for 30 years, thus the last purchase is a low value. The neighbors bought their homes (houses are all same age, same builder, same style) within the last ten years, at high values of recent years. My Z estimate is largely based upon a `70s value, adjusted forward by formula for appreciation assumptions. But those assumptions don’t track with actual appreciation over that time period. The adjacent houses start with a high resale price, then adjust from that point on. So they end up higher, even though smaller houses and not remodeled, than mine, which is handicapped with a low historical purchase price. I believe the weights assigned various factors within the Z formulation needs some correction. No automatic formula system will be as good as a genuine appraisal, but theirs could be improved at least on this point. Comps should trump trended original purchase price data.

They actually have my house right on the mark. Some of my neighbor’s home are too high, while others are accurate. It is interesting to see what the neighbor’s have though.

Zillow gives me a broad brush stroke for pricing, but often the numbers leave me puzzled. The satellite angle shots are helpful for
viewing the topography and layout of the neighborhood, etc.

Have yet to see a “true” foreclosure/bank sale number on the stats
(you know, that really low number that makes you spit your coffee out). Bank Sales and REO’s are rapidly multiplying. Zillow will have to catch up with everyone else. I look at Zillow, but rely on
the county assessor’s site.

Good info Drew. Zillow is an excellent starting point as you suggest. Also, some people don’t realize that a house is only worth what somebody is willing to pay for it and valuation is not an exact science. When I was building my current house, I had two different appraisals done, and they were different by $250K. At the start of our boom, appraisals were consistently low since comps hadn’t caught up with current sales prices. At the start of the down market, appraisals were consistently high for the same reason. Now appraised values seem to be low as appraisers and banks are much more conservative in a declining market. Zillow can be an excellent tool if you know how to use it.

I think Zillow’s new algorhythm needs to be seriously tweaked. Last time I looked, about 6 months ago, Zillow stated my 900 s.f. 2 bedroom bungalow brick home was $220,000. Now, when I checked after I read this post, my home has magically grown to 1,300 square feet, and its value raised to $294,000. Hmmmm…keep working on that algorhythm Zillow, it needs a bit more tweaking!

And yet its a good thing you don’t have 3 or 4 running around your house mike, because then you might be forced to buy that mcmansion that skrapguy talks about!

Changing topics here. No offense to Mike nor Zillow.

So today’s RGJ has an article that reads “Home Sales Slow to Crawl.” In the article, Wayne Capurro, president of the Reno-Sparks Association of Realtors, is quoted as follows:

“Things seem to be ‘picking up’ [a phrase you’ll recall Alan Murray introduced to this blog a month or so ago]. The agents in my office seem ‘busy.’ I’ve been checking, and there’s somewhat of a spike in pending sales. That’s a positive.”

Putting aside the question of what exactly Wayne means by “things” [see below], is the spin reserved for just the NAR? Or does it exist at the local level as well?

And while you’re contemplating a response, there was another piece of interesting data included in the article. Apparently 14% of all homes for sale in December “in the area” were bank owned [REOs]. If this is accurate [and given Mike’s data which suggests trustee’s deed recordations will increase over the next several months], could REOs possibly climb to 20% or more of all home listings in the next several months?

If so, do you think this is what Wayne had in mind when he observed “things seem to be picking up?”

I find Allen’s comments thought provoking.

First, his UPS person’s observation that banks aren’t willing to deal. That has ALWAYS been my experience. I hear all of this about short sales and REOs being sold at 80% or less of what is owed [although I DON’T hear these stories where we’re talking about a financial institution which stands in the first position] but insofar as my experience is concerned, I just haven’t seen it!

Maybe it’s because the banks DON’T really own this so called distressed property? Very few loans are portfolio owned. The ones that represented 100% financing really weren’t 100% first mortgages [meaning the first mortgages were not portfolio owned]. That means banks are by and large nothing more than loan servicing agents. So if they won’t bargain, could it be because the true owner of the mortgage [or REO] is some other investor [or country] that doesn’t need to bargain?

Second, Allen’s queries re: PMI are IMO valid. My recollection [from the PMI policies I have seen] is that the lender cannot make claim against a PMI policy UNTIL it has gone through the foreclosure process and title to the mortgaged property has reverted to the lender. Even at that point, title must be transferred to the PMI carrier [another entity that doesn’t need to bargain].

Interestingly, the PMI policies I’ve seen contain another provision that PREVENTS the PMI carrier from going after the borrower for any deficiency as long as the property insured was an owner-occupied single family residence. So this kind of turns the borrower’s obligation to pay the entire indebtedness, into no obligation at all. It also raises the question of why a lender would send the borrower an IRC 1099 for relief of indebtedness? The borrower has NOT been relieved of indebtedness. The PMI he/she has been paying for has covered the so called GAP between the amount owed and the value of the borrower’s property.

Finally, I too had a discussion this afternoon with someone; the manager of my local bank. Contrary to widespread reports [on/off this blog], my manager told me that new loan originations by borrowers who can document their income have all but dried up. According to her, the only people who want new loans are the ones who can neither document income nor actually afford to repay. Interesting.

So my conclusion based upon all this data [which includes the UPS person/manager on the street] is that we’re basically in a Mexican standoff. The people who can afford to buy are by and large sitting on the side lines waiting for a good deal; the kind that by and large really doesn’t exist. If they can’t get the kind of deal they’re looking for, they don’t need to buy and will rent [yes Derrick, ridiculously for $2,650/month].

Then there are the sellers who are really only sellers in name only [like Allen] who don’t need to sell [whether or not they are banks, countries, PMI carriers, etc.] and consequently, refuse to lower their prices.

So who do you think is going to blink first? This whole mess tells me that we’ve got a long way to go because until one side or the other blinks, sales are going to continue to languish.

Thanks Skrapguy! To me the formula for buying a smaller home in 2003 was simple; the larger the house, the more one has to spend cleaning!

Key economic indicators establish trends. This blog has astute observations with a blend of complete denial. Sounds to me like the Neanderthal is reading current data from the S+P/Case Shiller index and the Office of Federal Housing numbers. I’m thinking all
the Neanderthals (myself included) are sitting in our paid for caves
and watching this thing play out.

*unable to justify my margins, sorry for the raggy edges

Allen Murray-

I’m not going to engage in a war of insults with you, however your sweeping generalizations would suggest that you yourself might have quite the pronounced brow.

Never did I say that house prices would go to zero. However, I am confident that prices will drop to where they were pre-bubble in inflation adjusted dollars, and possibly in nominal dollars. From there, I expect a pronounced period of little to no price increases (I don’t buy into the notion that the bottom will be hard to identify), and then a return to historical rates of appreciation. I believe economic conditions will dictate how bad things get.

To even suggest that without greed there would be no innovation is so ridiculously absurd that it staggers the imagination. It’s also quite insulting to those who have devoted their entire lives to helping others. There are innumerable drivers behind every new idea. Furthermore, the desire of an individual to profit from hard work is NOT synonymous with being greedy. I do think it’s clear where your priorities lie.

I’ve got to thank the board for all the great comments on this thread. A weekend soft-ball post ended up being a real learning experience with a lot of great information imparted. I never considered how PMI fits into the short sale game. I appreciate “Mr. Zillow” checking in - I’m still trying to get my hands around the statistical accuracy of the Z-estimates - 43% +/- 5% percent seems a bit loose to me, but you get what you pay for! It never occurred to me that Zillow is probably picking up TD’s as new sales. It is something that they are going to have to work on filtering out of their algorithms.

For the record, I think Zillow has my home valued about 5-10% low today, after being 15% low at the peak. Views, improvements, horse property, low turnover neighborhood - all the usual intangibles that are hard to value. And all the usual denial on my part!

We are all gearing up for our February reports. Diane on sales and analysis, Guy on sales and median, and I’ll update you on what NOD/NOS/TD action looked like this month. Get ready for some interesting data to chew on.

“are we not at 2003-2004 prices?”

There is no way to provide a generalized answer to that question. Some houses in some neighborhoods are back to 2004 prices. But middle to late 2004 prices. Remember, 2004 was the Biggest Bubble Year of All. It saw the largest amount of Voodoo money fueled price appreciation from January 1 to December 31. I can locate quite a number of houses on the market today that are selling for what they sold for in mid 2004. I find far fewer houses that are selling today for what they sold for in early 2004. In other words, most houses that are selling today that were last sold in early 2004, are selling for higher than early 2004.

I find very few houses selling today for what they were selling in 2003. With the exception of Somersett. But Somersett is not an accurate bellweather of the entire market. As I have said before, the whole community of Somersett was built on the bubble. I recall that even Diane posted here a few months ago that she sees many houses in Somersett back to 2003 prices.

In the more established neighborhoods, like mine, which is Caughlin Ranch, I see very very few houses selling today for what they sold for in 2003. It just isn’t happening. I can assure you that no way have the bubble lottery gains been squeezed out of my house, for example. So I have to disagree that we are back to 2003 prices, especially in the more established neighborhoods in town.

Finally, I suggest it is inaccurate to say that the bubble began in 2003. It began earlier than that. The Fed began slashing the Fed Funds rate shortly after 9/11 in ‘01. By 2003, the Voodoo money was flowing. The Voodoo money was well into the spigot in 2002. Certainly the most egregious excesses came in 2003-2005 as lenders began to abandon all traditional standards of creditworthiness, but Voodoo money was clearly ramping up prices in 2002. (Hence my point about Somersett, which basically didn’t even exist prior to 2002). And, beyond any doubt, we are in no way back to 2002 prices.

So, no, I don’t think we are really very close to pre-bubble prices today.