Zillow www.zillow.com reports that they have upgraded their algorithms to allow more accurate Z-estimates on local properties.
So what do you think about the values they are assigning to you home? High? Low? By how much? Are the features that make your property "special" being missed? Take a look and report back in – it’s Blogger Participation Day!
(image courtesy of www.lostamerica.com used with permission)
BanteringBear
In my opinion, Zillow is almost always on the high side. I have no idea how they come up with their Zestimates, but they’re not accurate. They never take into consideration the condition of the property , the materials used, quality of construction, any views, or other critically important criteria. All Zillow is good for is the sales data.
Does Zillow even have a future? I’ve been wondering if they’re just another bubble business, like staging or sign twirling, destined for the pasture.
NCBound
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.
DERRICK
I can’t say for sure how accurate zillow is either. It has my home priced at 70k more than I paid in february of 2003..
Like ncbound mentioned, I also know that it would not sell for that much. Especially after a realtor takes a bite out of that, not to mention the closing cost. which MOST sellers now pay.
Tom
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.
Allen Murray
I sold 2 properties in 2006 in Reno for higher than their Zillow values, but both were somewhat unique. Both were bank financed and had full appraisals done. One was a completely remodeled 1975 vintage house in SW Reno, while the other was a 1926 house by the University that I built a duplex on the rear of the property. Like mentioned above, Zillow cannot take into account remodels, quality of materials, view, or rental income amounts. In January 2007 I refinanced my personal residence and compared the appraised value to the Zillow value at the time, and Zillow was much higher. I believe Zillow is fairly accurate in cookie cutter neighborhoods of similar vintage and construction, and is a great neighborhood guide in general, but it worthless in custom home neighborhoods or in valuing multi unit properties.
donna
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. 🙂
SmartMoney
Zillow is junk. Take a look at 3809 Heron’s Landing Dr. A similar house sold for 237,500 a couple of months ago. There are two of the same for sale for $239K and 245K. Yet Zillow lists 3809 as $278K. Why? The house went into forclosure and $278k is what was owed on the house. That is a totally inaccurate value. Zillow is pretty much worthless.
NAS
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.
Drew Meyers from Zillow
Hey, it’s Drew from Zillow-
There’s certainly some interesting comments on the accuracy issue, and I hope I can shed a little bit of light on Zillow’s accuracy statistics (we’re very transparent). In Washoe county, 43% of zestimates fall within 5% of sales prices — with a median error of 6.2%. Nationwide, the number is 32% within 5% and 8.8% median margin of error, so Washoe county is actually quite a bit more accurate than our national average. You can >check all the figures here. That said, Zestimates are a starting point, not the final word in home values. They are not a replacement for an appraisal or CMA by a local professional.
donna-
Glad to hear it 🙂
BanteringBear-
Though zestimates are a huge piece of what we do here at Zillow, there is much more on Zillow; things such as zillow discussions, home Q&A, listings (agents can advertise their listings for free), and the content in our real estate guide.
Allen Murray
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.
Diane Cohn
Sadly, I think Zillow is $50K-$90K too high for my house, depending on my level of denial versus pessimism. I can only guess that their healthy assessment of my home’s worth takes into account the elaborate backyard I was forced to install this summer to comply with Stepford, oops, I mean, Somersett rules (considering that I sold my neighbor’s nearly identical house two doors down for $693K a couple of months ago… and Zillow doesn’t even know about the short sale five doors down purchased for $682K, now offered at $625K, still without a nibble). Zillow is a very a good starting point, but there’s always more to the story.
MIke Van H
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!
SkrapGuy
Mike Van H:
You live in a 900 sq. ft. house? Why, Mike, that’s almost Un-American these days. Where is your sense of patriotism? Don’t you feel an obligation to go out and buy a 6100 sq. Ft. Toll Bros. McMansion for the sake of our local and national economy? And further, go completely in debt up to your ass in the process, of course. Somebody the other day said something about nothing down loans are still around (although he did not repsond to my inquiry as to the identity of that lender) so don’t worry about not being able to afford it. Just think how cool you could look in a house with a wrapping room.
Serioulsy, Mike, I commend you for living what sounds like a sensible and sustainable lifestyle.
DERRICK
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!
Tom
I see comments on here periodically about the so-called McMansions, and I wonder where those are, or is it all a joke!
The `McMansions’ I have seen in Reno, as built by the mass builders, are a disappointing hodgepodge of small rooms disguised by cutsy amenities and nooks. All of them are on ridiculously small lots– San Fernando Valley dense living transported to south Reno.
We have considered about everything over 4,200 sq ft in south suburban Reno–and found nothing to get excited about. I think to find a small number of large rooms (rather than a large number of small rooms, which is what the builders are creating), and on a large lot with decent side yard spacing between neighbors, you have to go up the Mount Rose Road a ways.
smarten
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?”
Allen Murray
I had an interesting conversation with my UPS driver this afternoon. He is looking to buy in S. Suburban Reno and has looked at over 20 properties. He is mainly looking at foreclosures and is getting frustrated because banks are unwilling to deal and he can’t seem to find a good enough deal. It was his take that banks were not willing to do short sales because if they let it go to foreclosure, they get paid through the homeowner’s PMI insurance. I’m not sure if this is true, but interesting. He can’t realize why seller’s aren’t reducing their prices given the slow market which I have also heard potential buyers on this blog express frustration over. As a current home seller, I simply told him I won’t reduce my price because I don’t “need” to sell and I suspect the majority of home sellers don’t “need” to sell either. In other words, as somebody pointed out on this blog, most of us aren’t real sellers. So the question is will us sellers get “real” now, or wait a few years for the market to come back. I’ll take the later.
There is no doubt that realtors are busier now than they have been in the past 6 months, mortgage applications are higher than they have been in a while, and there seems to be plenty of work for us contractors. However, this happens every spring and would be more surprising if it didn’t happen. Will this translate into increased home sales, I guess we’ll have to wait and see…….. meanwhile, all of you out there waiting for lower interest rates, lower sales prices, or months of increasing sales data, I sure hope it happens for you.
smarten
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.
BanteringBear
Allen Murray posted:
“As a current home seller, I simply told him I won’t reduce my price because I don’t “need” to sell and I suspect the majority of home sellers don’t “need” to sell either. In other words, as somebody pointed out on this blog, most of us aren’t real sellers. So the question is will us sellers get “real” now, or wait a few years for the market to come back. I’ll take the later.”
In light of everything which has been discussed on this blog and countless others as well as CNBC, Bloomberg, etc. over the course of the past several years, that certain individuals still believe home prices will “come back” is absolutely astonishing to say the least. It is this sort of wishful thinking, or worse-greed, which ends up costing individuals hundreds of thousands of dollars, and oftentimes their home. Those who adapt, survive. Otherwise, financial Darwinism will have it’s way.
MIke Van H
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!
Allen Murray
So let me get this straight Bantering Bear, you believe that home prices will continue to decline forever, or will stay at current prices forever???? Are you serious? I too believe in financial Darwinism and you must be a Neanderthal. Secondly, as a capitalist, I believe greed is a good thing, without it you wouldn’t have innovation, or risk taking, the two things that have made this country so powerful in a relatively short time. When stupid people get greedy they go bankrupt, when smart people get greedy, they get rich, financial Darwinism indeed…..
NAS
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
Perry
This topic of shortsales not being real sales and the PMI really covering the lender loss is being covered pretty good at…
http://blog.franklyrealty.com/2008/02/va-short-sales.html
BanteringBear
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.
Allen Murray
BB, I suggest we are near pre bubble prices now are we not? Are we not at 2003-4 prices? What would you consider pre bubble? Most, if not all, of your comments are negative and it gets a little old somtimes. Why does it upset you that I don’t “need” to sell my house, and neither do most sellers in our local market? All free markets have ups an downs, we had a record up, now we are having a record down? Is that really a surprise to anyone? If you are looking for a completely stable housing market may I suggest you try Cuba? I hear the weather is nice down there and Fidel makes sure everyone has enough to eat…….Cheers Bantering Bear=)
GreenNV
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.
SmartMoney
Allen Murray said: “So the question is will us sellers get “real” now, or wait a few years for the market to come back. I’ll take the later.”
Funny, reminds me exactly of what people were saying about the NASDAQ back in 2000 when it dropped from 5,000 to 3,000. “It will rebound in few years” Let’s see……eight years later and still not half the value it was at the peak. But I am sure real-estate is set to rebound any day now…
Reno Ignoramus
“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.
Allen Murray
Interesting take RI, so you are saying pre-bubble would be 2002 prices, that might be true. The funny thing about this discussion is that I haven’t bought any property in Reno since 2003 because I saw this coming, and I don’t really care if I have to live in my Mc Mansion for 10 more years. I would like to donwsize and get more land so I can build my hot rods, but I can’t complain. Smart Money, if you really think 10 years from now real estate prices here are going to be 1/2 their peak value in 2005 (as the NASDAQ)I think you’re crazy, but only time will tell.