Wikinvest Wire

Are Zestimates pointing to Ztrouble?

Tuesday, August 14, 2007

Getting good information about real estate sales and property values in any particular area seems to be fraught with difficulty if you rely on any of the free internet services.

HomeGain and Zillow are two of the more popular ones, but comparing the results retrieved by these two websites for the same query can produce more confusion than insight.

You can always go see a realtor and they are likely to provide you with information on recent sales or you can go to the county assessor's office and search the tax records, usually for a small fee.

The somewhat controversial Zillow Zestimates (outlawed in Arizona?) along with the Zillow sales records are probably the best way to go poking around in an attmpt to learn more, but you really have to be careful about what you're looking at - some properties don't appear at all on their maps, some sales never show up, and some sales aren't really sales at all, but rather, title changes where some value - any value it seems - shows up in the tax records.

However, the Zillow graphical tools are without equal and the Zestimates are, if nothing else, very interesting - well worth the time spent for anyone who is curious about what's happening to real estate values in their neighborhood.

Here's a screenshot of the recent sales from a neighborhood not too far from where we used to live in Southern California - note the difference between the Sales Prices and the Zestimates.

While not claiming to be an expert on the subject, after reading a handful of reports on Zestimates over the last year or so, they all seemed to come to a similar conclusion - the estimates can be pretty good for large developments where there are many similar houses, but they can be pretty bad when comparable sales are more difficult to find.

The screenshot above is for an area where there are indeed many, many similar houses and any nearby 30 and 60 year old homes have been removed - this eliminates another common source of confusion that results when a new development is built next to a much older one.

In this one area of Southern California, it would appear that either home prices are falling rather sharply or that the Zestimates (based on comparable sales) are just wrong.

It is probably the former and not the latter - buying a 1900+ square foot house for less than $600,000 is something that has not happened much in the last few years in this part of California.

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Anonymous said...

Zestimates Shmestimates!! It's not the mortgage markets that should be spooking you, its the volatility pattern of the last few months. The cycle of big plunge - big recovery is the loudest possible alarm bell that the folks applying the wrench to the credit tap are getting ready to shut it off! It's such a wonderful device this gives you time to sell off everything AND still get a juicy price (because reserve banks, and the perennially optimistic keep helping the market recover)...but for how much longer...may as well set your watch.

Anonymous said...

Sales are soooo slow, all estimates are dubious. Appraisals must really be lagging badly these days since there is little to base them on.

Anonymous said...

Ya 'aint seen nothin' yet-- before this is over we'll have 2002 prices again-- that means those people who just bought at $550K thinking they were getting a $100K off are gonna be in the hole by at least that much come this time next year

Anonymous said...

Have you tried the recent sales comparables on At least there what really sold at what price in the market...

Tim said...

I guess if you live in certain areas you have more options - Property Shark and others only cover a small portion of the country, unfortunately not where I used to live or live now.

David G said...

Hi Tim, it's David from Zillow.

Good feedback. I wanted to respond to your observations about transactions that aren't arms length deals. Those transactions are excluded from Zestimate calculations based on their type as coded by the County recorder and based on a few other rules that exclude outliers. Thanks to feedback like yours we now plan to flag excluded sales in an upcoming redesign of the sales history on home's detail pages.

Tim said...

Hey David - nice of you to drop by.

Wow - did you know that Googling "David from Zillow" will get you to Greg Swan's (adjective deleted) Bloodhound blog where they appear to have zoomed in even closer on that dog?

Anyway, if you'd like more feedback, just send me mail - I think you guys have done a fantastic job so far.

Anonymous said...

Seems the shine is off Zillow as more and more people realize that running public comparable home sales through an algorythm and spitting out a "Zestimate" is nothing special or new

Homegain did this nearly 10 years ago and still does it today.

Zillow's declining traffic indicates that the novelty has worn off.

These automated valuations are close to useless other than for entertainment.


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