Yesterday Zillow announced their nationwide view of the housing market, a sort of national Zestimate. Charlotte made headlines as being the 3rd fastest appreciating city in the country at a 9% increase from last year. Most of us are aware of the pricing inconsistencies between Zillow and appraisal, or even a good CMA, but when you add them all together you get a press release like this one. And here in Charlotte I'm waiting on the local newspaper to publish this "Good News"... and then having to tell a seller next week that his neighborhood is off 5, 7 or even 13% from last year.
Zillow responded in another forum to my question on how these numbers were created:
Hi, it's David from Zillow;
Terry -
Zillow is a database of all homes not just those that are currently on the market and so we calculate Zestimate values for all of the homes in our database. With this database we can report the value trends of all homes not just those that recently sold. The beauty of this approach is that it is not skewed by a change in the mix of homes that are selling - a common problem for the traditional approach of reporting value trends using only an analysis of recent sales
I think I understand that David, but I have two questions:
Your national and local MSA numbers are then the addition of all of your Zestimates, which were created from the extrapolations from actual comparable property sales, correct? Essentially additions of estimates based on comparable sales, right? Then if I took ALL the sales over a longer period of time, and compared them to the same time and place last year, our numbers should be similar shouldn't they? Well I measured 3 months of activiity ending July 31 and the numbers are just way off.
Your President has stated that as much as 38% of your Zestimates are more than 10% off, why isn't your margin of error compounded in a fast moving market where prices could be going up or down relatively quickly. I'm not a statistician, but it seems that margin of error must go up in these conditons.
While our numbers and yours do correspond in some regards- for example our more expensive homes have taken the hardest hit- your data indicated the medium to large home have taken a harder hit, a pretty similar picture, there is still a huge variance in our actual results from the MLS which while not 100% complete is a good representative sample of non-builder sales.
I've recently done research on two of the top three leading zip codes in Charlotte, with appreciation based on average square foot prices from the MLS, reports showing them for the 3 month period ending July 31. In one zip code, there was price appreciation 50% below yours, and in the other? Double digit depreciation! The zip codes in question, 28277 appreciated 4.5%, and 28278 depreciated 11.97%--over May, June and July- quite a difference to Zillow's +9%, the actual reports are below for your review. A full makret review is under way for the first 7 months of the year.
Why is this important? Because I am sure one of our local papers will pick up the Zillow press release and report it, probably uncritically, and I'll have to face a seller next week who thinks his property has gone up 9% when it might have fallen 10% from last year.
See the rest of this post here on my blog, including the actual zip code market reports.
I have to tell you that their number crunching capabilites are astonishing- even if they aren't right. I'm sure that sound idiotic! If you haven't visited, take a look here. If you live in one of their 66 metro areas, their neighborhood appreciation index is excellent , download it, see the Excel format where you can slice and dice the material yourself. Now if they can only get their numbers closer...
Terry McDonald
www.TerryMcDonaldRealEstate.com
www.CharlotteCommunities.net, your on-line relocation guide
Blog at http://charlotterealestateandcommunities.blogspot.com
See Charlotte Communities http://terrymcdonaldrealestate.slide.com
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