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Friday, January 18, 2008

Zillow weep for me: Real estate voyeurs' tool debuted in good times, bitter pill in bad

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    Zillow.com, the online real estate site that estimates and tracks the value of more than 70 million homes in the U.S., was like a recreational narcotic when it debuted two years ago.  After a busy, perhaps tough day at work, what fun it was for homeowners to plug the Zillow.com address into their computers and see how much the value of their homes had added to their net worth.  It was a little like betting on a horse race whose outcome you knew.
    Well, that didn't last long.  Today, a Zillow search is likely to be pretty much of a downer, an in-your-face reminder that gravity sucks, and what goes up always comes down eventually.  
    Zillow's "zestimates," the organization's cutesy-poo name for its home valuations, are based on local data and rely substantially on the selling prices of homes by zip code and neighborhood.  Tax assessments and official real estate appraisals are also considered in Zillow's proprietary formula.  Zillow checks the accuracy of its zestimates against actual sale prices and rates itself on how its assessments measure up.  A table at Zillow's site shows how the zestimates performed market by market; Zillow gives itself gold stars depending on their margins of error

I can't complain...our home in Connecticut has lost only 1% of its value over the last year.

(e.g. if they are within 8% or less, they give themselves four stars).  Zillow's accuracy in the Norfolk/Newport News, VA, market is quite good, with a median error of just 5.6%.  But those looking at values in Pittsburgh, for example, might want to take zestimates with a grain of salt; the median margin of error for that metro area is 13.3%.  New Orleans is a whopping 19%.  On the other hand, with the amazing volatility in the Miami market, I was surprised that Zillow's margin of error was under 10% (but, of course, all those unsold condos do not not figure in the calculations).  Phoenix, another dynamic market, also was a surprise at 7.5%.
    In the current market, misery loves company.  I feel a little like Lot's wife every time I check my home's value on Zillow, expecting to be stopped in my tracks one of these days by a double-digit loss in value.  I can't complain that our home in Connecticut has lost only 1% of its value over the last year, considering the pain others are feeling. 

    It is, of course, none of my business, but I checked out a Las Vegas friend's zestimate this morning, and she has lost 9% in the last year, not surprising in that horrible market.  About the only thing at Zillow that might make her feel a little better is if she searches for condos in Miami.  Everything is relative in real estate...unless you were the last one to buy a Miami condo.  Then where do you turn?

 

Read 4403 times Last modified on Friday, 18 January 2008 06:46
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Larry Gavrich

This blog was conceived and is published by me, Larry Gavrich, a former corporate communications executive who founded HomeOnTheCourse, LLC, in 2005.  Our firm advises baby boomers and others seeking a lifestyle in which golf is a major component.  My wife Connie and I own a home in Connecticut (not on a golf course) and a condo at Pawleys Plantation in Pawleys Island, SC, on a Jack Nicklaus layout.  We began our search for our home on the course more than 15 years ago, and the challenges of the search inspired me to research golf communities and write objective reviews of them.

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