The Zillow Factor

[lostkitty]

Why do so many newspapers discount Zillow? I think the site is dramatically contributing to the rupture of the ballon.
I, for one, look up houses not to see what the “zestimate” is, but rather to see what the home last sold for. When I see a 4 bedroom purchased in 2003 at 610k and now asking 1mil+, I get a little angry!
As a consumer, this information was historically difficult to come by. The speed of information gathering is changing everything, and I cannot see a rational person buying anything at this point in most of the San Diego market.
Why on earth would someone like me pay someone like the above (example) seller +/-400k over the next 30 years, plus interest to the banks for giving me that priviledge? Not going to happen.
I’ll keep zillowing – it’s fun too.

[powayseller]

I think zillow got in over their head with posting appraisals (or guesstimates). They’re right on if a house hasn’t been remodeled, otherwise they’re way off. Since their appraisal figure is so prominently posted, their divergence from reality makes them look bad. That’s what I don’t like about them. But good point – we can still use the site to check on prior sales.

[speaker]

I completely agree. The owners/operators of Zillow have stated many times over that Zillow and the Zestimate are still in beta phases of development. With time, their algorithims will become more precise as more data comes their way. I absolutely don’t bother with the Zestimate. Sales history is laid out right in front of you for free. There is a 5 Bd/3 ba house with a partial ocean view down the street from me. The house is up for sale TODAY in the range of 930 – 950k and the sales history goes something like this:
Sale History
12/15/2005: $930,000
08/29/2003: $690,000
09/26/1997: $303,500

See? The zestimate is somewhat irrelevant at this point because it doesn’t really matter what the comps are nearby because there is nothing to justify why this house gained 240K in “equity” in just 2 years (2003 sale to 2005 sale). did they install gold countertops in the bathroom!? by the way, do you think whoever tried to flip this million dollar pig is getting hosed or got hosed right now!? They paid 930k a few months ago and it is now on the market (AGAIN!!) at 930-950K.

I know home sales and property taxes are a matter of public record but i wouldn’t know where to begin to find out that kind of information but it is my suspicion that it involves the local municipalities and fees. but now, thanks to zillow, i get the sales history and property taxes (based on assessed value mind you) all with a couple of clicks for FREEEEEEE!!!!!

the realtor of this particular home i pointed out just had their legs cut out from under them because they would have a very, very difficult time justifying the price of this home based on the sales history that was made available to everyone for free.

oh and by the way, did you all know the guy who started zillow also started expedia? travel agents still exist but they had to totally reinvent their business model to compete.

“End of line.”

[jabrwoki]

I agree absolutely ! The last sale price is invaluable information which would have been a bitch to find out in the past. In fact every house in SD seems to have added $200k to the last sale price. We have a loooong way to go before anyone should dip into this crazy market !!

[Wickedheart]

I also find the sales history invaluable. I’ve found some of the sales histories to be incomplete though. For instance the house next door sold in 2002 for 168k. The flipper slapped a little bit of lipstick and rouge on the pig and sold it 2 months later for 229k. The last sale doesn’t show up on Zillow. You can figure out there was a sale by the 2005 taxes though. Anyway last year that same house would have easily sold for about 475k.

[Anonymous]

I don’t think Zillow factors at all into the bubble bursting – more like higher interest rates, loans made to questionable buyers, and the fact that income has not tracked with housing prices.

Domania.com has the same info Zillow does (without the photos) for free years before Zillow came along. Zillow just has better marketing. Also, many counties have this info on line and it is easy to find.

[Bugs]

As an appraiser, I have some familiarity with Zillow and other artificial valuation models. They don’t produce appraisals as we define an appraisal, but they do provide information and as we all know information can be a powerful tool when used well.

Inasmuch as this type of information has not been as readily available in an easy format at the consumer level, I think that as time goes on and more people learn how to use the information well it could have a significant impact on how these trends unfold. For instance, if after suffering a big decline in values it becomes apparent to people that they could have avoided their losses in the first place by following the blogs and keeping up on the information, it could serve to stabilize our cycles somewhat by alerting people to where the prices are in relation to the historic trends. I mean, if people realize that once prices decline past the trendline it becomes safer for them to buy those trendlines will serve as triggers. If enough people came to that conclusion it could prevent the market from sliding too far into the red. Likewise, if people realize the prices are getting too far ahead of the trend it might cause *some* people to hold off, depending on what their motivations for purchase are.

If you were to ask appraisers about this current trend you’d find that most of them believed it got crazy 3 or 4 years ago – hardly any of them were buying then because they recognized the high point for what it was. That’s the result of having the data and the tools to analyze that data; and it’s an effect that could possibly trickle down to the masses as the information becomes more available and the tools become easier to operate.

That is, unless I’m being too optimistic about the intelligence of the masses.

[powayseller]

I agree with you Carolyn. This bubble is bursting because the consumer just can’t qualify for these high loans. I think the County Assessor lists sales prices, and several years ago there was a site advertised on TV, where I snooped around and looked up neighbors’ prices.

I also don’t think that seeing a previous sales price has much to do with what sellers will offer. In a rapidly rising market, it didn’t matter what the previous price was. You pay market price, regardless of what the seller paid! You may not like it, but if the seller can get a 20% markup in 2 months because that’s the market rate, and you don’t offer it, then someone else will offer that price.

I experienced this myself, when we moved here in 1999. I looked at homes which had sold for 20-30% less just a year ago, and thought, “I’m not going to give this seller such a huge profit margin!” So we didn’t buy, and the market kept going up, and eventually we had to accept that sellers were getting rich off us and made an offer. The house we bought was marked up 30% vs. its last price just 2-3 years prior.

There is no turning back. The leading indicators are in place. Even if interest rates had not moved up, these LEADING indicators are showing us that the market is turning:
inventory is up,
DOM is up
building permits are down.

It doesn’t matter that construction hiring is up, median price is up, etc. All of these are LAGGING indicators. Construction hiring is up as builder scramble to finish projects, or they hire to build out their record high permits they got in January. But new permits are down, and construction employment will follow.

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