I have been keeping an eye on Zillow’s valuation of our house this summer, largely for morale-reasons. Currently the site lists the home as valued at well over 100K more what we paid for it in October. Anecdotally, I have heard that Zillow tends to err on the side of inflating reported values. It’s certainly what I expect the site to do, as a way of creating stickiness – it’s certainly working very well in drawing my repeated site visits.
Curious to see if anyone has done a systematic analysis of what Zillow’s reported values for a given property are in comparison to what people are actually paying for these listings, I was disappointed to find that no one’s done so in a careful, large-scale way. Are you listening, Consumer Reports? For that matter, are you listing, HouseValues and Redfin? Careful competitive analyses of competitor’s datasets over time could be a great marketing tool!
However, I did not come up wholly dry. This Phoenix-area blogging realtor did a quick set of reality checks on some recent sales in the Arizona community, and while I’m guessing he must have cherry-picked, he found little correlation between Zillow’s estimates and what he takes to be real-world market values. In two cases, he found gross overvaluations based on inaccurate data at Zillow, and in cases of homes currently listing, he found that Zillow was undervaluing the homes, based on his opinion of the market.
His basic critique is reasonable enough – you can’t trust an automated valuation service to provide accurate estimates because the actual condition of the property is likely to vary from that represented by the available data. I’m also not surprised that he feels the site is undervaluing homes that he is involved in developing listings for – the more capital there is in his market, the more there is available for him.
I am surprised that Zillow’s valuations do appear to be on the conservative side. I suppose that after this summer winds down and Seattle’s market cools down to match the rest of the country’s slowing sales, I’ll have a better sense of things. I was amazed to see that so far this summer nearly every house that has sold in our immediate area has well topped $400k. Wonder if it will hold. I hope so, now that we’re in it.