Zestimates Endorsed by BizJournal
My resolve has faltered… I promised I wouldn’t write about Zillow but this tidbit was just too interesting. Our local Business Journal proclaimed today that Portland is among fastest appreciating markets:
The “Portland-Salem” metro area posted the second-highest appreciation for residential real estate in the 2006 third quarter, according to Zillow, the Seattle-based service that provides online home valuations.
Did you catch that? It took a minute for it to sink in for me. Overall, the piece is a fairly standard quarterly update of real estate conditions. But who’s their source for this information? It’s not the MLS or NAR anymore, but Zillow.
Zillow may very well be a victim of its own success here; it says it has insisted all along its valuations are just estimates, but these third-party endorsements start to make that defense ring a little hollow.
If I were them, I’d be steeling myself for more lawsuits to come.
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David G from Zillow.com | Nov 10, 2006 | Reply
Hi Joel, I’m glad we’re irresistable!
A few points to note here;
1) Zillow’s quarterly reports analyse the Zindex, which is the median Zestimate — so an endorsement of Zillow’s quarterly reporting is not an endorsement of Zestimate accuracy for individual houses.
2) Because the Zindex is a median, it effectively ignores inaccurate Zestimates.
3) House value trends are most typically reported as median sales values which can be a flawed approach in a changing market. Because changes in the rates of sales in sub-sectors of a real estate market differ (e.g. high end homes typically stop selling first), the median sales value approach is actually biased towards the end of the market where the rate of sales is (relatively) accelerating. So, the standard approach to measuring the markets where sales have slowed, will tend to over-report reductions in house values.
4) So, we believe that the Zindex approach, which considers the value of all homes, not just those that have sold — is likely to yield a very useful, if not more accurate measure of trends in real house values than homeowners typically have access to.
5) Lastly; please note that if Zillow had to be sued, it would be a first.
Thanks for blogging!
JeffX | Nov 10, 2006 | Reply
Bwahahahaa….Im glad your resolve was broken…you made me laugh for the first time today Joel….
rudolph d. bachraty III | Nov 10, 2006 | Reply
joel - nice find. i too wonder what the NAR, local MLS or appraisers have to say about this.
rudy.sellsius°
rudolph d. bachraty III | Nov 10, 2006 | Reply
JeffX | Nov 10, 2006 | Reply
FWIW…The recent Zillow complaints are a complete joke, and hope they are identified for what they are…a brazen shakedown attempt.
It’s amazing how far people will go to take a swing at you when you’re ‘on top’. I wonder who the complaintors receive their operating funds from
Joel Burslem | Nov 10, 2006 | Reply
Thanks David, for clarifying that the Quarterly reports are based on the Zindex not the Zestimates.
Still I think it’s dangerous for Zillow to bill itself just as a fun toy for consumers and claim no liability for its estimate - but at the same time, position itself as an expert or trusted source of market conditions.
It’s a very thin tightrope Zillow is walking and I think most consumers won’t understand the difference.
My point is by trying to be both a fun toy and trusted authority, I think Zillow is setting itself up as a big target for lawsuits, justified or not.
jf.sellsius | Nov 10, 2006 | Reply
David G points 1 & 4 taken together illustrate the problem. The extent of the inaccuracy of 1 determines the inaccuracy of 4 & therefore the inaccuracy of the overall report. To rely on a report that includes unsold homes of unknown accuracy is misguided IMO. It’s like pure drinking water with unknown levels of contaminates. How’d you like to drink some water blended like a zillow housing report?
Actual sales are more representative of reality, NOT less as David G maintains. Consider also that no one is told of the total properties in the report & how many are actual sales vs. how many are are zestimates. If the overwhelming % are zestimated homes (possible in a slow market) what you have is a heavily weighted zestimate report. This distribution of actual sales v zestimates is an important stat (see south florida discusion below). Does Z provide this?
Keep in mind the Housing Report contains “unvalidated” individual zestimates. What I mean by this is that no one knows the extent of error for the individual zestimates included that report. Why? Because it takes an actual sale to measure the error rate. To say they cancel each other out sounds logical but it’s not true. Perhaps the South Florida report will be a good example. The report says appreciation in SOuth Florida outpaces the rest of the country. But look at the error rates for South florida zestimates included in the report. According to zillow.com 40% of the zestimates in SOuth florida have an error rate in excess of 10% of the selling price. There is no way to measure how much off the 10% this 40% is. Now if we discover the weighting in the South florida report is overwhelming zestimates the report is basically worthless.
I have suggested to Zillow in a comment like the one above (which was not published on zillow blog), that zillow publish the report showing actual sales findings AND their Zindexed report & let consumers decide which is truly representative.
One of the many problems with statistics : median v. average. For those of you you think median is a great soution to cancel out errors I give you this example:
100,000 200,000 300,000 301,000 1,000,000, 2,000,000 5,000,000
The Median is 301,000 while the average is approx. 1,270,000
You tell me which one is reflective of reality.
Candybags | Nov 12, 2006 | Reply
First, I would like to commend Zillow on a great concept and an even greater execution. Secondly, I would like to confirm with anyone in the know that Rich Barton stepped down on Friday. Yay or Nay?
Greg Tracy | Nov 12, 2006 | Reply
Joel
I just want to say that I am extremely envious-
Seems like every time I read your blog you’ve got more goodies and cool stuff going on with it.
Reminds me of the first Batman movie when the Joker (Jack Nicolson) says of Batman, “Where does he get all those cool toys?”
I want some cool toys, damn it…
greg@blueroof
David G from Zillow.com | Nov 13, 2006 | Reply
Candybags -
NAY! Rich Barton is not going anywhere. Please tell whomever told you that this rumor is incorrect.
Thanks.
Jake | Nov 13, 2006 | Reply
I may be the slowest person on earth, but what is the deal with Zillow. I am long past tired of hearing about Zillow.com and Zestimates and Zeverything else about them. I understand what they do, which is done by many other websites with out as cool of a map. I understand how they could change the industry if some how they could grow from a map site with far fetched estimates to a national mls. What I don’t understand or ever read about is how they are going to accomplish their goal. To me it seems as if they are a million miles from their goal with thousands of impassable road blocks in the way. I could have been the best basketball player in the NBA if I was just 2 feet taller, I have everything it takes except 24 extra inches, but you don’t read about me constantly on all the NBA blogs. In my mind there are 50 other real estate 2.0 companies that have just as good a shot, but all I read about is Zillow this and Zillow that.
So could someone fill me in on what I am missing? It is driving me crazy. Call me names, tell me how stupid I am, just spell it out for me. Why does Zillow deserve all the press it gets? Tell me how it is ever going to make big dollars? And please tell me who is in charge of their marketing and PR, because that person may have stirred up more press with less than any other person ever.
If not, let’s talk about something else. If I ever need to find out; with in 30%; of what my home is worth, I already know where to go.
jake
Joel Burslem | Nov 13, 2006 | Reply
Jake,
I’ll tell you why Zillow gets all the attention.
57 million reasons, that’s why.
Jay | Jan 18, 2008 | Reply
Jake - the reason they get so much press is because they are so inaccurate. At least with this latest round of “improvements” to their Al Gore ithm their craptimates are so far off that absolutely everyone looking to buy or sell will most likely discount them as idiots.
To ad insult to injury with the latest changes to the craptimate they have also changed all historical data to conceal(lie about) the gross inability of their formulation.
And yes it is costing sellers sales in an already weak market. I am one of them.