For years I have been frustrated with Zillow’s Zestimates. I have countless cases where the sales prices of homes were wildly different than the Zestimates. They cause confusion and frustration every time I hear them brought up. Today was a breaking point.
Even today, many years after they first started playing pin the price on the donkey, in my market they are STILL only within 10% of the sales price 53% of the time and 22% of the time, or over one in every five homes, they are off by more than 20%! You can find the error rates for other markets by clicking on their “About Zestimates” link.
The median error for the Twin Cities stands at 9.1% according to their most recent numbers, which is equivalent to about $15,000 on the average home in this market. If every website visitor looking at a Zestimate were to know this information, would they still find it valuable? If they’re just playing in fantasy land they might, but if they’re looking to actually buy or sell a home and I show them these numbers, they quickly discard any notion of the Zestimate being valuable.
So what does Zillow do with their zilly Zestimates, why they combine them all together into a housing index of course! Then they put it into nifty reports and do a press release touting their take on home values locally and nationally. Please remember that this is all based on Zestimates for properties that they’ve already admitted are often substantially off from actual sales prices and the average amount they are off varies significantly from one area to the next.
In the Twin Cities, the Minneapolis Area Association of REALTORS reported a 10.5% increase in median sales price and a 6.2% increase in price per square foot in May 2012 vs. the same month a year ago. Zillow reported this market declined 3.1% during that same time period. Ask any of my buyers this year and they will tell you prices are up from last year. Often not as much as what the median sales prices are implying, but definitely up.
What do these mixed signals do to the public? Well in the case of a housing reporter from the Star Tribune, it confuses the hell out of him. I would suspect most consumers to be as confused if not more so.
Every housing metric is flawed and housing is a very complicated thing to try to standardize and measure, but when a company knows they are working with such flawed numbers, why do they think publishing those numbers provides a service to the community?