A False Sense of Zillow Security

Amazing to me how many Californians reflexively head to Zillow to “check” (they think) the value of their house during the current decline. As the foreclosure sale of one San Diego property shows, what Zillow thinks a property is worth in a rapidly-declining market, and what it is newly lists for — let alone sells for — are very different things.

The value of 4374 Wilson Avenue in San Diego, a 1,400-square foot house which sold in early 2007 for $511,000, and now is in foreclosure:

The selling price? Likely lower yet. After all, in 2000 this house was pegged at around $160k.

Related posts:

  1. Zillow Mobile: SMS-Integrated Data Access
  2. Is Zillow in Freefall?
  3. Zillow is Data Porn
  4. Zillow and the Real Estate Data Problem
  5. Zillow Drops Some Hints

Comments

  1. PaulSweeney says:

    … but now that you’ve pointed it out, someone will mash this with other data to get a closer valuation, right? that’s the beauty of this stuff. I mean, how hard would it be to email/sms people that have sold their homes and just ask them to go on line and update their realised sales value? There must be some kine of “crowdsourcing” approach to this!

  2. Bob Morris says:

    We sold our home in L.A. in Jan 2007. Our agent there, who has 25 years experience, told us in Ausgust 2007 if he were to put the house on the market then, it would be for 15-20% less. A recent check of foreclosures in the areas, which were rare when we sold, shows a startling number of them now, with asking prices sometimes 20% or more less than the purchase price.
    Yet Zillow still shows our old house in L.A. listed at what it sold for in Jan. 2007 even though comparables in the area are much less. So yes, their numbers are Fantasyland indeed.

  3. dub dub says:

    Well, the divergence between zillow’s house price and the 92104 zip code is clearly apparent.
    Maybe the two quick sales (2006, early 2007, presumably the one now defaulted on) skewed the house estimate somehow.
    This divergence would have tipped me off right away. This data, imperfect as it is, simply was not available a few years ago, and it’s amazing anyway. So there! :)
    w

  4. Hi Paul, it’s David from Zillow,
    Your analysis of this property is not relevant to Zestimate accuracy. I won’t deny that the current market makes valuing property extremely difficult but this home has been deeply discounted in foreclosure.
    As any Realtor will tell you, the value of foreclosure sales do not yield an accurate view of “fair market value.” Before it went into foreclosure this home was listed at $609K; pretty close to its Zestimate value. This house has now been deeply discounted in foreclosure – not to it’s market value – but rather to a price at which it can be rapidly liquidated. The sellers’ primary goal is to sell the home far quicker than the current market would absorb it; and not to earn fair market value. Now obviously in the case of a normal sale, the opposite is true and the sellers’ primary goal is to earn fair market value and they will typically hold out for that price even though it may mean waiting a year in the current Californian real estate market.
    A Realtor excludes foreclosure sales like this one from the comps used to estimate a home’s value for sale. Zillow implements similar logic. Using foreclosures to value properties would truly cause the RE market to crash.
    I hope that explains foreclosure pricing and why foreclosure sales will often be at a significant discount to Zestimates. Californian homeowners can happily continue to use Zestimates as a starting point to figure out the fair market value of their homes.
    If you’re ever similarly confused about Zestimates or Zillow, please just e-mail me; [davidg AT "z" dot com]

  5. Bob Morris says:

    > Using foreclosures to value properties would truly cause the RE market to crash.
    But in many ways, the market already is crashing.
    I used to have a business selling rare records. Price guides can show relative prices. But the real price is what someone will pay you for it.
    Foreclosure prices drive down all prices. A L.A. homeowner may be willing to wait a year to sell, but if he prices at 30% above what comparable foreclosures are going for, it’s difficult to see how he can sell.

  6. Jim says:

    Zillow may be skewed by foreclosure prices, but asking prices on Redfin aren’t skewed by foreclosures – they’re certainly not all this bad, but what effect are sales like this going to have on the market:
    http://www.redfin.com/stingray/do/printable-listing?listing-id=1297700
    Ouch.

  7. Joe says:

    Good grief, David from Zillow–do you even understand market value? It’s the value the market pays for something. Period.
    Zillow is valuable only as a comparative tool; it’s values in real terms are 30-50% over priced in every market with which I am familiar.

  8. Ben Hyde says:

    Safe as houses or walls of worry.