Minding my own real estate business when out of the blue came an email from Zillow telling me my Schaumburg Market Area here in Northwest Chicago had decreased 5.3% and had I been aware of it? WHAT? CUMON!
I knew the market was in a slight downturn but 5% a quarter in the Midwest? Seemed suspicious but I left it aside and thought nothing further about it. But it stewed and stewed in my head! How did they come to find those numbers? How could I verify those numbers that were being spread thru the internet like a bad case of athlete's foot? How could I keep my blood pressure down!
A little background here first. I have always been suspicious of Zillow and their numbers and on two different occasions have found them faulty and downright ficticious with available listings in my market area. Duplicates, padding, going outside the area and including them in specific 'high hit' zip codes - naw, that doesn't happen with Zillow! Yes it's true - that's what I found on two separate occasions.
SO NOW THIS! After a bunch of exhaustive research this is what I've found. Using our MLS solds for the 1st quarter of 2008 this is the scoop. (Nudge yourself if you fall asleep during the numbers presentation).
Sold Volume May 2007 - $10,604,700 Sold Volume May 2008 - $20,202,201 -402,499 or -3.8% Down 3.8% FOR THE YEAR This is only off by $403,000 which is about 1.25 homes in my market area. SO THAT'S NOT BAD!
Average Sold Price May 2007 - $342,000 Sold Price May 2008 - $319,000 - 7% Down 7% BUT WAIT, WHAT IF MORE LOWER PRICED HOMES SOLD WOULDN'T THAT BRING DOWN THE AVERAGE PRICE. I had thought that first-time homebuyers were spurring on the market here and according to these numbers I think it's true.
# of Units Sold May 2007 - 31 May 2008 - 32 I'm not even going to bother figuring this out it's so minuscule. SO THAT'S NOT A DECENT PERCENTAGE THAT ZILLOW COULD HAVE USED??
Hmmm. Where does Zillow get the numbers? I have all the closed sales with fairly certain accuracy from the MLS here in the area. What does Zillow use to tout these numbers?
The email also went on to tell me how I should help sellers set realistic prices for their home using Zillow! Yikes - but where did they get those numbers! I've got numbers too and nothing matches up!
Working my fingers and pencil to the bone I have come up with one conclusion - THEY MAKE THEM UP! That's what I think and my pencil proves it. Why not try it in your market area & see if it isn't true for you too?
What's truly sad is the public is not aware of this scam. It's a plain and simple "information" scam that the public doesn't realize yet. You can provide all sorts of numbers, statistics, and whatever fancy graphs you can chart but they are of no effective use to Mr. Public. Mr. Public just wants those numbers that the shifty realtors are hiding from them, so in steps Zillow.
SCAM. The site just doesn't work.
So folks I've posted what and how the market truly is in my area. I've got numbers too!
Lyn Sims at RE/MAX Suburban (847)230-7324
Northwest Suburban Chicago Areas of Schaumburg, Hoffman Estates, Elk Grove Village, Roselle, Medinah, Itasca, Bloomingdale, Hanover Park, Streamwood, Bartlett, Elgin, South Elgin, St. Charles.
I don't know Lyn...I have others complain about Zillow. They are sounding like the media!
Lyn, I've found the same type of discrepancies when checking property values on Zillow. I wish my house was worth the number they gave me! :)
Ah yes, they had said in one statement that they could be up to 30% off in some marketplaces. A realtor couldn't be 30% off of anything! Hopefully the public will wake up.
Hi Lyn, it's David G from Zillow,
Easy to explain: if you read the e-mail again you'll see that the metric is not one quarter's appreciation but rather one year's appreciation reported at the end of the first quarter. When looking for trends in home values, it's most common to report annual appreciation because as you know, there are seasonal trends in the demand for homes.
Could you please correct your post?
P.S. It's also important to note that the average or median sales price is a poor measure of home value trends because it is a calculation that's easily thrown off by a change in the mix of homes that are selling because it only considers the change in value of that small set of homes that have sold. For a much more in depth explanation, see this blog post by Stan Humphries, Stan Humphries, VP, Data & Analytics.
David G didn't tell us how zillow came up with the numbers. I like your explanation that they made them up. It seems with agents is a love zillow or hate zillow. Guess which camp I am in.
Lyn, I have never understood how zillow gets their numbers or how they justify them. I think someone has a big dartboard.
David G from Zillow again ...
@Denise and @Bob -
Zillow's home home value reports are calculated using the Zindex which is the mdian Zestimate value in the area in question. This approach allows us to consider the change in the values of all homes, not just those few homes that have sold. The other benefit of this approach is that using the statistical median effectively ignores inaccurate estimates because Zestimate accuracy has no bias (i.e. Zestimate are as likely to be high as low and so, when you pick the one in the 'middle', you cancel out the noise from less accurate estimates.)
I hope that makes sense and again, the main reason for Lyn's confusion is that she's comparing a year's change in value to one quarter.
All this stuff is explained in deatil on our website and your buyers and sellers are doing their homework, so let me know - or write a post like this one if you're ever confused about how Zillow works. I'd be glad to help you understand our site better.
David Gibbons: When was the last time your glasses were checked? The email was for DEPRECIATION in my marketplace. This is EXACT VERBAGE, CUT & PASTE FOR THOSE THAT CANNOT SEE THE ORIGINAL EMAIL IN THE POST ABOVE.
According to Zillow's latest Home Value Report, home values in Schaumburg decreased 5.3% in the first quarter of 2008, compared to the first quarter of 2007. Nationally, single-family home values decreased 7.5% while condo values declined 9.0% during this same period. Use this information to help keep your clients informed.
I do not see the reasoning & logic behind your post above: Appreciation is a +, Depreciation is a -. My numbers are from 1st quarter of 2007 and 1st quarter of 2008.
Denise: Thank you for noticing how the gentlemen from Zillow did not give an explanation on how the numbers were compiled and from WHAT they were compiled. He also confused the appreciation and depreciation verbage. I think that he was too quick to start a response before throughly comprehending my post.
Anytime a buyer mentions zillow - I tell them they are a sales tool - a business to make money. THey will tell you whatever benefits them. Zillow is a joke.
Zikes, this is getting interesting, better watch it Lyn you might end up with a Z-suit. Zet the point?
I was on the debate team in college and it was my befuddled partner's turn to rebut the Aces from the University of Minnesota....and he said "As Mar Twain once said...there are 3 kinds of lies...lies, damn lies and statistics." and with that he sat down.
Hi Lyn -
I actually like Zillow a bit, altough I hae never found their numbers to be very accurate for my job in my opinion. Some of the Zestimates are right on, but most seem pretty off from the market values I am seeing on the street. I love their mapping features, though:)
All Zillow has done is create awareness of "possibilities" of problems in value. Buyers and Sellers still need local real estate agents to give them the real picture of what is actually going on in a market, because local agents KNOW what is going on. A big corporation located only on the internet, full of unknown faces of unknown and questionable expertise, is never a substitute for a face to face meeting with a local real estate professional.
Hi Lyn - This is an apples and oranges issue here. Zillow's email referred to the first quarters of 2007 and 2008. Your numbers are from one month (May) in the 2nd quarter. Of course results will be different, and to label Zillow a scam is simply irresponsible.
Two agents sitting right next to each other can come up with entirely different interpretations of the market. The bottom line is it's just numbers, so why is there so much animosity toward Zillow or any of the other online sites that provide data?
Zillow Shmillow. What a joke! This site has done nothing but put a snag in the real estate market nationwide. Ths site puts ideas into the public's mind that are very hard to erase. It seems that they should have left the research to the experts...the Realtors.
Zillow and cyber homes started off as a good quick look... and in the beginning at times they were pretty accurate for markets where there was enough data.... but lately they have changed into another MLS and that messes with the numbers, especially since anyone can make changes add photos etc...
and the most important thing to remember: a wise man once said; "97.6% of all statistics are made up"
At 6:55 David Gibbons said, "It's also important to note that the average or median sales price is a poor measure of home value trends . . . ", then at 8:21 he said, "Zillow's home home value reports are calculated using the Zindex which is the median . . . ". Hmm - a little contradictory?
Also, he said their values aren't determined by properties that have sold. It seem to me a pretty rock-solid fact that sold values are the most important factor. I don't know an appraisor who checks Zillow to come up with their values, and the appraisor's value is what the lenders care about.
And a question for all the buyer's agents out there - how many of your clients, after viewing a few homes in person, feel the need to check Zillow values? My clients seem to get a pretty good handle on the value of homes from their personal experience.
My experience has been that Zillow leaves a LOT to be desired. However, the discussion boards there are lively and very helpful, and I like the Make Me Move feature...
Nice Research!! Thats awesome you did your homework but keep in mind zillow is a marketing company and will find ANY way to get more of your business, so maybe they just did a poor job in research or maybe just researched what they wanted to see which was a decrease, so for a decrease they want you to utilize them to help your business, lol good ole business tatics but kudos on the numbers, NUMBERS DON"T LIE :)
I don't have the same level of hate for zillow as some do. I think it's corny that everything is a zestimate or a zindex and all it does is make me want to see if they still make zima....but we're all prone to the corny from time to time (me especially) and if it helps their branding...rock and roll. I think it's a valuable tool for REALTORS with the exception of the zestimate. Case in point: About a year ago they had a zestimate in my area of $230,000 for a house that was worth about $180,000. If it's 22% off it falls within the 30% off in some market places guidelines, I guess- but doesn't really do a lot for sellers except skew logic and provide a huge false hope....but since then, I've not really paid much attention.
I have just done a zillow search on my neighborhood. They are only off by about 2% high on my house, 10% low on the house across the street that just recently sold, about 30% high on the house two doors down, Don't know how they are arriving at their figures. They don't correlate with either comps or tax records.
Go figure
I wonder if my clients would like for me to come and RONTIMATE their house value or if they would prefer I pull real market data from the MLS to show them what a reasonable value might be.
Perhaps they would like to RIST the home with me or maybe they would like to LIST in in the MLS.
Perhaps they would like to get their home ROLD, but I suspect again, SOLD would suit them better.
It seems if you make up a word, you can make the definition anything you want it to be. So instead of using Mean, Median, Standard Deviation, Statistical Derivation, Statistical Significance, Correlation Coefficients and Regressions, you can replace the statistical analysis with whatever Zestimates and Zindexes you want and how could anyone possibly say you are wrong except for people that are actually dealing in reality.
I have found in my area that Zestimates are about 20% off and while that isn't a real problem, what is a problem is making people believe that the values are real and having to combat that to get buyers and sellers to be reasonable about their expectations!
This is nothing new. What zillow doesn't "get" is that a few percentage points here or there equates to a signifcant amount of money in a sellers or buyer's pocket. 1% of $1 million is $10,000. If they are off by 5-10% - YIKES. On a $500k house that's $25k or $50k respectively. They really have to get serious if they want to provide these kind of stats. The trouble is that they are not responsible to anyone for the drivel they spew. But they do PLENTY of damage.
Zillows report for my market looks to be right on
heres what I see in Zillow for Schaumburg ..... down 0.6% this quarter over quarter change and down 5.3% year over year. This sounds a lot like what the zillow rep said in his comment.
heres the link to the report
Hi, it's David G from Zillow again,
@Lyn - PLEASE correct your post. Your misread of the e-mail you received from Zillow is now featured on A/R and as you can see, it's causing some confusion about Zillow's home value report. Please read my previous comments - the e-mail you received reports 1 yr's change in value, not one quarter's change in value. You're comparing leechees to pineapples.
I tried to explain above that there's also good reason why Zillow's Home Value reports could differ from a median sales value analysis; particularly in a changing market. This is not just a Zillow thing, other widely reported home value indices like those from OFHEO and Case Schiller also do not report median sales values for the reason that that calculation is easily skewed by other changes in the housing market (most often by a change in the type of homes that are selling in the area in question.)
@Joetta - I did not contradict myself. The difference between the two approaches has nothing to do with taking the median value; I didn't say that it did. A median is simply the correct statistical mechanism for excluding outliers and finding the 'middle' data point in the set of homes. The difference between the two approaches is that Zillow calculates the median value of ALL homes while a median sales analysis only considers the median value of those few homes that have sold. Does that make sense?
Let me also be clear that sales values ARE the primary input to calculating Zestimate values and so sales are certainly the major input to Zillow's home value trends - again, the benefit of the Zindex approach is simply that it considers the change in value of ALL homes and so is not thrown off by a change in the mix of homes that sell (which often happens when market trends change or there's a spate of new construction.)
@All - Zestimate values are not to be feared or "hated" and they certainly are not "spewed" or a "scam." They are simply estimates and many web sites besides Zillow now publish either Zestimate values or similar estimates. These online estimates are simply a research tool, certainly NOT intendeed to replace a CMA or an appraisal. Consumers get that. When it comes to deciding on a list price or on an offer we obviously recommend the advice of a local professional - that's not what Zestimates are for - but they do play an important role as a research tool for millions of buyers and sellers.
Zillow offers agents multiple opportunities to promote their listings and services to the 5+ million people that visit the site each month. If you don't understand something about Zillow, Zestimates or the Zindex, please consult the site or just ask. When your client asks you about their Zestimate it's an opportunity to demonstrate your local knowledge and your expertise in web marketing. A few minutes spent researching the information we publish about your clients' homes and your area (in particular, local Zestimate accuracy) could make you look like a rockstar in their eyes and believe me, THAT is our goal.
Let me defend David for a moment... You don't seem to be getting that the values are year over year changes based on quartley numbers. So, Q1-2007 v. Q1-2008 shows that between those time periods, the values decreased 5.3%.
Now, let me NOT defend David. Zillows numbers are notoriously innaccurate. If they hit the right value, it is a lightning strike. But to say that the cure for wildly innaccurate numbers is more of them is a stretch. also, few of the Zestimates move in any given year, unless it is connected to a home sale. So, they are still only half a step away from basing THEIR numbers based on the mix of homes sold, and using a statistical median. They are just filling in with other, more innaccurate numbers.
If Zillow is getting their numbers from public records they could be accessing more sources than just your MLS. After all, Realtors only sell around 80% of all the homes in the country. ;->
I like it that David G wants you to correct YOUR post, but they never agree to correct any of their misinformation. If you want a good read on how inaccurate and unresponsive they are to bad data, check out Sellsius' blog. Joe has MANY posts on the inaccuracies and problems with Z.
Fortunately, here I've not found them to be a factor because their numbers are SO bad and most clients recognize that. The sad thing is that they take themselves so seriously and pretend that they're a legitimate source of housing data.
Here's a suggestion. The next time a seller wants to price their home at the Zestimate, tell them "OK" but that you also expect them, as a buyer, to pay whatever the Zestimate is.
Love Ruthmarie's comment regarding the "drivel they spew". Good assessment.
@Elaine -
Not true. Zillow is in fact the only website of its kind that allows owners and agents to update the home facts used to calculate estimates and Zillow is the only site of it's kind that allows owners to publish their own estimates.
I have to somewhat agree that you need to be running the same criteria that Z is running in the e-mail instead of the month to month difference. Z is stating a quarterly report. Personally, I prefer a month to month comparison since obviously (especially Chicago) weather in January and February can play a big part in sales numbers.
I love proving Z wrong every time I've had a chance but you really have to use the same criteria (time frame) they are using which appears to be a quarterly number. (January through April?)
And as I say, if everything was easy as just punching numbers into a program, we would have all been replaced years ago. Interest by third party companies to dip their hands into real estate advertising did not start until the real estate boom / addiction. And geez... I must get an e-mail a day from a new website offering "free" advertising to help sell our listings which is pure balarney.
(Umm... actually you should be paying us for use of content and that's the real story that real estate agents should be getting upset about.)
David - I won't debate the usefulness or legitimacy of Zillow's estimates here, but I do have a side comment to make. One funny thing that I have noticed here on this comment thread and on the ones with Spencer from Zillow is the use of the @ sign instead of just a name. This is not Twitter, and the @ doesn't do anything here on AR other than look odd.
For Joetta. I have often had to "explain" Zillow to home buyers. Once I get them in front of my computer, it's easy. FACTS trump Zillow Zestimates with Zindex every time.
This thread is so funny. There's a big smile on my face. Remember the post from Zillow wherein they suggested that REALTORS may violate our duty of fiduciary if we don't enter listings in their system.
It was a "MEMBERS ONLY" post of Posted by Zillow's Sara Bonert on 05/16/2008 11:44 PM.
IMO, Zillow's systems are fatally flawed. But, one thing is for sure, they'll doublespeak themselves out of admitting it.
Lyn. This is a wonderful post. I'm bookmarking it to add to my own about Zillow to give to the next buyer who throws Zillow at me with a smug expression on their face like they really know what they're talking about.
Thanks.
Sally & David: Totally agree with Mark Twain, thanks for your comment.
Please don't get me started on Zillow. I absolutely refuse to post a listing on that site or use any service they have to offer to us, Realtors.
Ron Parise: Sorry I don't know you personally since we move in the same marketplace. But I've posted MY numbers from MLSNI and what I posted is what I've found. You check with Zillow again for your numbers. Look forward to meeting you some day & thanks for the comment.
Lyn - I don't wear glasses. Your post still erroneously claims "5% a quarter in the Midwest?." Zillow's data is not reporting one quarter's depreciation. PLEASE correct your post.
You're comparing totally unrelated pieces of information so it really shouldn't surprise you that they don't agree. The change in the total sales in an area honestly tells you absolutely nothing about the values of those individual homes and likewise, reporting the average sold price makes no sense - the average is too easily skewed by a few weird transactions. When using past sales to draw conclusions about home values the traditional approach is to compare the change in the median sales value. The median is the "middle" number in a set on numbers - so the 'middle' sales value in the set of homes that sold. But that approach also has its limitations as I've discussed above.
Thank you Courtney for your comment I wasn't aware they had mapping features. I am still asking HOW THEY GOT THEIR NUMBERS?
Jim Lee: Thank you for your comments - that is my point exactly THEY DO NOT have my MLS statistics. So 80% of their numbers are ascew as realtors do 80% of the sales? That's kinda my point. I - having the MLS sales have a greater number of accurate information than they do. Again, they will not mention where they get their information from. I am assuming tax records or anything else they can get their hands on 'feed' wise.
Oh, Lyn, your last comment on "how they got their numbers" really puts an image in my head (chuckle, chuckle), and certainly there is clip art somewhere to reflect it ............. but then it wouldn't be a "G" rated blog. ;-)
Yes, I agree! I have spent way too much time having to prove to my Clients that their property is NOT worth what Zillow quotes.
Only a Real Estate Agent that knows the local market and does a comparable study can give an accurate valuation.
We have the same problem with "National Statistics." Each market area has been affected differently. Some have had more depreciation than others. Some are still flat... some are selling rather well... etc... etc... etc.
That is why they need us. We give our Buyers and Sellers the actual facts for our locality.
My client believed his house was almost $500,000 (yes, half a million) over the actual value due to that website. It took alot of time to show him actual values and sales.
John Novak: I verified all numbers before posting this piece so I wouldn't be considered IRRESPONSIBLE. They were verified by others in my office & other stats were left off just to keep the 'numbers' portion down to a minimum for easy reading & to show the drastic differences in results. Thank you for your perspective John.
Wasn't this post featured, and now it is not? Am I crazy? Zillow is interesting, I had buyers who thought they were being aggressive on an offer this spring because of numbers they saw on Zillow until I showed them the actual CMA. The homes were close together, but not the same size, and amenities. They went with my CMA instead :)
Pam: That's also one of my points - we have to spend so much of our valuable time providing the correct numbers to either buyers or sellers depending on our situation. We have the BEST data and yet have to PROVE our numbers. Zillow gets to collect all kinds of advertising revenue & spew (a computer spewing out unknown) numbers at the public and then they do not have to prove credability to the public.
SOMEONE MENTIONED THAT THIS WAS A FEATURED POST & NOW IT IS NOT??? NOT SURE HOW THAT HAPPENS, ANYONE KNOW?
Other great Posts on Zillow:
Lenn Harley Post
Rennee Burrow Post
Just in case Zillow thinks that I am the only one with a poor opinion of them, please see these other posts & I am sure you will then agree that Zillow's numbers aren't the only thing people are complaining about.
Previously I have posted one of my listings on Zillow only to have a low 'zestimate' done on the property (20,000 low). When I tried to get the 'zestimate' upgraded/overturned/pleaded upward for a higher price which was proven by the MLS sales comps, Zillow REFUSED to correct any of the information. They told me that any information entered cannot be changed. That is when I dedided to say "adios Zillow". I just didn't need to get ''screwed by the Z' so to speak. I manually put in my listings & they tell me what they are worth?? Before they sold?? No comps from them?? That's the kind of stuff I've had to deal with from these folks.
I welcome all your opinions and thank you for a spirited discussion. As someone said, this reminds me of the debate team.
Have just gone thru the "Zindex" sent to me from a Zillow advocate on how they arrived at their numbers. HERE WE GO AGAIN. The numbers include the City of Chicago(30 miles east) - Naperville (20 miles south) - Joliet (45 miles south) - WISCONSIN (the entire state) - INDIANA (the entire state). Now that's some 'Zillow' territory! I can't describe to you all on AR how large that territory is!! Real estate in local - you cannot include the entire state of Wisconsin and then send me a deprecation rate from a town not even in that state. Does anyone else find this odd? How about 'Zanny".
Lyn -
Please take a closer look; again you are jumping to all the wrong conclusions.
If you click on the link to Zillow's data in the Schaumberg MSA you will notice that we do in fact report home value trends at very granular local levels. Home values are reported for each County, City, Neighborhood and ZIP code in the MSA. Here's that link again.
Also; did you notice that Zillow is reporting annual appreciation and not quarterly? I would really appreciate it if you could update your post to correctly address this.
AR Piece from the newsletter - Unexpected April Pending Sales Increase
Still havent got the question answered eh?
No answers yet on where those numbers come from. Still waiting.
Lynn - so sorry - I thought I explained where these numbers came from in my reply to Denise & Bob above.
The quarterly home value reports that Zillow publishes are our estimate of the annual change in the value of the median valued home in the area in question. To calculate the change in value for zip codes, neighborhoods, cities and counties, we use the median Zestimate value. For MSA's we use a weighted calculation of the value from the counties (weighted according to the number of homes in each county.) If you need more background on how Zestimates are calculated, you'll find it here. The strength of this approach is two-fold;
So, how does Zillow's method compare to traditional methods for calculating home value trends? There are two more or less standard approaches to reporting home value trends; index calculations and median sales value analysis. There are two blog posts I recommend reading that answer those questions. First, Zillow's home value reports correlate very closely with the Case Schiller index but not with the OFHEO index (for good reasons.) In the next post, Dr Stan Humphries explains why the traditional median sales price analysis is often skewed by the constant change in the mix of the types of homes that have sold.
Let me know if this information triggers any further questions.
Yes Lyn, as the market here was changing I had a seller that insisted he was well read when it came to HIS price and more informed than me. I agreed tot ake the listing thinking he'd get a little more realistic but Zillow already had him barin-washed and this made working together difficult because the seller was using inflated stats.
Thank you Carol for your response & telling your experience with an unrealistic Zestimate.
Thank you David for the explanation on the median price which I completely understand. I would like to know the feed, the subject data that you compile those figures from. Tax records? County sales records? Just the total sales number used to calculate that median value? In other words, how many total homes closed each quarter? EX. 1st quarter of 2008 - 207? 350? 450?
Lyn - yes, it's the County sales records and county tax records that are our starting point for all our calculations. And we also supplement that data with home facts supplied by agents and owners.
Amen & Alleluia you've finally answered the question in this debate.
Just an update to this debate. Another interesting post from Jim Ludes with numbers you all might think intersting that I did not have. Thank you Jim for your input.