Zillow has come out with their analysis of when the best time to list a house in each metro area. I scoffed at the accuracy factor in my video, but Zillow is large enough that the headline is all that matters – and people like to hear a date that confirms their belief.
San Diego is one of the warm-weather states that has an earlier start, and the last two weeks of March are the ideal time here to sell for a whopping 1% more!
It probably doesn’t matter when or how much, or even how accurate. It sounds like good advice, and it coincides with expectations. If potential sellers go along, we should see a healthy dose of new inventory over the next 30 days!
The San Diego Case-Shiller Index showed 7.2% appreciation for 2015, but can we break that down further?
The Zillow version (assuming these are more accurate than their zestimates!):
Zillow ranked ZIP codes based on their median home value in January 2015, and grouped them into deciles for every metro area nationwide for which we have sufficient data (the average metro area in our database spans 23 ZIP codes). The top 10 percent of ZIP codes in each metro area is classified as the “luxury market,” and the bottom 10 percent of ZIP codes in each metro area is classified as the entry-level market. We grouped the middle two deciles – the 5th and 6th deciles – to capture home value trends in middle-market ZIP codes. We then compared how home values evolved over 2015 for each of these groups.
Our regular commenter elbarcosr backed me up on how wacky the zestimates have been lately. They seem to be getting worse, which is hard to believe.
Being a Zillow homer now, I thought I better look into it.
Let’s serve up a nice big softball. Certainly the zestimates have to be accurate on recently-sold homes, don’t they? We saw how Redfin’s evaluator can cozy up close to a recent list or sales price, and you can’t blame them. After a few years, the database would look pretty consistent.
Does Zillow do the same? Wouldn’t it make sense to have your algorithm compute a recent sales price into the property’s zestimate? Because if you did, it would also help value the nearby homes that haven’t sold recently – because that’s how everyone would value them.
Evaluations in unique, non-tract areas is tougher. But if we are just looking at recently-sold properties, and their zestimates – the uniqueness shouldn’t matter as much!
I looked at 28 homes sold in La Jolla, Del Mar, and Rancho Santa Fe that closed between $2,000,000 and $3,000,000 in 4Q15, and compared their sales price (the definition of value) to their zestimates.
The average margin of error was 16%, and after removing the four that were wrong by more than $1,000,000, the average error was still 12%.
These are houses recently sold, and their sales price defines the actual value!
Even though the $2,000,000 to $3,000,000 range is the lower end for those areas and there are plenty of comps to help pin-point a zestimate, let’s consider an easier target.
Carmel Valley should be the hotbed of zestimate accuracy, especially when we look at the low-end where every data point is a pure tract house.
There were 57 CV sales in the fourth quarter between $1,000,000 and $2,000,000 that were considered.
The average margin of error was 3.6%, which is probably acceptable. But if it was any higher, there would be concerns – these are tract houses that just sold in 4Q15, and have a long history of steady comps around them!
My takeaway?
The only zestimates that might be close are in pure tract neighborhoods.
Zillow’s new video format leaves a lot to be desired – no audio, no zoom, and no graphics. Here I am commenting on my latest Zillow video while watching it on my computer screen:
Here’s a great reason to list your home with Jim the Realtor – Zillow is giving ‘special preference’ to listings by Premier Agents that feature a video tour.
Hopefully this will help bring home video tours into the forefront of real estate marketing. It is time for agents to embrace video – finally!
This will help to further magnify the superiority of Zillow’s website over our local MLS, who refuses to allow agent videos to be publicly displayed.
It demonstrates how Zillow will keep developing exclusive benefits for the Premier Agents who pay them to advertise.
Home sellers will have one more way to evaluate which listing agent to hire – who does the best video tour!
The home video tour also gives the listing agent direct access to the buyers, allowing them to sell the house using video and audio – which might be the more important benefit of the two.
The Zillow tagline this year is that they have the best agents – Spence says it twice in a row here. Nobody else in the business gets as much exposure as him, so we should keep hearing it, which should cause more consumer trust and engagement – with Zillow agents.
Since my Sandicor vs. Zillow post on Wednesday, I’ve had a few conversations with agents around town – including the guy who is the chair of the Sandicor committee charged with handling the negotiations with Zillow.
Every opinion was similar to this comment left over the weekend, including the standard zinger that I don’t know anything:
Jim, you were not on the committee dealing with Zillow’s demands. The demands were highly unreasonable. Sandicor is leading the way nationwide on holding its ground against giving away data to Zillow, and no agents have gone out of business because listings are not flowing automatically to Zillow. It’s not a big deal nor is it the end of the world. It’s a relief.
You’d be surprised how many people I have talked to, highly successful agents and brokers, who love that we aren’t tied to Zillow. Your comments are very uninformed and to me your opinions are in the tiny minority. Brush up on how Sandicor works and why it’s here.
All I said was that Sandicor should make the deal with Zillow so every listing agent could choose Yes or No to auto-uploading each listing. The system is already set up that way for all other portals, why exclude Zillow?
But the Zillow Haters aren’t interested in discussing, they just want to hate.
For the record, I wish Sandicor and others would have mounted a credible challenge to Zillow years ago. But we did nothing, and now we’re on the defensive – just hoping to slow them down a bit.
The hate is short-sided, and probably understandable for those who already have one foot in the tar pit. But for those of us who are long-termers and want to hand off the business to the next generation, Zillow and other outsiders are creating the future.
Last year it was well-documented that the #1 problem in the industry are the masses of marginal agents. But free enterprise is solving the problem.
Zillow is educating consumers on how to find quality agents by using reviews and recent sales histories – which favors the agents who use Zillow as a marketing platform.
In the beginning, I was a Zillow hater too. But they have evolved into one of the best resources available for both consumers and agents. Ignore them at your own peril.
P.S. Haters – have you seen those Redfin TV ads? All that Zillow is doing is giving consumers a great portal, and suggesting a conduit to other agents – Redfin is spending millions on TV ads to directly take your business away.
It is the biggest threat to the status quo – companies that spend millions on advertising are going to direct the future of the home-selling business, regardless of what is actually best for the consumer.
Most national forecasts are predicting a 3% to 4% appreciation rate for 2016, which has to be a safe bet. If it comes in anywhere from -2% to +8%, you can say that you were close.
Zillow has enough algorithms that they are willing to make predictions for each local area. They have conflicting numbers, depending on where you look on their website – these are from the Home Values section:
You can see that Zillow was less optimistic last year too. Most were predicting that mortgage rates would be in the mid-4s by now, so the lower rates in 2015 helped fuel higher-than-expected prices. Could rates stay right where they are? Maybe, but both Zillow and I think the euphoria will die down next year:
Zillow Price-Appreciation Predictions
Town
2015 Prediction
2015 Actual
2016 Prediction
“Market Temperature”
Carlsbad
+2.7%
+4.8%
+1.9%
Cool
Carmel Valley
+0.3%
+5.4%
+1.4%
Cold
Del Mar
+5.5%
+1.1%
+1.4%
Very Cold
Encinitas
+0.6%
+8.3%
+2.4%
Warm
La Jolla
+2.7%
+6.6%
+2.3%
Very Cold
RSF
+0.4%
+11.1%
+3.7%
–
San Diego
+1.7%
+6.4%
+2.1%
Warm
Solana Beach
+2.7%
+6.4%
+2.2%
Cold
For some reason, Zillow is also labeling each market from Warm to Very Cold. The labels don’t seem to correspond to the predictions, so I don’t know their intent – are they just trying to tell you to put on a sweater?
How will buyers feel about getting worked over for that last 2% to 3% when they see they are in a ‘Very Cold’ market?
The Z Group is probably smart to talk in generalities and just spew the usual stuff about next year – higher prices, tight inventory, and less affordability. They even dropped a ‘priced out completely’ about those in the bottom-third-of-incomes category.
One thing they mentioned that the industry needs to stop saying:
“Qualifying for a mortgage can still be extremely difficult.”
The underwriting guidelines are standard, not difficult – one size fits all, and either you fit or you don’t. Buyers can find ways to fit – if you are self-employed, you can stop taking so many write-offs for one year only and get a Freddie Mac loan.
Three Zillow predictions for next year:
Affordability will be a major issue in the 2016 presidential election.
Rents will set new records in 2016.
The consensus of the 100+ experts they surveyed was 3.5% appreciation
There isn’t much any politician can do about un-affordability except give houses away, which I guess is possible. It’s hard to believe anybody could make a solid case that they deserve to be elected because of their housing policy, so I doubt it will come up much.
Rents around the coast will probably set new records next year.
The 3.5% appreciation kick is probably the safest number available, especially if they are talking about a national stat. It will probably range from -5% to +15% depending on the local area, so 3.5% is comfortable.
The speaker yesterday mentioned that Zillow did a survey a while back and asked, ‘What is your favorite real estate website?”
Amazon came in 5th place. But Amazon doesn’t offer a real estate website.
Remember when you would never send your credit card data over the internet? Now look – people are becoming brand-loyal and trusting of internet companies that offer maximum convenience.
It seems like it will only be a matter of time before 1-2 companies dominate the real estate space. And it probably won’t be long now!
The length of time people own their home gets longer with every survey. The rah-rah days are over, and from now on, you might buy and sell 2-3 homes in your lifetime.
With little recent experience to rely on, who will you trust the next time you move? By then, you will probably have even more comfort in doing business with internet companies, and prefer those who are most transparent.
Zillow is looking to capitalize on the consumers’ brand loyalty to quality internet companies. What’s the impact?
Zillow is becoming the Amazon of real estate.
The Zillow Group already has 70% of the mobile real estate traffic. They’ve had over 500 million homes viewed on mobile devices, or 185 homes viewed per second!
Their new Premier-Agent mobile app will alert realtors to incoming leads immediately, and give them the consumer’s Zillow home-search history, and their social media accounts. A big advantage when trying to build rapport with a potential new client!
Zillow has also developed additional tools for their agents to use when managing contacts and transactions, and has a phone team who will call your leads and set appointments for you!
They aren’t a brokerage, they have never sold a house (Their CEO still hasn’t sold his house that he listed in July), yet Zillow is providing a top-notch website, $100 million in advertising, and several powerful tools for agents to use to improve their business.
Eventually they will be advertising that their agents are the best in the business. But are they? All we know is that they are the agents willing to spend thousands per month to get on the Zillow bandwagon.
Zillow is catering to the big agent-teams, and thus, that will be the future of real estate sales. To build a big enough team to be able to afford $10,000 – $50,000 per month in Zillow ads.
It will be a few years before it really takes hold, but the realtor old guard is already on it’s way to retirement so it seems like a natural progression.
With internet companies like Amazon dominating their space – combined with consumer not moving as often – the next time you think about buying or selling, who will you text?
Jim, you were not on the committee dealing with Zillow’s demands. The demands were highly unreasonable. Sandicor is leading the way nationwide on holding its ground against giving away data to Zillow, and no agents have gone out of business because listings are not flowing automatically to Zillow. It’s not a big deal nor is it the end of the world. It’s a relief.
You’d be surprised how many people I have talked to, highly successful agents and brokers, who love that we aren’t tied to Zillow. Your comments are very uninformed and to me your opinions are in the tiny minority. Brush up on how Sandicor works and why it’s here.
All I said was that Sandicor should make the deal with Zillow so every listing agent could choose Yes or No to auto-uploading each listing. The system is already set up that way for all other portals, why exclude Zillow?
But the Zillow Haters aren’t interested in discussing, they just want to hate.
For the record, I wish Sandicor and others would have mounted a credible challenge to Zillow years ago. But we did nothing, and now we’re on the defensive – just hoping to slow them down a bit.
The hate is short-sided, and probably understandable for those who already have one foot in the tar pit. But for those of us who are long-termers and want to hand off the business to the next generation, Zillow and other outsiders are creating the future.
Last year it was well-documented that the #1 problem in the industry are the masses of marginal agents. But free enterprise is solving the problem.
Zillow is educating consumers on how to find quality agents by using reviews and recent sales histories – which favors the agents who use Zillow as a marketing platform.
In the beginning, I was a Zillow hater too. But they have evolved into one of the best resources available for both consumers and agents. Ignore them at your own peril.
P.S. Haters – have you seen those Redfin TV ads? All that Zillow is doing is giving consumers a great portal, and suggesting a conduit to other agents – Redfin is spending millions on TV ads to directly take your business away.
It is the biggest threat to the status quo – companies that spend millions on advertising are going to direct the future of the home-selling business, regardless of what is actually best for the consumer.
Here’s more on the bigger picture:
http://www.notorious-rob.com/2016/01/the-myth-of-the-irreplaceable-realtor/