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Oh Zillow Oh

I was surprised to see Zillow's Q2 real estate update get coverage at face value without a discussion of the accuracy of their zestimates. Zillow's own website indicates a 10% +/- margin of error and yet, some very smart people like Barry Ritholtz at the Big Picture simply reported the statistics as gospel and drew some alarming conclusions. [ I did like the "imposter" Lawrence Yun comment :) ]

Zillow's website states that zestimates are only a starting point in determining home value and their data shows the majority of zestimate home valuations are within 10% of the selling price of the home.

Zillow data coverage and zestimate accuracy table 

Now to the data in Zillow's 2nd Quarter market report:

Zillow Q2 2008 real estate market report 

Home prices in the Charleston real estate market as reported by Zillow are down by 5% over the past year. Click here for Zillow's detailed statistics. At least we're not black and blue like battered and beaten Florida and California.

Published Tuesday, August 19, 2008 7:05 AM by Howard Arnoff

Comments

# Home Value Index vs. Zestimate accuracy

Hi Howard, it's David G from Zillow.com,

The accuracy of individual homes' Zestimate values and the accuracy of the Home Value Index reported in Zillow's Q2 real estate market reports are not directly related and that's why they're not a part of the same story. The accuracy chart you show above is for individual homes. As you can imagine, there's a lot more noise in the raw data at the property level and that's why estimating the value of individual homes can be so challenging. However, when we aggregate home values into the Zillow Home Value Index, we are able to exclude individual outliers and adjust for any bias in the data at the home level. The Home Value Index has been shown to be highly correlated to the popular Case Schiller Housing Index data. Like the CSI, Zillow Home Value Index is increasingly referenced as a reliable source of housing trend information but unlike the CSI, the Zillow Home Value Index is available to the ZIP code level.

Wednesday, August 20, 2008 11:04 AM by David G from Zillow.com

# re: Oh Zillow Oh

David, I'm honored to have you stop by and clarify. Of course, the more accurate we can all get the better and I'm glad to hear you report that Zillow has been able to accomplish this.

Having said that however, I'm not as enamored with Case-Shiller as many others seem to be since higher priced properties which are under more pricing pressure tend to overstate price declines of all homes.

Of course, when prices were increasing, the higher priced homes tended to do the same thing but nobody worried about home values when prices were appreciating rapidly :)

Wednesday, August 20, 2008 1:02 PM by Howard Arnoff
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