The Truth About Zillow
Recently I've gotten more and more questions about Zillow and the accuracy of the information it presents. Below is a short look at some things you should know about Zillow. (Impatient readers skip to the bottom for a better alternative).
How Accurate is Zillow's Zestimate?
Let's look at what Zillow has to say about itself first: Zillow reports that its median price error for homes in the Denver Metro area is 5.1% How much could 5.1% affect the price?
Home Price: $300,000 +/- $15,300 $284,700 - $315,300
Home Price: $400,000 +/- $20,400 $379,600 - $420,400
Home Price: $500,000 +/- $25,500 $474,500 - $525,500
Anywhere from $15,000-$50,000. That's not even the worst part. Zillow reports that less than half (49%) of its Zestimates are within 5% of sales price. This means that over half of the Zestimates for homes in Denver are off by 6-20%
"Over half of the Zestimates for homes in Denver are off by 6-20%"
How much is Zillow off by?
Based on Denver's median home price ($355,000) and Zillow's self reported median error for Denver (5.1%), Zillow's typical error for homes in Denver is $18,105.
"Zillow's typical error for homes in Denver is $18,105."
I'm a buyer and I look for houses on Zillow
Unfortunately, it's not uncommon to find an "active" listing on Zillow that actually sold months or even years ago. Zillow does not update their listing information reliably or consistently. You as a buyer could be wasting time looking at houses that aren't even actually for sale. Zillow wants you to contact one of the agents it has displayed on the right side of your screen. They'll then take your information and sell it to those agents.
Where does Zillow's data come from?
According to Zillow: (emphasis added is mine)
“The Zestimate is not an appraisal and you won’t be able to use it in place of an appraisal, though you can certainly share it with real estate professionals. It is a computer-generated estimate of the worth of a house today, given the available data. Zillow does not offer the Zestimate as the basis of any specific real-estate related financial transaction. Our data sources may be incomplete or incorrect; also, we have not physically inspected a specific home. Remember, the Zestimate is a starting point and does not consider all the market intricacies that can determine the actual price a house will sell for.”
"Most upgrade information is not in the public records, and is not easily quantifiable. We do not know about home updates and remodels unless they have been reported to the local tax assessor, so those items are not used in Zestimate calculations. While we do utilize user-submitted data that is measurable, (e.g., additional bedroom count, bath count, and square footage) there is no way for us to systematically gather and verify the type of remodel or build information where the value is based upon how the final product appeals to the buyer. Because of this, the algorithm can’t use that information."
In short, Zillow uses and in-house algorithm that analyzes data from public record.
Zillow cannot account for:
Additionally, when calculating home price, Zillow uses years worth of data. Most real estate professionals in Denver use 30-60 days of data when listing a home. The market here in Denver changes rapidly and neighborhood activity fluctuates weekly.
How should home price be determined?
When I list a home, I want to have the most complete picture and understanding of current buyer behavior. It is the buyer, not the seller or listing agent, that determines what a house is worth.
How much is your home worth?
If you'd like to know how much your home is actually worth, contact me for a free competitive market analysis.
What should I use to search for homes?
Let me introduce you to recolorado.com. Recolorado is the public version of the MLS. It is the most accurate and up to date system available. It is also free, and unlike Zillow, they will not collect your contact information and sell it.
The Best Time Of Year To Sell Your House
If you had to guess what the best time of year is to sell a house is, what would you say? The majority of people believe its the summer time, but its actually right now. March-May has been the best time to sell a house in Denver for the last four years. But don't take my word for it, lets look at the data.
The graph below (provide by Land Title) shows the relationship between sold properties and active listings over the last three years. Notice the "compression phase" from March-May. Simply put, for the last several years, demand spikes and supply plummets during the spring months.
This year, our annual spring frenzy is in full swing. Last month inventory reached a new all time low of just 3,900 active listings. By comparison, the average number of active listings for the month of February from 1985-2016 is 14,600. Consider also that in housing markets a cross the country, six months of inventory is considered normal; in Denver, we've got five weeks of inventory. To top it off, prices are still increasing; the median home sale price in metro Denver is up 9% year over year.
More: How To Buy In A Seller's Market
More: Are We In A Bubble?
More: 4 Quick Market Facts & What They Mean For You
Lets look at some more recent numbers. In the graph below, notice that from February - May of 2016, and February of 2017, properties under contract (the green bar) met or exceeded active listings (the yellow bar). For the number of under contract homes to be anywhere near the number of active listings is a telling indicator of a hot market. Notice that in the other months of the year, active listings surpass the number of properties under contract by much wider margin.
What does this mean for you as a seller?
It means right now is the best time of year to sell your house. If you want leverage in negotiations, favorable terms, and top dollar for your home, there is no better time to sell. It is not uncommon for homes that are listed in March, April, or May to receive multiple offers over a few days, be listed for a week or less, and to sell for $10,000 or more over asking price. That's just the tip of the iceberg in terms of what's possible.
If you want to see market forces at work for yourself. Stop by an open house this weekend. How many others came and went while you were there. If you are actively looking for houses, maybe you noticed other buyers and their agents at your last last showing. Go to recolorado.com and find five houses under $400,000 that you like. In a week, check to see how many of them are still active. The bottom line is, if you want the opportunity to get the best deal possible for your home, then now is the time to sell.
If you have questions about potentially selling your house, email me at firstname.lastname@example.org; I'd be happy to help in any way I can.
4 Quick Facts & What They Mean For You:
1. Record Low Listings
In February, active listings reached a record low of 3,878. February’s historical average is 14,635 (1985-2016).
What this means for you: Simply put, there are so many people and so few houses. If you are looking at buying this year, you will likely be up against stiff competition especially in price ranges under $400,000. It’s very important to be prepared and have a plan when you enter the market. If you're selling, you'll enjoy the benefits of an extreme seller's market, but you'll also need a plan and a strategy for the next home you buy.
More: How To Buy In A Seller's Market
More: 6 Ways To Get Your Offer Accepted
2. Rising Rent Rates
Rents rose 10.2% from Q4 of 2015 to Q4 of 2016. Denver now has the 4th highest rental rates in the nation.
What this means for you: There are fewer and fewer situations where renting is cheaper than buying in our market. Is buying a home in Denver expensive? Yes, but the cost of getting into the market and owning a home is well worth the reward. Plus, its extremely unlikely our home prices are going to go down anytime soon. We could be looking at many more years of appreciating home prices.
More: Are We In A Bubble?
More: How Much Money Does It Take To Buy A House?
3. Denver’s Job Market
NerdWallet ranked Denver the second best city for job seekers in 2017. In 2016, our job growth rate was 3.2% as we added nearly 45,000 jobs.
What this means for you: Expect more and more people to continue to move to the Denver Metro Area. Our well-balanced local economy paired with job growth is one of the main reasons our population keeps increasing. Population growth and job growth mean increasing demand. Increasing demand combined with low supply (see #1) mean home prices will continue to climb. In February of 2017, median sold price increased 9.2% year over year.
4. Condo Prices Soar
In February, condo median sold prices increased 14.6% year over year. Condo development currently only makes up 4% of residential new construction. By comparison, in the early 2000’s, it made up around 25% of residential new construction.
What this means for you: Inventory of condos, the most affordable price points, will remain low. One major reason for low condo development is our construction defect laws. Colorado lawmakers have been unwilling to allow any changes to our construction defect laws up to this point. Builders are not building condos currently because the current law allows for them to be sued very easily even over minor issues. Lack of affordable housing and condo units is a major contributing factor for our low inventory.
If you have questions, or you're looking to buy or sell this year, please feel free to reach out to me: Email Me