Zillow Values No More Accurate Than Homeowners Estimates: The Appraisal Journal
CHICAGO (Feb. 25, 2010) – Estimates of home values from Zillow.com may be no more accurate than homeowners' estimates of value, according to a new study in The Appraisal Journal's Winter 2010 issue.
The Appraisal Journal is the quarterly technical and academic publication of the Appraisal Institute, the nation's largest association of real estate appraisers. (The materials presented in the publication represent the opinions and views of the authors.)
"Zillow's Estimates of Single-Family Housing Values," by Daniel R. Hollas, Ph.D., Ronald C. Rutherford, Ph.D., and Thomas A. Thomson, Ph.D., examines how Zillow's estimates of value, known as Zestimates, compare to actual sale prices. Zillow.com is an automated valuation model Web site.
The authors looked at home sales in Arlington, Texas, a location where Zillow has indicated its data has the highest accuracy level. The authors' study found that 40 percent of the homes in the sample were overvalued by Zillow by more than 10 percent compared to actual sale prices. The study's authors suggested that Zillow may not take into account the occupancy of properties, which has been shown to affect sale prices.
Other studies have shown that on average homeowners' overestimate the values of their homes by 5.1 percent and new owners overvalue their homes by about 8.4 percent. The authors conclude, therefore, that while Zillow is a helpful tool, it may not be more accurate than the owners' own estimates of value.
Other articles in The Appraisal Journal's Winter 2010 issue include:
"Cemetery Proximity and Single-Family House Price," by James E. Larsen, Ph.D., and Joseph W. Coleman, Ph.D., looks at sale prices of homes near four cemeteries in Ohio, and reports that in neighborhoods located near two of the cemeteries, a view of a cemetery had no impact on home prices. But in two other neighborhoods, a cemetery view decreased sale price of 10 percent and 8.8 percent. The authors conclude that appraisers need to test their local market to determine if cemetery proximity has an impact on home prices.
"Water Market Trends: Transactions, Quantities, and Prices," by Elizabeth Basta and Bonnie G. Colby, Ph.D., examines water leases and sales for 1987-2007 in the western United States and finds that while the amount of water traded annually varies, the number of transactions and prices for water clearly show an increasing trend.
"On Price, Cost, and Value," by Ünsal Özdilek, Ph.D., explains the relationship of price, cost, and value in terms of their position in the past, current, and future markets.
"The Home Valuation Code of Conduct and Its Potential Impacts," by Avery M. Abernethy, Ph.D., and Harris Hollans, Ph.D., MAI, looks at the history of the Home Valuation Code of Conduct, its relation to financial regulations, and how it may affect appraisal practice in the future.
"Risk and Reasonableness for Nonmarket Occupancy — A Second Look During a Recession," by Richard L. Parli, MAI, and Jeffrey D. Fisher, Ph.D., revisits the issue of how to value commercial property when its rent or occupancy is different from the rents being paid in the market or different from the occupancy rates for other similar buildings in the market.
A historical reprint, "Narrowing Margins," written in 1955 by Morton Bodfish, then-executive vice president of the U.S. Savings and Loan League, discusses the dangers of residential mortgages with narrow margins from no-down-payment mortgages and the pressure on lenders to make loans during a building boom.
To read the Appraisal Journal's Winter 2010 cover article on Zillow estimates of value, click here .