I’ll admit…I’m a dork.
I really enjoy numbers and love checking trends and data to find patterns and solve puzzles.
The problem with numbers is that they can be skewed. Sometimes they tell a story that doesn’t exist in the real world.
Because I enjoy seeing different opinions on trends and market factors I have subscribed to Zillow to receive a monthly market report for the 53575 zip code. I call it research in terms of data and marketing.
But the problem with this information is the source. In our industry we know Zillow is inaccurate. Houses appear for sale that have actually sold or expired years ago. Some homes for sale don’t find their way to Zillow.
We all know of the Zestimate that promises to give you an accurate representation of your homes value within 20% of the actual price…80% of the time. That means a Zestimate on a $200,000 home could show $160,000 all the way up to $240,000, and 20% of the time it will fall outside that range. Curse the Zestimate.
So if we hear that someone saw something on Zillow, we typically take it with a grain of salt. We consult our local sources of relevant information for a more accurate picture of what’s happening.
I opened my inbox this morning and this is what I found:
But then I looked. The market is cold, but the health is excellent. Wait, is that median value correct? What about the 1 year price increase? Just how accurate is this information?
So I dug, and here is reality for the 53575 zip code.
Home Values: There are a few ways to look at this, but most commonly we use home sales to determine median home prices. If we look at home values in the 53575 in recent history we will find that the median sold price in 2014 was $246,750, while 2015 we saw a median price of $243,000…a decrease of 1.5%. Yet Zillow shows a 4.1% increase in home values. How can that be?
While I don’t know the value of active properties at the end of 2014, I can share that as of today (1/13/2016) the average listing price in the area is $279,000. Perhaps Zillow is using actives to gauge home values?
Dane County as a whole saw a 6% increase in home values last year. So why did Oregon drop?
That’s a good question that likely has a number of factors but I’ll go ahead and say part of the drop has to do with the unloading of a high number of properties in the $300,000 and below price point. A great year for sales at that range and with more sales below a given price, the more that median drops.
I would not agree that home values decreased in 2015 and here’s why….
Market Temperature: Zillow identifies the market temperature for the 53575 as “cold”. In fact, the thermometer on the Zillow chart looks downright frigid and even makes the claim we are sitting in a heavy buyer’s market. I’m not sure what factors Zillow uses to identify this trend, but they are way off base on this one.
In the industry we use a term called “Months of Inventory” to determine market health and what type of market we are sitting in. It’s agreed upon that 6 months of inventory would be a balanced market. As this number drops the market tilts to favor sellers. As the number rises the market tilts in favor of buyers because there are more options available for them.
Today we are sitting at 2.37 months of inventory, a huge sellers market. In the single family segment here is where we sit in given price points.
Beyond nearly every piece of the market tilting to favor sellers, and most of the market heavily favoring sellers, we also so more sales in 2015. In 2014 the Oregon area had 194 sales compared to 273 in 2015. That’s nearly 41% more homes sold in 2015 than 2014. A huge increase.
But Zillow is calling the market “Cold”. Yet when things move this quickly, when inventory and available homes are as low as they have been, prices simply do not fall. Supply and demand. Basic economics.
If you’ve stuck with me for this long here’s your bottom line takeaway. Zillow can be fun for shopping, but please don’t rely on it for an accurate representation of available homes or home values.
Our market (both the 53575 zip code and Dane County) is extremely hot and is alive and well. While we are in a sellers market, prices are not reflecting that. Yes, prices have risen, but they have done so at a fair and healthy pace. In fact, sellers who are attempting to take advantage of current trends by pricing high are often sitting as buyers aren’t willing to overpay at this point.