Sites Like Zillow, Good For Exposure, Horrible For Determining Value
While I was listening to the news today, I heard a report that used Zillow.com as a source for home values. I was immediately shocked that they used a source like that to get their facts. I knew in the back of my head that their numbers had to be way off but I decided to run a little test on my own.
I tested a normal subdivision in Greenville with prices ranging anywhere from $150,000's to $250,000's. The subdivision currently has five homes for sale and has seen seventeen sell since the beginning of the year. One of the homes currently on the market has 4 bedrooms, 2.5 bathrooms, and over 2200 square feet and is in top shape. They have it currently listed at $210,000. After looking at the comparables from the year so far, I feel like they are at a very good listing price and right where they should be. They are also competitive in price with the other homes on the market. If they end up getting 97% of what they are asking for the home they should have a final sales price of $203,700. I even found multiple homes with a lot less square footage and one less bedroom going for right at $200,000 since the beginning of the year. Based on what the market will allow, the home should go for somewhere between $203,000 and $208,000.
So, what does Zillow say the home is worth? I put the address in Zillow's address search and the "Zestimate" gave me a price of $185,000 for the value of the home! What is interesting though is that on one that just sold a few moths ago with less square footage and one less bedroom it gave an "Zestimate" of $204,000! This shows that their estimate are not based on comparables at all but on things like tax records. They are producing these estimates without ever seeing the house to see if it would actually compare, taking into account distressed situations, or having any understanding at all of what that subdivision's local market will allow.
Bottom line, Zillow is another source for exposing a home for sale to the web but a horrible source for determining value. This is especially true when reporting a news story. Zillow should never be used as a factual source and the Greenville, SC Zillow search that I did proves this. The best way to determine a fair market price for your Greenville Area home is to use a real estate agent or appraiser that deals with the local market on a daily basis and can compare apples to apples in person.
Greenville Homes Priced Under $150,000 Not Classified As Buyer's Market
We hear Greenville, SC real estate markets referred to as "buyer markets" or "seller markets" but what makes a market good for buyers or good for sellers. The National Association of Realtors® classifies markets based on absorption rates and inventory as follows:
0-5 months = Sellers Market, 5-7 months = Even/Split Market, 7+ months = Buyer’s Market
So what is an absorption rate and what does the 0-5, 5-7, and 7+ months mean? The number of months represents the number of months of inventory on the market. The number of months of inventory is determined by the absorption rate. The absorption rate is determined by taking the number of sold listings for any criteria (price range, city, subdivision, or a mixture) and dividing it by the amount of months (12 for a year or 9 for January to September). You can find the amount of inventory then by dividing the absorption rate number by the amount of active listings.
For instance, lets say that it is August in a local Greenville subdivision and it has 4 homes on the market and 16 have sold since January. This makes an average of 2 homes selling every month and means that there is a 2 month supply in the subdivision. When looking at absorption rates for the entire Greenville area as a whole, it reveals some interesting facts when keeping the definition of a buyer's and seller's market in mind.
Here are some recent Greenville Area real estate statistics:
•Listing Price: $0 - $150K
–Active Listings: 2639
–Sold Listings: 3083
–3083 / 8 mths = 385/mth (Absorption Rate)
–2639 / 385 = 6.85 (Months of Inventory)
–Avg DOM: 83
•$150K - $300K
–Active Listings: 2732
–Sold Listings: 2399
–2399 / 8 = 300/mth (Absorption Rate)
–2732 / 300 = 9.11 (Months of Inventory)
–Sold DOM: 95
•$300K - $500K
–Active Listings: 1123
–Sold Listings: 565
–565 / 8 = 71/mth (Absorption Rate)
–1123 / 71 = 15.82 (Months of Inventory)
Sold DOM: 110
•$500K - $1Million
–Active Listings: 638
–Sold Listings: 174
–174 / 8 = 21.5/mth (Absorption Rate)
–638 / 21.5 = 29.67 (Months of Inventory)
–Sold DOM: 125
•$1Million +
–Active Listings: 144
–Active Solds: 14
–14 / 8 = 1.75/mth (Absorption Rate)
–144 / 1.75 = 82.3 (Months of Inventory)
Sold DOM: 109
These statistics show that Greenville is in a buyer's market in every category except one. The homes priced at $150,000 and below are not in a buyer's market. According the the NAR's® definitions of markets, that price range is an "even/split market." What does this mean? Seller's under $150,000's can expect a better market than those with higher prices and buyers cannot expect the luxury of a buyer's market under $150,000. Seller's under the $150,000's still have to keep things in perspective though since they are not in a seller's market either.
Comments