A new survey from Zillow.com is projecting that metro Phoenix home prices will rise 3.6 percent by April 2015. That is not a significant increase compared with the 17 percent rise last year and the 30 percent jump in 2012. Zillow has Phoenix ranked 15th for projected home-price appreciation on Zillow’s list of large metros for 20104. Las Vegas, which has lagged the Valley in the housing rebound, ranks No. 1 with an almost 11 percent expected jump in home values for 2014.
However, what do Zillow’s predictions really mean? How accurate are they and do they give home buyer’s and seller’s erroneous information about their local housing market, their home or the home they intend to purchase? Let us look to a local expert in the housing market for his take on Zestimates.
“Zillow’s forecasts are for entertainment purposes,” said housing analyst Mike Orr, of Arizona State University’s W.P. Carey School of Business. “Zillow is not predicting changes in home prices. They are predicting changes in their own Zestimates.”
Orr, who tracks home sales daily, does not agree with forecasting home prices several months out on sales that have not even been started.
Zillow calculates what it calls a “Zestimate” on more than 100 million homes nationwide. This data is not scrubbed or verified. The Zestimate is automatically computed three times per week based on millions of public and user-submitted data points, according to Zillow. This can cause wild fluctuations in the Zestimate of your home in a short period of time without an explanation. Zillow estimates market value for individual homes and is calculating a similar value for about 100 million homes nationwide and no one reviews the data for accuracy. This is simply a starting point in determining the value of home and is not an official appraisal or broker’s price opinion. Orr said the Zestimate for his house has gone up and down during the past year for reasons that can’t be explained by what’s going on in the housing market.
Tom Ruff, real estate analyst with the Information Market, said a 3.6 percent increase for Valley home prices this year is “plausible,” but said Zillow has been “wildly inaccurate” in forecasting future home prices.
Greg Burger, an Arizona housing expert with RL Brown Report, said a 2 to 2.5 percent increase for home prices is more realistic than 3.5 percent.
So, what can we expect for the rest of 2014? In assessing our local market in Ahwatukee, it appears that prices might be stagnant this year or even dip a little. Given the current days on the market for some properties, sellers might have to drop their prices to get an offer and eventually sell their homes. If your home has been on the market for six to nine months or more and you have not received an offer, it is probably an indication that buyer’s do not view the property the same way that you and your agent do at this time.
Metro Phoenix’s median home-sales price fell in January and February but bounced back to December 2014’s level of $205,000 in March. So, keep that in mind when determining the list price of your home. Overpricing initially tends to mean longer days on the market and lower final sales price.