Why Using Zillow to Check Housing Values is Laughable!

The stock market has valued USA real estate value website, Zillow.com, at more than $1.6 billion. This coincides with the launch of Zillow’s new “proprietary algorithm” which creates the notoriously skewed ‘Zestimates’ (property valuations) on nearly 100 million American homes.

This article looks at what has gone wrong with Zillow and how its ‘Zestimates’ have been warped by the glut of foreclosures in the US market. First though, some good news!

The good news!

Yes, it is possible to purchase a good quality, professionally refurbished and often tenanted, foreclosed property in the States for between £15,000 and £50,000.

These are exceptional deals, especially considering rental yields in the USA are much higher than the UK and can deliver returns of up to 22% net per year, along with capital growth potential as the market recovers over time.

In order to do this, however, you need to work with an expert acquisition agent, such as Axis, who has professional partners in the USA who know how to navigate the market and get the best deals.

Call us today on +44(0)1273 447 300 for a no obligation chat about how and where to buy quality, performing, foreclosed stock at massively reduced prices; and view our currently available USA property. Read on for the full story.

One dollar houses which will cost you an arm and a leg

So what exactly is the problem with Zillow and its ‘Zestimates’?

The USA property market has been so flooded with foreclosures (repossessions), the reduced selling prices of these foreclosed properties has warped the national average. Some of these properties have been in such a bad state of repair and/or attached to liens (bad debts), they have been listed for ridiculously low prices.

In reality, the infamous ‘one dollar houses’ would cost anyone buying them an arm and a leg in refurbishment and attached debt. And reports emerging in July 2011 reveal foreclosures are now being either given away for free, or demolished.

“Zillow Talk Isn’t Comfy”

The Zillow website states: “The new Zestimates are 33% more accurate than the older ones. We hope you enjoy the new Zestimates.” However, US real estate professionals and economists are treating Zillow’s new, improved ‘Zestimates’ and “overpriced stock” as a joke.

In his ‘Zillow Talk Isn’t Comfy’ article (The Wall Street Journal), Dow Jones columnist, Al Lewis, writes: “Zillow.com is worth squat. That’s my official ‘Alstimate’ for the money-losing real estate pricing machine. My Alstimate is based on my own secret formula and I’m not telling what it is. I’m just going to publish it – like Zillow, which deploys a ‘Zestimate’ to tell us that our homes are worth Zilch-O.

What could be more “enjoyable” than watching the value of your largest investment plunge with the weedy bank-owned property next door? And now Zillow boasts new and improved accuracy too? Like many homeowners, you may not like the ‘Zestimate’ on your abode, especially if you think you got a deal after the housing bubble began to pop.”

Does this mean we are expected to roll with the punches doled out by Zillow and its ‘Zestimates’?

“The worst in 13 years” (NARS)

Let’s look at some facts and figures. According to the National Association of Realtors (NARS), existing home sales fell 0.8% in June 2011, putting this year on track to beat 2010 as the worst in 13 years. This was the third monthly slide in a season when home sales are supposed to pick up.

The Realtors group also reported an unexpected spike in buyers pulling out of contracts, quite likely down to the horrendously skewed ‘Zestimates’.

The Zillow stock bubble

Zillow, however, is laughing in the face of adversity as its shares sell for $60 – a price which values the company at about 50 times its $30.5 million in 2010 revenue.

Zillow has “no earnings”, but boasts declining losses and rising revenues. Its stock price soon slipped back below the $60 high and closed below $35. That is still a leap on its original $20 offering price!

Al Lewis concludes: “It’s like the Internet bubble, followed by the housing bubble, followed by the Internet bubble, all over again. Who knows what it’s really worth? Like Zillow, I will be unresponsive to complaints about my Alstimate. But I will work on my secret formula so that I can be 33% more accurate in the future, perhaps upgrading from squat to diddley squat.”

As you might expect, Axis has been aware of the problem with ‘Zestimates’ for some time and has stopped using them for valuation purposes. There are better options to assess value.

Next steps for success

1. Call us on +44(0)1273 447300 today for a no obligation chat about how and where to buy quality, performing, foreclosed stock at massively reduced prices.

2. View our currently available USA property.

We welcome your opinion and invite you to leave your comments below.

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