Accuracy of Zillow Statistics

There was a recent article in the Bellingham Herald about Zillow’s quarterly home report stating that the median price of a home in Whatcom County is down slightly in the past year.

This may be so, but then again maybe not.

The reportshows that the median price for single family residences sold  in Whatcom County was $278,649 during the second quarter of 2007, down 2.1 percent when compared to the same period last year.

When I look at the NWMLS statistics they sure are different that Zillows.  According to the NWMLS statistics for the second quarter of 2007 vs 2006, I get a median sales price for a single family residence of  $292,500 for 2007 vs $282,250 for 2006 which is a 3.6% increase in residential home values.

When I look at the stats for all homes, I assume they mean residential and condos, Zillow says the median home sold for $247,074 in the 2nd quarter of 2007. Once again looking at the NWMLS statistics the median  sales price for all homes in 2007 was $274,900 as compared to $269,500 for the same time in 2006, which is a 2% increase….. There is also an 11% spread between the Zillow median and the NWMLS median prices. What does this all mean?

If I take into consideration the fact that Zillow also uses FSBO’s that are not part of the NWMLS data then it leads me to believe that those selling their homes on their own are leaving a lot of money on the table as there is a 5.7% spread between the Zillow statistics and those of the NWMLS for single family homes.  

What do you think?Which is more accurate Zillow or the NWMLS?

If Zillow is right you might want to think about getting the help of a Realtor if your thinking about selling your home.

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3 Responses to Accuracy of Zillow Statistics

  1. Hi, it’s David G from Zillow,

    It’s quite normal that Zillow’s trend reporting can differ from MLS sales trends. It’s also unlikely that FSBO’s account for that difference. Zillow’s trend statistic or “Zindex” measures the change in the median value of all homes in your area whereas the MLS only reports the value of homes that were sold in the period in question.

    In a market where the mix of homes that are being sold is changing these two statistics won’t agree. The median sales price of homes that recently sold is a statistic that is easily skewed by a change in the inventory that is selling — and so it isn’t a perfect measure of average house values. And there are no perfect statistics so it’s a good idea to use a few different approaches and then synthesize the results based on an understanding of how they’re calculated.

    I’m not an expert in the Bellingham real estate market. If the Zindex is flat or decreasing while the median sales are increasing there would be a number of possible reasons for that. Do any of the following apply to the Bellingham market;
    1) The demographic of homeowners moving into the area is wealthier than that of existing residents.
    2) Demand for homes on the lower end of local property values has slowed down or availability of low end property has dried up.
    3) New development is focused on higher end homes (>$300K).

    I hope that helps.

    David

  2. Michael says:

    David,
    You say that ” The median sales price of homes that recently sold is a statistic that is easily skewed by a change in the inventory that is selling — and so it isn’t a perfect measure of average house values.”

    What makes your approach any better than looking at the actual values of recently sold homes. All 3 of your reasons for the difference may or may not apply to Bellingham, but that doesn’t help explain why you zindex or zestimate is a truer or better picture of the market

  3. Hi Michael,

    Sorry for my delay in getting back here.

    The Zindex is not susceptible to the scenarios I listed because it considers how the values of *ALL* homes have changed – not only the subset of homes that recently sold. The accuracy of the Zindex is not negatively impacted by a change in for sale inventory whereas the median sales price is. Median sales price actually tells you nothing about general house values; it just tells you about the values of the homes that recently sold.

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