Not all homes falling in value, Zillow.com says
Zillow broke housing into five groups based on value. In our metro area, the bottom was $137,999 or less; the lower middle was $138,000 to $232,999; the middle was $233,000 to $297,499; the upper middle was $298,000 to $388,999; and the top was $389,000 and up.
This was a new analysis of Zillow's Home Value Reports for the fourth quarter, which were released last month.
The results don't suggest it's all good news for owners of less expensive homes and bad news for owners of pricier ones.
People in the lower-middle category who bought last year "had the least owner equity ... and nearly 40% actually have negative equity," Zillow says. The typical person who bought a home in the most expensive category last year has a 21 percent equity stake -- "fueled by the fact that those in the Top quintile had a median down payment of 20%, while those in the Lower Middle quintile put less than 1% down," Zillow says.
Click HERE for the data or HERE for the national press release.
Zillow's Zestimates have drawn criticism for inaccuracy. Zillow's vice president for data and analytics, Stan Humphries, blogged about the data earlier in the month:
The Zillow Home Value Index takes a different approach to constructing its market index. We generate valuations several times a week on more than 67 million homes, or roughly three out of four homes in the U.S., and calculate historical values dating back to 1997 (thus creating over 13 billion Zestimates). This complicated process allows us to aggregate these house-level valuations into indexes (what we call the Zindex) at the neighborhood, ZIP code, city, county, metro area, and national levels. This Zindex eliminates the bias present in median sale prices by looking at the value of all homes in a region, not just those homes that sold. ...An important property of the Zillow Zestimate that allows us to aggregate them into a very accurate and reliable Zindex is that they have relatively little systematic error meaning that, while each Zestimate has some margin of error, they are just as likely to be above the actual sale price of a home as below. This means that individual estimates, each with some error, can be aggregated to form a quite accurate measure of all homes.
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Comments
A computer program does not live in the real world though. Even in this market I think there will be a very small percentage of houses that gain value. There has to be something of substance behind that rise in value though. Did a drug filled empty lot across the street become luxury food store? Well the house will gain value. It just can not be "well my neighborhood is better now (for some ambiguous reason) and thus my house is worth more". That is not going to work in this market anymore. Show me real drastic change and then you will see rise in value.
Posted by: Adam Meister | April 1, 2008 5:31 PM
There's some economic rationale for less expensive housing to rise in value. It's what first-time homebuyers are most likely to be able to afford, and (if rehabbers' experience is any judge) these are the folks who are most reliably buying. They don't have something else to sell, after all.
On the other hand, Zillow's other chart -- the equity one -- suggests that one out of three who bought the least expensive housing last year are underwater.
Posted by: Jamie Smith Hopkins | April 1, 2008 7:45 PM
In theory a shell is the cheapest house you can buy. From what I have seen shell prices have gone down in Reservoir Hill and other areas.
Posted by: Adam Meister | April 2, 2008 2:43 PM
But first-time homebuyers are unlikely to be in the market for shells. Investors are the usual buyers, and there's a lot less gut rehabbing going on now than there was during the boom. That sort of change will naturally press shell prices down. You see similar trends in other neighborhoods, such as Canton.
The "bottom" category would include both shells and non-shells, judging by the price.
Posted by: Jamie Smith Hopkins | April 2, 2008 2:48 PM
Zillow has a very nice site but it is not accurate for lake homes which we specialize in. http://www.mnlakeplace.com has the largest selection of lake homes -cabin rentals resorts in minnesota.
Posted by: mnlakeplace | October 3, 2008 8:26 PM
In response to Adam Meister:
Shells in Reservoir Hill and similar areas have declined because their after repair value (ARV) is in the $300K-500K range. This market segment has so much inventory that few, if any, investors are willing to take the risk of rehabbing a property if it's going to take 6-9 months to sell after taking 3-5 months to rehab.
However, prices for shells in solid rental and first-time homeowner areas are still holding up.
These shells can be bought for as little as $10,000 and it's hard from them to fall much from such low values.
And after being rehabbed for $40K-70K, these properties can be sold for up to $150K or rented for up to $1200 per month.
People have to live somewhere and there are still many programs for first-time homebuyers or city/employer help with down payment and closing costs.
The smart investors are either working the bottom or top markets which are not quite as volatile as the middle.
Posted by: Alan Chantker | October 4, 2008 9:29 AM
Zillow is not popular with us because it creates misguided notions of value for homes, especially for lakeshore.
Prices for homes in our area have stabilized, which may suggest that the bottom of the market for homes has past.
Posted by: MN Homes | July 25, 2010 4:02 AM