Consumer Confidence in Home Prices Exceeds Zillow Property Valuations
Consumer confidence toward their home’s worth was mixed across the country in the Zillow Q110 homeowner confidence survey. But nationally, only 50% of homeowners thought their property value decreased during the past year, when in reality, Zillow said 65% of US homes lost value. In the West, 18% of homeowners believe that their home gained value during the past year, but Zillow said in actuality, 31% of Western state homes appreciated. “It is clear that there is a lag between market realities and public perceptions of home values. For quite a while after the market peak, Western homeowners continued to believe their own homes' values were doing better than they were in reality,” said Zillow chief economist Stan Humphries. “Conversely, after years of press coverage about declining home values, homeowner perceptions are now in line with market conditions from early last year, although the Western market has improved since then.” In the South, 34% of homeowners said they believed their home to have appreciated, when in reality, Zillow’s data showed only 27% of homes appreciated. "We see the opposite phenomena in the South where home values in most markets — with the exception of Florida — took some time to begin falling,” Humphries said. “Many markets there have recently joined the housing recession in earnest, with five of the nine Southern states tracked by Zillow hitting their home value peak after 2007, but homeowners there are likely to believe the downturn has not affected them.” “This could also be a result of the fact that most attention has been on the hardest-hit areas of California, Florida, Nevada, Arizona and Michigan, and homeowners outside of these markets may have less information about what has happened in their local markets,” Humphries added. Nationally, 23% of homeowners said they believe their home’s value was stagnant, compared with Zillow data that showed only 7% of homes did not experience a change in value. Most homeowners, 43%, believe their home’s value will remain even during the next six months, while 39% believe their home will appreciate and 18% believe it will decrease. The difference between homeowner’s perception of home value and Zillow’s automated valuation model (AVM) software is a much-debated topic. A report published in the quarterly technical and academic publication of the Appraisal Institute questions the accuracy of Zillow’s AVM valuations, which Zillow calls “Zestimates.” The study found Zillow overestimates value for approximately 80% of the houses in the sample by at least 1%. The study said 59% of the Zestimates fell within ±10% of the sale price and only 0.88% of values are underestimated by more than 10%. On average, the Zestimate was 11.66% overvalued, or $13,576 with a median of $9,717 or 7.92%. The report’s authors said Zillow’s magnitude of overestimation is higher than other studies that have shown average homeowners overestimate the values of their homes by 5.1% and new owners overvalue their homes by about 8.4%. When the report was released earlier this year, Zillow criticized the report as “misleading,” adding the results are based on outdated and narrow information. Write to Austin Kilgore.