It’s that time of year again when I point out the Zillow doesn’t understand home prices at Mueller Austin. And it’s not surprising, given that it doesn’t have access to sales price data in the State of Texas. That’s a blanket statement for understanding Zestimates anywhere in Austin, Texas, but there’s a little more behind the Mueller story.
I pulled the Zestimate graph for a home for sale on my street. It’s interesting as it is pretty much the antithesis of real home price trends. The home in particular was on the market for 7 days before going under contract at a higher list price than that advertised 20 months ago, when the builder sold it. So you might reasonably expect the sales price to be somewhere close to the list price – a far cry from a 20% drop in value.
So why does Zillow get it particularly wrong here – more so that in another Austin neighborhood where it similarly lacks sales prices? Pretty simply, it’s because it doesn’t understand the affordable program, and it arrives at it’s estimated values based on inference from list prices. And the market in Mueller suddenly saw a great deal of new affordable homes about 10 months ago. This fooled Zillow into thinking that average prices were plummeting. Which they were, when you consider 14 new MLS listings for homes on the market under $170,000.
The actual appraised values for these homes varies between around $230,000 and $280,000, and the difference between value and price is supported by a contribution from the Mueller Foundation. So these homes don’t represent a free market – they are externally constrained. Zillow doesn’t know that, so it just thinks the sky is falling and house prices along with it.
So, if Zillow is so bad at understanding markets, why do I pay so much to advertise my listings there each month? Zillow does attract a lot of visitors. Not as many as Realtor.com, but it’s promise of charts and data does bring a lot of eyeballs to it. So that’s where I want to advertise my clients’ listings there. That way, it can be me that answers the phone and explains that house prices are actually going up at Mueller (and I have the data to prove it).