Zestimate: (GIGO) Garbage in .... Garbage out

Zillow ‘Zestimate’ Shifts, Prompting Howls

Excerpt:

Bill Garber, a spokesman for the Appraisal Institute, the main trade group for U.S. property appraisers, said that Zestimates, like most automated valuation models, or AVMs, are not used by appraisers as a benchmark because they are based on public information and information from local multiple-listing services that is often inaccurate.

“Zestimates are a form of AVM … AVMs have limitations, the biggest being the lack of inspection and oversight of any improvements. Complex markets render them nearly useless. They’re basically an aggregation of public records data, and public records are riddled with errors,” Mr. Garber wrote in an email. “Some AVMs are now intermixing MLS information, which is also filled with incorrect information. Garbage in, garbage out.”

Comment: Still interesting. My take is that the Hennepin County home value (on the tax bill) is pretty accurate.

23% of homeowers "underwater"

Home Values to Drop by $1.7 Trillion This Year, Zillow Says

Excerpt:

U.S. home values are poised to drop by more than $1.7 trillion this year amid rising foreclosures and the expiration of homebuyer tax credits, said Zillow Inc., a closely held provider of home price data.

This year’s estimated decline, more than the $1.05 trillion drop in 2009, brings the loss since the June 2006 home-price peak to $9 trillion, the Seattle-based company said today in a statement.

The drop in home values pushed more buyers underwater, meaning they owe more on their mortgages than their homes are worth, Zillow said. The percentage of homeowners with so-called negative equity reached 23.2 percent in the third quarter, up from 21.8 percent at the end of 2009.

“With foreclosures near an all-time high in late 2010 and high rates of negative equity persisting, it does not appear that the first part of 2011 will bring much relief,” Stan Humphries, Zillow’s chief economist, said in the statement. “Government incentives can only temporarily hold back the tide.”

Comment: Good definition of underwater - bolded and red above. Image source: Freaking News. Per Zillow, my own house has declined in value by 20% from mid-2006 to today.

Time to buy a home?

10 Reasons To Buy a Home

Excerpts:

1. You can get a good deal
   
2. Mortgages are cheap
   
3. You'll save on taxes
   
4. It'll be yours
   
5. You'll get a better home. In many parts of the country it can be really hard to find a good rental
   
6. It offers some inflation protection
   
7. It's risk capital. No, your home isn't the stock market and you shouldn't view it as the way to get rich. But if the economy does surprise us all and start booming, sooner or later real estate prices will head up again, too.
   
8. It's forced savings. If you can rent an apartment for $2,000 month instead of buying one for $2,400 a month, renting may make sense. But will you save that $400 for your future?
   
9. There is a lot to choose from
   
10. Sooner or later, the market will clear. Demand and supply will meet.
    
    
    

Comments: I question the validity of # 6 and 7. # 8 is a wrong reason to buy. # 10 may be later rather than sooner. My advice, if you can project staying in that home for at least 7 years consider it.

Housing Prices in 20 Cities

NYTimes Graphic: Housing Prices in 20 Cities

Comment: Check out Vegas, LA, Phoenix. Very interesting.

2006 a 'lifetime' peak in home prices?

Why home values may take decades to recover

Excerpt:

The boom in home prices — fueled by heavily leveraged loans built on low or even no down payments — made it easy to forget that housing values had been remarkably stable for a half-century after World War II, rising at roughly the same pace as income and inflation. Prices soared in most of the country — especially in Arizona, California, Florida and Nevada and metro areas of Washington, D.C., and New York — during a brief period of easy lending, especially from 2002 to 2006. That era's over.

So far, home values nationally have tumbled an average of 19% from their peak. As bad as that is, prices would need to fall as least 17% more to reach their traditional relationship to household income, according to a USA TODAY analysis of home prices since 1950. In that scenario, a $300,000 house in 2006 could be worth about $200,000 when real estate prices hit bottom.

The price plunge has wiped out trillions of dollars in home equity and caused the worst financial crisis since the Great Depression. Susan Wachter, professor of real estate at the University of Pennsylvania, fears that foreclosures and tight credit could send home prices falling to the point that millions of families and thousands of banks are thrust into insolvency.

Comment: Longer article that is a worthwhile read. Explains how this housing crisis is different than previous.