How Accurate is Zillow's Zestimate? Coverage Map

Do you rely on Zestimate values to assess what a property would sell for on-market? In this video, I cover Zillow's Zestimate coverage and accuracy by state.

Ariel Herrera 00:00

Are Zillow home estimates total garbage? Or can we actually use them to evaluate properties in our market to know what they should go for? In this video, I'm going to show you how we can evaluate estimates based on our market, we'll be able to pinpoint how accurate Zestimate is whether we're in a certain city, state or county. And if we're looking at on marker off market deals, my name is Ariel Herrera with the analytics area channel where we bridge the gap between real estate and technology. I really think it's imperative to use data driven analyses when it comes to real estate. And if you feel the same, then please subscribe to this channel as well as like this content if you want to see more of it. Alright, let's get started. So here I created a basic dashboard just to look at Zestimate coverage throughout the states. However, let's just take a step back to actually review what is estimate. So if you're ever searching for a property on Zillow, whether it's a property that you look to invest in or property just to own, you'll see that there's usually a value associated with that house. And the Zestimate is a home valuation model to estimate the home's market value, as estimate incorporates public MLS and user submitted data into Zillow proprietary formula, also taking into account home facts, location and market trends. I have personally used Zillow Zestimate. In the past, when trying to gauge how much of the property go for if I'm going to refinance my property, what is the current market value. Now sometimes this could be a little bit inaccurate depending on where you are. So if you look here, Zillow actually provides an accuracy mapping for top metropolitan areas, and they gauge how close they are to the sales price. So for example, say if 123 Main Street is on sale in Atlanta. Once that property actually gets sold. Zillow will pull the last Zestimate that it recorded and see how far away it was from the actual sales price. For example, if Zillow estimated at the property was worth $95,000, and it sold for $100,000, and it would fall within the 5% bandwidth of the sales price. So what this tells us here is for a metropolitan area like Atlanta, when we're looking at active listings, the median error is about 1.7%. And that's looking at 32.4k homes, we could see that almost 87% of properties that are active listings are within 5% of the sales price, which is really good. And if we go down all the way to 20%, we're at 99.2. This makes sense that we would expect Zestimate to be pretty accurate when it comes to active listings. Because there's more property information for active listings. When an agent puts a property for sale, they're entering a lot of detail if it's not already in their MLS system. This includes number of bedrooms, baths, types of roof, types of heating or cooling and more. In some cases, when we look at off market property deals, these could be properties that have not been sold in over 20 3040 years. So the data that Zillow may have that may be pulled from county information or the MLS may be outdated and inaccurate. So as we see when we go over to off market, and we look at that same Metropolitan Atlanta, that the median error is 6.2. About 1.9 million homes as we know most homes are off market and are not being sold. And we look at how often is Zillow, right about it being 5% of the sales price, and it's 42%. So it's not that great, but they are within a good bandwidth and we're looking at 20% of the sales price. So right here, if we were looking at off market deals in Atlanta, I would highly suggest not to use estimate as your only source of evaluating a property's estimate. You should be using several different models, and then maybe do the median across each of them. But we could go even further. So Zillow also provides an Excel spreadsheet to look at this data where they go beyond just metropolitan. In this data. We have four different tabs. We have country, state, MSA and county.

Ariel Herrera 04:36

So let's zoom in a little bit here. And let's imagine that we're looking at areas within Florida. So I'm going to pull up Florida and let's look at off market deals. Let's sort by the highest percentage from this we could see that the county that has that most accurate Zestimate is a clo County in Florida for off market deals. No idea where this is let's look In a map, this comprises the central part of Florida, right under Orlando. Or as I like to call it somewhat of a ghost towns, I've driven through this once before to get to the West Coast. And it was pretty scary. But going back to here, you could also filter on median error and look at your county to see is estimate usually accurate or not? As well, you can go back to MSA and view a specific city, you can also choose here. So what I did was I quickly took the information from the Excel file per state. And I want to see across states, where does the error reside. So in this first part, we're looking at the number of homes. So we have here that Zillow was able to provide estimates for 9.9 million homes in California, which is the most and less so for some other states. Now, if we look at the bottom chart, we could see the median error. When we look at on market properties, the worst is New York, median error of 2.6, which still isn't that bad. But now let's look at off market properties. For New York State. The median error here is 11%, which is pretty high. You may be thinking, okay, great. Well, if I want to rely on Zillow, and I haven't chosen a market yet, maybe I should go for those lighter states. Well, actually, that's data that's missing from their spreadsheet, which is kind of a bummer. I'm not really sure why these are missing. But at least we do have some type of data coverage to understand where their gaps may lie in some other states. As a recap Zillow, Zestimate is not perfect. They do need to rely on information being accurate from an owner or from the MLS. And also sometimes they don't have information like, is it a corner house? Is it next to a large factory? Is it right behind a major highway with a lot of noise and pollution? These are things that do come into play when people are selling a property and what buyers are willing to pay for. So I highly suggest that you should still use estimate if the median error isn't too high within your market. But be mindful to take this into account. Other estimates. I have a lot of videos on pulling data from API's and getting rent as well as property estimates. So feel free to check that out when you're doing your analysis. And please leave comments below on what your favorite automation value model is in real estate. Thanks so much and please subscribe