Zillow’s Zestimate Forecast: A Cracked Crystal Ball

Real estate aggregator Zillow – the “Z” is short for “zany,” as in “a whole load of hooey” – has temporarily taken a break from stuffing the internet with inaccurate and potentially harmful home information to try something new. Ever wonder what happened to Miss Cleo, the queen of the late-night, pay-per-minute astral plane? Turns out that she may or may not have loaned her crystal ball to the Zillow team, because they are now claiming that they can predict the future value of your home.

For late-night tomfoolery, there’s tarot cards and palmistry. For everything else – well, at least for real estate – there’s Zillow. (Photo credit: Creative CommonsAnthony Easton)

Zillow utilizes a number of factors in creating these projections. From their site:

The Zestimate forecast is based on a statistical model using a variety of economic data as well as information on the individual characteristics of each home. The model takes into account economic and housing data that will have an impact on future home values in a region, as well as specific factors that might impact an individual home.

Just imagine the possibilities! Investors would have a tool to aid them in targeting properties with more potential, and nervous buyers could rest assured that their choice of neighborhood was a solid one. This could change real estate as we know it!

…except, yeah. Refer back to the beginning of this post, and the fact that ZILLOW IS FULL OF IT.

All ball-busting aside, the reason that the Zestimate Forecast is a load of crap is rooted in the Original Flavor Zestimate’s inherent flaws. While any computer algorithm can do all sorts of clever things with public records, comp sales records, and projections based on mortgage rates, it takes human eyes and ears to go inside a home and assess its condition. A home’s interior literally makes or breaks any valuation, and with the Zestimate being based on vastly incomplete (and/or outdated, and/or inaccurate) information, the Forecast truly isn’t worth a wooden nickel.

Investors and consumers alike would do well to put little faith in the Zestimate forecast. At best, this tool is misleading and unhelpful. At the worst, it could actually prove detrimental, as inaccurate forecasts could lead to buyers making uninformed home purchases, or overlooking better options. Psychic hotlines may be fleetingly entertaining, but the buying and selling of homes is too big a deal to be left to speculation.