Sunday, August 17, 2014

How soft is housing?



Situation:     Below is a table with information on asking price and the Zillow estimate for houses in an expensive neighborhood.



Houses for sale price >$800
 in ($ 000)
Zillow
estimate
Asking
Price
Difference
1
724
825
101
2
795
835
40
3
739
845
106
4
989
850
-139
5
860
860
0
6
853
875
22
7
794
880
86
8
763
890
127
9
511
890
379
10
763
934
171
11
762
950
188
12
867
980
113
13
1050
1075
25
14
1100
1010
-90
15
936
1100
164
16
944
1149
205
17
936
1100
164
18
944
1149
205
Table generated from the Zillow web site on 8-16-14.



What is the median, mean, standard deviation, min, max 25th percentile, and 75th percentile of Zillow, asking price and the asking price – Zillow for the 18 houses for sale in this neighborhood?

What additional information might be useful?  


What can be reasonably inferred from this chart?


Descriptive Statistics: 


Descriptive Statistics for Zillow, Asking Price and
Differential in High-end Real Estate Market
Zillow Estimate
Asking Price
Zillow - Asking Price
Median
$857
$912
$110
Average
$852
$955
$104
Skew
-0.423
0.612
0.012
Min
$511
$825
-$139
Max
$1,100
$1,149
$379
25th percentile
$763
$864
$29
75th percentile
$942
$1,059
$169


Note that for 15 of the 18 house sales in this high-end market the asking price was more than Zillow.

In many cases the Zillow-Asking Price was non trivial.   The median differential was $110,000

What does this mean?   The Zillow Corporation takes great measures to explain that there are many reasons why the actual price of the home could differ from their estimate.  However, systematic differences could indicate either that Z-estimates respond slowly to changing market conditions or that market expectations are off.

In order to better understand the meaning of the Zillow asking price spread it would be useful to have information on actual house sale prices, Zillow and the asking price.

Below is such information for 14 house sales in the same high-end market.




Houses Sold in Last 90 Days in the Same High-End Market
Zillow
Price
Lisiting
Actual Price-Zillow
Listing Price-Zillow
1
855
825
875
-30
20
2
763
840
850
77
87
3
849
880
870
31
21
4
922
885
929
-37
7
5
940
900
NA
-40
NA
6
900
920
945
20
45
7
945
1000
980
55
35
8
950
1000
1000
50
50
9
972
1020
1000
48
28
10
1190
1117
1250
-73
60
11
1290
1200
1295
-90
5
12
1250
1220
1220
-30
-30
13
1800
1680
1695
-120
-105
14
1760
1790
1820
30
60




Observations:

In at least 11 of the 14 houses listing price was above Zillow.



Two Spreads at the Median
Actual Price
-Zillow
Listing Price
-Zillow
Median
-5
28


The median of the listing price Zillow price for the houses that actually sold was $28,000.   This differential is non trivial.  It is however, a lot smaller than the differential for the sample of houses on the market.  This difference is because some houses on the market with large listing/Zillow differentials do not sell.


The actual price-Zillow differential for the houses that sold is reasonably small.   This probably occurs because Zillow can incorporate information about the sale price in its Z estimates.


Concluding Remarks:  The market that I look at in this post has one of the strongest economies (lowest unemployment rates) in the United States.  Realtors in this market claim that inventory is low and that it is a great time to sell and that buyers should be aggressive.

The truth is that even in this high-end market with low unemployment the housing market is slack.

People who want to down size are having a very hard time selling.

Many real estate pros have access to a lot of data on different markets segmented by price or house size.   It took me hours to put together theses simple charts. 

The ordinary guys are outmanned. 

My take.  

Housing is still a buyers market.

In most cases, we are five years from getting back to 2006 nominal numbers.  People may not want to down size now especially if their high-end market is softer than the market for smaller homes.

It is not a terrible time to bid for a house but don’t overbid.   See results above.


#Zillow
#Housing
#House Prices


http://dailymathproblem.blogspot.com/2014/08/is-prius-economical-choice.html







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