Zillow is predicting home prices to drop in some towns (real estate, refinance)

[d_vader123]

So I'm looking for a home and have been using Zillow. Their website provides Zestimates and even tries to predict the value of homes over the next several years.

Their estimates have been a source of some controversy because buyers use it as a starting point of negotiations and it becomes problematic when the starting price is way off from that estimate.

However, I'm here to ask about the validity of Zillow's prediction of home value over the next several years. How much do you think we should trust these predictions? Why are they predicting homes values to go down?

[GiantRutgersfan]

Zestimates should not get much attention. The estimate is generated by a computer algorithm based on comparable properties (area, sq ft, etc).

There are several reasons for a potential decrease in home values.

- interest rates will rise from the current historic lows
- Demographic changes (baby boomers downsizing/retiring)
- Student loans
- Poor economy 07-13

Generally speaking, I expect values to be more or less flat for the next few years. In an environment where values are growing 0-3% a year, there will inevitably be some towns that see some modest declines.

[jaymoney]

They say the value of my home has dropped by about 10% when we've put that amount of money into it since moving in.

So I would not take their word on anything.

[sjinnj]

Zillow is worthless.

[vision33r]

My neighbor has a really nice remodeled home and is worth less than mine and mine is worth less than another neighbor down the block with a smaller home.

Bottomline, Zillow is crap.

[d_vader123]

haha...ok. I get the point.

[jaymoney]

I'd like to see the predictions they had for 2009...

[stradivarius]

Originally Posted by d_vader123

Their estimates have been a source of some controversy because buyers use it as a starting point of negotiations and it becomes problematic when the starting price is way off from that estimate.

This is exactly why buyers and sellers alike need to be represented by real estate agents who will, from the very beginning of the process, make sure that their clients are well-informed about the true market conditions.

[rickrobinsonhomes]

I agree with stradivarius, everyone needs to be represented by a real estate agent to protect their interests and answer any questions they have along the way.

[ansky]

From what I've seen Zillow seems to greatly undervalue homes. I did a refinance last year so the bank pulled several valuations on my home. The Zillow estimate of my home was as much as $50k below some of those valuations.