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Posts Tagged ‘Zillow’

Bloomberg View Column: The Myth of Real Estate Stigma

August 31, 2014 | 4:52 pm | BloombergViewlogoGray | Charts |

BVlogo I gave some thought to what the long term impact of a nationally-covered local tumultuous event on a local housing market might be…

The Aug. 9th shooting death of unarmed black teenager Michael Brown by a white police officer has roiled Ferguson, Missouri, thrusting it into the national spotlight. But what happens to the town of 21,000 outside of St. Louis after the turmoil ends — more specifically, what happens to property values?

Read my latest Bloomberg View column
The Myth of Real Estate Stigma. Please join the conversation over at Bloomberg View.


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My First Post on Bloomberg View: Homebuying Gets a Housecleaning

July 28, 2014 | 9:28 pm | BloombergViewlogoGray | Charts |

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I was recently approached by Bloomberg View, the editorial arm of Bloomberg LP, to provide commentary on the housing market. I seem to be in good company.

Although their well oiled machine began to append my additional title “Bloomberg Contributor” earlier in the month when being sourced, it wasn’t an oversight on their part. I didn’t submit my first post until last week. It took me a few weeks to get my groove on as I was in the midst of a 2Q14 market report release gauntlet.

Last Wednesday evening I wrote my first post about Lawrence Yun’s attendance at the Zillow Housing Forum and how NAR had become just one of the crowd, and the symbolism of it all. I got the idea when I was sent the Zillow e-vite to attend the conference and I noticed that Yun was to speak.

Excited, I submitted my first post on Thursday morning, unfortunately just before the Zillow-Trulia bombshell deal jumped into the headlines. So I needed to add this new twist – which thankfully made my original point even stronger. I re-wrote my first post and it was placed online last Friday.

Here is the first column of hopefully many to come: Homebuying Gets a Housecleaning


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Zillow is Forecasting Future Property Values

May 14, 2014 | 10:42 am |

zillow-logo

“I may be cool, but you can’t change the future” -Beavis & Butthead.

Zillow has recently re-announced it is forecasting the value of each property out over the next year. It’s not a new tool for them, at least conceptually since the “What is a Zestimate Forecast?” page was last updated on October 3, 2012.

In a world with Big Data, it’s clearly inevitable to see an expansion of the capabilities of services from firms like Zillow and Trulia as their data set grows. Zillow’s Zestimate was a key web site feature at their launch (no listings!), but the company lit the real estate housing market industry on fire, establishing Zillow as a powerful brand that was here to stay, even if the Zestimate tool was problematic.

The challenges facing the Zillow Forecast tool

The Zestimates are still dependent on the quality of public record
Many markets (ie NYC), have quality-challenged public record. But as time passes, Zillow’s data set gets bigger and their logarithms get better and I have not doubt that the reliability will continue to improve.

If the Zestimate is wrong, the forecast will be wrong
Take a look at this chart on the highest price closed sale in Manhattan:

15cpwzestimatechart

This is perhaps Manhattan’s most famous “trophy” sale of the past several years, 15 Central Park West. The property sold for $88M but the Zestimate at the time of sale indicated the value was $72M. However today the value is $11.9M and the forecast estimated an 8.6% increase next year to $12.9M.

15cpwlandingpage

The Zestimate Forecast projects the current Zestimate out over the next year using a bunch of indicators

Zillow uses:
-mortgage interest rate (local, but not much different than national)
-property tax rate(local)
-construction costs(local)
-number of vacant homes(assumed local)
-percentage of loans that are subprime(assumed local)
-percentage of delinquent loans (assumed local)
-supply of homes for sale (local)
-change in household income (somewhat local, huge lag time)
-population growth (somewhat local, huge lag time)
-unemployment rate (somewhat local, lag time)

I feel that most of these indicators, when considered as a group, are important to consider won’t capture the nuance of next year’s view because they either lag or aren’t granular enough to be a key influence on value trends over a short period. I would think Zillow would add search patterns and other “Internety” things to leverage their proprietary data to help with accuracy. I’d also consider “new inventory”, not just total inventory (supply) to help catch the nuances of a tight time frame of forecasting.

The key national factor driving nearly all housing markets now – credit – is really hard to quantify.

Still, forecasts are the future (sorry) and kudos to Zillow for taking the first step, even though the results, like the early days of the Zestimate, are probably not very accurate.

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With Mortgage Lending Historically Tight, Renters Suffer Just As Much

April 15, 2014 | 4:19 pm | nytlogo |

nytrentafford4-14

There was a good article in the New York Times yesterday: In Many Cities, Rent Is Rising Out of Reach of Middle Class

Many have complained about the Federal Government’s (and our society’s) overselling of homeownership over the past decade and how the decline in homeownership will eventually lead to an emphasis on rentals in the US. Of course, like many housing market ideas, good and bad, they tend to be presented in a vacuum, without real context.

I believe much of this discourse is in reaction to tight credit combined with a weak economy rather than some sort of fundamental cultural and economic shift. During the bubble we got the opposite discourse – that there was a fundamental cultural and economic shift towards homeownership.

Currently there is a much smaller subset of Americans that have access to financing. According to the Federal Reserve Senior Loan Officer Survey, lending has actually tightened in 2014 over 2013 (related to QM). Many homeowners are unable to sell because they can no longer buy and many renters no longer qualify for financing so the idea of of homeownership as a goal fades.

Case in point has been the recent public discourse on the issue of home affordability, whether it be sales or rentals. Zillow presented an analysis for the New York Times that illustrates how much rents have risen in the past 13 years (since 2000) in cities across the US.

Here’s the scenario:

The economy is weak – we are seeing tepid growth in employment, stagnant incomes and historically tight residential mortgage lending.

  • Approximately 38% of homeowners can’t buy their next home so they won’t list their home for sale.
  • Buyers without credit issues won’t list their homes until they can find something to buy.
  • The lack of supply presses prices higher because those who have access to credit have little inventory to choose from, driving up prices.
  • Renters looking to buy can’t find a home they want to purchase so they are kept in the rental market.
  • Renters looking to buy don’t qualify for a mortgage so they stay in the rental market.

The organic flow out of the rental market into the sales market is slowed and a log jam is created of too many renters and not enough buyers.

Rising rents against stagnant incomes creates an affordability crisis. The sales and rental markets are connected. They are not mutually exclusive.

Rising rents are a product of tight credit, which is a residual byproduct of the financial crisis. Fix the economy and credit eases, then lending normalizes (no, not circa ’06) and the pressure on rental housing is eased.

ASIDE I’m not entirely confident with the reliability of the historical rental data being presented to the New York Times by Zillow – but I still agree that affordability is being pressured:
- Zillow was launched circa 2006 and rents are not public record so the early data has to be super thin.
- The comparison was made between a first quarter (low) and a third quarter (high) in a highly seasonal market.
- I am not sure if “New York” means Manhattan or New York City. If it is Manhattan, then our median rent figure in 1Q 2000 was $2,600 in nominal terms, and $4,276 in real terms. In nominal (unadjusted for inflation) terms, rents have risen 23.1% through 3Q 2013 while real median rent has fallen 27.3%. The Zillow median rent as share of median income nearly doubled, rising from 23.7% to 39.5%. Either incomes have collapsed in NYC or the 2000 rental figure being punched into their model is flawed, ie way low, no?

Other inights on any of this would be appreciated.

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Zillow Acquires StreetEasy, Goes Vertical, Literally

August 19, 2013 | 10:41 am | bloomberg_news_logo |

I was reading my twitter feed and it just jumped out at me: Zillow announced their acquisition of StreetEasy for $50M in cash. I also heard it simultaneously on the show Bloomberg Surveillance. Their CEO Spencer Rascoff will be on the show tomorrow morning to talk about the acquisition.

While there will be lots of prognosticating about Zillow‘s entrance into the NYC housing market through a heavily used resource like StreetEasy (Zillow was here already, just not taken very seriously).

I think there’s a bigger story for Zillow. If Zillow leverages the StreetEasy data presentation model, Zillow will be shaking up the housing market real estate information space across the US.

Think highrise urban housing markets – I call them “vertical” markets (not to be confused with “vertical” in marketing parlance).

• All national data aggregators and brokerage companies haven’t yet figured out vertical housing markets yet in terms of their presentation of information.
• MLS systems remain firmly single family orientated and have yet to present data in highrise markets in a visually logical way – ie co-ops and condos. Symbolic of the general primitiveness of MLS systems in handling multi-unit housing, one MLS system in the NYC metro area still tags “co-ops” as “condos.”

Kudos to Streeteasy for shaking up the market from day one. When they launched, StreetEasy became the housing data resource of choice for most in NYC. I met most of the team a while back and I was impressed with how a small group of people could really shake things up in a huge market. While presenting clean data in a very dirty data environment continues to be a challenge, I think their greatest contribution to the housing market has been how they displayed their information – in a way that consumers screamed for.

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Talking Case Shiller on Bloomberg TV’s ‘Street Smart” with Betty Liu/Adam Johnson

May 29, 2013 | 11:57 am | bloomberg_news_logo | Public |

Yesterday’s release of the Case Shiller Index prompted a flurry of coverage given the 20-cities’ highest YoY increase in 7-years. I did a three way split interview from a remote location in CT (see studio set up below). I was a guest along with Vincent Reinhart, chief US economist at Morgan Stanley and Stan Humphries, chief economist at Zillow Inc. Betty Liu and Adam Johnson kept the conversation going.

I especially liked Stan’s modification of the Case Shiller Index results which excluded foreclosures and his research on low and negative equity (my explanation for low inventory right now). The drop in foreclosure activity over the past year caused significant skew to the mix. According to Stan the index would show roughly a 5% increase YoY rather than an 10.9% increase. A huge difference and yet another reason why this index does more harm than good to our understanding of the housing market.

Vincent’s observation that seasonality is considered in Case Shiller is basically wrong – not technically wrong because the data is seasonally adjusted. However the methodology of a repeat sales index washes out seasonality. If you look at the Case Shiller chart, there hasn’t been “seasons” in housing since 1987. That’s simply not true. The Case Shiller Index does not reflect annual housing cycles.

Since Case Shiller Index lags the signing of contracts by 5-7 months, expect to see much higher YoY results this summer.

How the sausage is made

Bloomberg TV is always great to work with – they arranged for me to use a remote studio in CT through a third party. Here is what the studio looks like. Amazingly primitive but it works!

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Low Housing Inventory Is NOT A Sign of Housing Recovery

July 9, 2012 | 10:49 am | wsjlogo |

I wrote “The Decline In Inventory Right Now is NOT a Good Sign” back in February, but there has been a more refined discussion about low inventory recently. Back then my orientation was more about the “robo-signing” scandal causing a drop in distressed listings as servicers held back supply – as well as the lack of confidence by sellers over whether they can achieve their price.

Stan Humphries, chief economist of Zillow has been a guest on my podcast and penned a great piece about it a few weeks ago called “The Connection Between Negative Equity, Inventory Shortage and Increasing Home Values: Why the Bottom Won’t Be as Boring as We Expected” tackling the impact of negative equity on inventory.

CoreLogic reported (via Nick Timiraos/WSJ) that the supply of homes for sale declines as negative equity increases.

David Rosenberg, chief economist as Gluskin-Sheff, and whom I had the pleasure of meeting with for dinner a few months ago, presented a great series of charts in his newsletter (via ZeroHedge).

It basically presents the idea that “upside-downers” ie those with negative equity, can’t list their homes for sale because they don’t have equity (or enough equity) for the next one.

Here’s the most compelling excerpt:

According to data cited by the USA Today, the supply backlog where over half of homeowners are “upside down” on their mortgage is at 4.7 months’; in areas where “upside down” borrowers make up less than 10% of the market, the listed inventory is closer to 8.3 months’ supply.

In other words, in markets with unusually tight inventory, prices are being “goosed” higher, not because the housing market is improving, but because there are fewer houses in the game. Low mortgage rates are artificially creating excess demand, with those buyers fighting over the slim pickings of sellers who can actually sell.

That, my friends, is NOT a housing recovery.

More visuals:



The Decline In Inventory Right Now is NOT a Good Sign [Matrix]
David Rosenberg Explains The Housing “Recovery” [Zero Hedge]
The Connection Between Negative Equity, Inventory Shortage and Increasing Home Values: Why the Bottom Won’t Be as Boring as We Expected [Zillow Real Estate Research]
Why Aren’t There More Homes for Sale? [WSJ Developments Blog/Nick Timiraos]

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[Interview] Stan Humphries, Chief Economist, Zillow.com

December 15, 2010 | 2:00 pm | inmanlogo | Podcasts |

Read More

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[ChartFloor] Manhattan Price Per Floor Breakdown

June 9, 2010 | 6:18 pm | trdlogo | Favorites |

trdfloorlevel

Floor pricing has been the stumbling block for credibility with automated valuation models (appraisal replacement tools) used by banks and for services like Zillow. StreetEasy gets it right, in the way they display information – grouped by building so the patterns are apparent.

Matthew Strozier over at The Real Deal Magazine asked me to crunch apartment prices to show some sort of floor level relationship to value. I took the down and dirty approach (because SPSS is way over my head) and looked at all closed co-op and condo sales in 2009. I broke those sales down by floor level and crunched the metrics for each floor. The results are seen in this very cool chart. Click on the graphic to the right that TRD created to open the big version.

  • First Column – % share of units on that floor compared to all sales in 2009
  • Second Column – floor level
  • Third Column – Average Price per Square Foot of all sales in 2009 on that specific floor.

Some observations

  • 1st floor – 19.3% jump to second floor reflecting concerns about security, privacy and noise levels.
  • 2nd floor – 11.4% jump to third floor reflecting concerns about security (scaffolding), privacy and noise levels.
  • 7th floor – jump reflects penthouse and roof line breaks from adjacent 6 story buildings.
  • 13th floor – data suggests only 18.4% of buildings with a 13th floor actually call it that.
  • above 13th floor – market share declines with height, reflecting fewer apartments and the floor level price per square foot continues to rise.

In addition, the erratic price per square foot patterns on the higher floors reflect the differences in views. In our appraisals were make adjustments for floor level and view separately.

I ended the presentation at the 25th floor only because the data set gets so thin that it was more difficult to extract or infer a pattern.

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Appraisal Journal Study Cites Flaws In Zillow AVM

March 3, 2010 | 2:38 pm |

[click to open report]

Zillow has been one of the most visible and talked about AVMs (Automated Valuation Models) in the US and enjoyed considerable press during the housing boom. Of course they have always been at the mercy of the quality of public record data despite their technology prowess.

Perhaps they were more guilty of overhyping the reliability of their “Zestimates” in the early days by presenting value estimates precisely down to the dollar. But hey, it was cool to see how much your neighbor’s house was worth.

There was an interesting article in Valuation Review (subscription) and HousingWire.

The study concludes that:

Zestimates on Zillow.com are no more accurate than homeowner’s estimates.

When it comes to using the Zillow.com automated valuation model (AVM) to get a free listing price on a house, users may be getting what they paid for, according to a report published by the Appraisal Institute that finds the Web site overestimates the values on homes almost as often as the actual homeowners.

Zillow has become the real estate punching bag to the real estate community. And once again, they are on the defensive in the media coverage of this report.

Here’s the issue:

The key issue regarding Zillow’s Zestimates is whether they reflect transaction prices. Zillow has been described both as “a useful site” and as “categorically wrong.” There have been many instances of praise and many instances of complaints by homeowners using the Web site to estimate the value of their homes. Realtors in general have also been critical of the values produced by Zillow.

Agents had issues with over valuation because they tended to set seller’s expectations too high. Of course, appraisers have an ax to grind with a service that was perceived to trivialize their expertise in valuation.

The report, “Zillow’s Estimates of Single-Family Housing Values,” was authored by Daniel Hollas, Ronald Rutherford and Thomas Thomson, doctors in economics, real estate and business, respectively. The report was published in the quarterly technical and academic publication of the Appraisal Institute, the nation’s largest association of real estate appraisers.

View the report.

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