38 thoughts on “CNBC Video on Zillow’s 1st Quarter Report”
If, as Spencer suggests, there is potential pent up demand for sellers who have been on the sidelines waiting for more favorable selling conditions, I’m not sure how that may translate into higher prices as Diana mentioned.
Seems to me if we see more inventory come on the market competing for borrowers that have jobs and have a down payments(even as low as FHA’s 3%) that buyer demand would have to far out pace homes coming to market for prices to start rising again.
This was a good analysis of what is going in the real estate market. I think Erin Burnett and Mark Haines are a little clueless regarding the reality of the situation for most people.
What concerns me most, and what may stymie recovery is the low appraisals that have been coming in.. in our market we are seeing appraisals coming in 20% below the county assessed valuation. In order to stop the decline, we are going to need a lot of cash buyers to soak up some of the inventory and establish new market prices.
Right now, sellers are setting prices too high. If the sellers are lucky enough to find a buyer who is will to paying their price, it better be an all cash deal because it is doubtful that a lender’s appraiser will find enough comparable sales to support the contract sales price.
It is a vicious cycle and I’m not sure that we will see a correction until a majority of distressed properties are out of the market place.
Amazing how the CNBC pundits are still utterly clueless, and would rather argue with the numbers than accept them!
If all that’s selling are foreclosures and short sales, then that is the market! “Normal” sellers can live in fantasyland, or lower their prices to match the foreclosures and short sales.
If I were a buyer today, I’d walk right past the delusional “normal” sellers and deal with the banks, who’re eager to unload great homes at whatever prices they can get.
I would be interested to see a more detailed breakdown of this report. I would also like to see more details on how the zestimates are run, I do not quite understand the methodology yet. Useful iPhone app they have though, pretty easy to get price estimates.
Had no appraisal problems with any of my last 4 closings. Though only one bothered to stretch it up well past sold price. All were under 2009 assessed values, but equal to or more than the sold price. One was 20% more than the sold price (bank-owned property).
I’ve seen one stretch to include at least one distressed sale, as the data for recent close comps didn’t have any. I’ll check a couple of areas in response to sampai’s comment.
As for the video, and I’ve experienced 1st hand the same, I am always amazed when people in the news media ask and answer from a personal perspective. You would think lacking research into the topic at hand, they would believe the results. But they simply say “I don’t believe it” without back that statement up with any facts they researched. No wonder the “news” media is in trouble.
I remember one local news person calling me to talk about commissions and the only info she had was what she personally paid when she bought and sold a home. Is there no obligation to research the topic before having a segment on that topic?
If you click on the link in the text of this post there are excel spreadsheets for the detail by City. The 1st Quarter Report details are available there.
As for the algorithm for the Zestimate, I think that’s like asking for my grandmother’s lasagna recipe. Some things are proprietary. You can get a general answer, but we’re always going to leave out a few ingredients so you can’t copy it exactly 🙂 I wouldn’t expect Zillow to make public the exact algorithm, so that other sites could duplicate their efforts.
sampai said:”If all that’s selling are foreclosures and short sales, then that is the market!”
But that is a big “if”. I’m going to run some numbers and do a new post on that, rather than try to answer it here. As someone said in the video, foreclosures may be concentrated in a certain area or price range. If they are concentrated in a certain area, do they drag down an area with no short sales or foreclosures?
I think financing issues are pulling the market in many places moreso than short sales and foreclosures…those financing issues lead to short sales and foreclosures, so it becomes a which came first, the chicken or the egg, question.
I just saw a property assessed at $1.4M + sold at $900,000. The buyer had a conforming 1st of $417,000 and a $300,000 plus second to finance the purchase. The seller bought it in the early nineties for much less than the sold price, so it wasn’t a short sale or pre-foreclosure.
The nearby comps were not the problem, the problem was a buyer’s willingness or ability to get a loan for more than $720,000 with 20% down.
I think that caps out at $900,000, maybe… Could be urban legend that there is money available up to $900,000 with 20% down or even 15% down. Will do some research to see if I see any evidence confirming that.
I’ll have to tie in the solds in the County records, as I think much of the confusion is that the mls no longer contains a majority of the solds, in some areas.
Question for you sampai (or anyone) with a real example.
One of my clients bought a property for just over $250,000 at the foreclosure. I resold it recently for just over $300,000. If I count them as two sales, the sale price would averaGE AT $275,000, BUT it’s the same house. So my logic says the foreclosure sale doesn’t count and the comp is only the resale on open market of $300,000+
The foreclosure is not “the market” if the buyer at the foreclosure is an investor who resells it vs. an owner occupant. And many, if not most foreclosures, are bought by investors who turn around and sell them at higher prices in short order. So foreclosure price may not influence market price in any way.
It really depends how much the 2nd sale of a foreclosure, or after sale of a flip, was “like kind” product.
Many if not most of the flips from 2002 to 2008 offered dramatic difference in “the product”. New kitchen, new roof, and other major improvements. So 1st sale as a “fixer upper” was a comp for a fixer upper and 2nd sale was a comp for a different type of property, depending on how good the renovations were.
An investor buying and reselling a foreclosure with only modest changes, like improving neglected maintenance items, is more “like kind”. So the first comp, the foreclosure price, would normally be negated in it’s entirety, other than being a comp for someone buying at foreclosure vs. open market conditions.
It’s pretty easy to tell by looking at the pictures of the home in the mls before the foreclosure, and after the foreclosure. Most often the owner did try to sell it before it went to foreclosure, so you can compare the improvements, if any.
The one I mentioned was built in 2005, so the improvements after foreclosure purchase were not “dramatic” from a value standpoint, since everything was already “newer” and not replaced…only “fixed” and some paint.
I just did some stats in Redmond on recent sales and only 5% were bank owned, none were short sales.
I think the woman is right, that the market is not reflecting short sales and bank owned sold prices as current “market value” unless they are in an area that actually has them.
An area without them is running at down 11% YOY. Areas that have them are done much more than that.
Here is a a far more entertaining video showing the REAL state of housing in America. I assure everyone we are no where near a bottom and the perceived bottom will be very long and drawn out over many years.
They bull dozing new homes where you work are they, David? Is that reality where you sell real estate? If so, that’s big news. Please send us some photos and we’ll be happy to print “your reality”.
Re. foreclosures and short sales, I think that in places like California, Nevada, Arizona, and Florida – where more than 25% of Americans live – foreclosures and short sales are the comps. In the rest of the country, maybe not.
However, why would a savvy buyer buy a “normal” property at a huge premium when it’s possible to buy an REO or short sale at a lower price? Even if REOs and short sales constitute only 5-10% of the available inventory, buying a “normal” sale is downright irresponsible.
I also agree that financing is a huge concern. Both because of the issues around getting a loan in general (and jumbo loans in particular) and because appraisers may create a vicious cycle of dropping prices, just like they helped hike prices during the bubble years.
If, as Spencer suggests, there is potential pent up demand for sellers who have been on the sidelines waiting for more favorable selling conditions, I’m not sure how that may translate into higher prices as Diana mentioned.
Seems to me if we see more inventory come on the market competing for borrowers that have jobs and have a down payments(even as low as FHA’s 3%) that buyer demand would have to far out pace homes coming to market for prices to start rising again.
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This was a good analysis of what is going in the real estate market. I think Erin Burnett and Mark Haines are a little clueless regarding the reality of the situation for most people.
What concerns me most, and what may stymie recovery is the low appraisals that have been coming in.. in our market we are seeing appraisals coming in 20% below the county assessed valuation. In order to stop the decline, we are going to need a lot of cash buyers to soak up some of the inventory and establish new market prices.
Right now, sellers are setting prices too high. If the sellers are lucky enough to find a buyer who is will to paying their price, it better be an all cash deal because it is doubtful that a lender’s appraiser will find enough comparable sales to support the contract sales price.
It is a vicious cycle and I’m not sure that we will see a correction until a majority of distressed properties are out of the market place.
Amazing how the CNBC pundits are still utterly clueless, and would rather argue with the numbers than accept them!
If all that’s selling are foreclosures and short sales, then that is the market! “Normal” sellers can live in fantasyland, or lower their prices to match the foreclosures and short sales.
If I were a buyer today, I’d walk right past the delusional “normal” sellers and deal with the banks, who’re eager to unload great homes at whatever prices they can get.
I would be interested to see a more detailed breakdown of this report. I would also like to see more details on how the zestimates are run, I do not quite understand the methodology yet. Useful iPhone app they have though, pretty easy to get price estimates.
Cathy,
Had no appraisal problems with any of my last 4 closings. Though only one bothered to stretch it up well past sold price. All were under 2009 assessed values, but equal to or more than the sold price. One was 20% more than the sold price (bank-owned property).
I’ve seen one stretch to include at least one distressed sale, as the data for recent close comps didn’t have any. I’ll check a couple of areas in response to sampai’s comment.
As for the video, and I’ve experienced 1st hand the same, I am always amazed when people in the news media ask and answer from a personal perspective. You would think lacking research into the topic at hand, they would believe the results. But they simply say “I don’t believe it” without back that statement up with any facts they researched. No wonder the “news” media is in trouble.
I remember one local news person calling me to talk about commissions and the only info she had was what she personally paid when she bought and sold a home. Is there no obligation to research the topic before having a segment on that topic?
Portland Real Estate,
If you click on the link in the text of this post there are excel spreadsheets for the detail by City. The 1st Quarter Report details are available there.
As for the algorithm for the Zestimate, I think that’s like asking for my grandmother’s lasagna recipe. Some things are proprietary. You can get a general answer, but we’re always going to leave out a few ingredients so you can’t copy it exactly 🙂 I wouldn’t expect Zillow to make public the exact algorithm, so that other sites could duplicate their efforts.
sampai said:”If all that’s selling are foreclosures and short sales, then that is the market!”
But that is a big “if”. I’m going to run some numbers and do a new post on that, rather than try to answer it here. As someone said in the video, foreclosures may be concentrated in a certain area or price range. If they are concentrated in a certain area, do they drag down an area with no short sales or foreclosures?
I think financing issues are pulling the market in many places moreso than short sales and foreclosures…those financing issues lead to short sales and foreclosures, so it becomes a which came first, the chicken or the egg, question.
I just saw a property assessed at $1.4M + sold at $900,000. The buyer had a conforming 1st of $417,000 and a $300,000 plus second to finance the purchase. The seller bought it in the early nineties for much less than the sold price, so it wasn’t a short sale or pre-foreclosure.
The nearby comps were not the problem, the problem was a buyer’s willingness or ability to get a loan for more than $720,000 with 20% down.
I think that caps out at $900,000, maybe… Could be urban legend that there is money available up to $900,000 with 20% down or even 15% down. Will do some research to see if I see any evidence confirming that.
I’ll have to tie in the solds in the County records, as I think much of the confusion is that the mls no longer contains a majority of the solds, in some areas.
Question for you sampai (or anyone) with a real example.
One of my clients bought a property for just over $250,000 at the foreclosure. I resold it recently for just over $300,000. If I count them as two sales, the sale price would averaGE AT $275,000, BUT it’s the same house. So my logic says the foreclosure sale doesn’t count and the comp is only the resale on open market of $300,000+
The foreclosure is not “the market” if the buyer at the foreclosure is an investor who resells it vs. an owner occupant. And many, if not most foreclosures, are bought by investors who turn around and sell them at higher prices in short order. So foreclosure price may not influence market price in any way.
Ardell – I think the appraiser would use your second sale as the comparable property if the home was listed and tested on the open market.
I agree, Cathy.
That negates or at least dilutes sampai’s contention that short sales and foreclosures”are the market”.
Ardell –
So does that mean all of those properties flipped from 2002-2008 were not “the market” either?
b,
It really depends how much the 2nd sale of a foreclosure, or after sale of a flip, was “like kind” product.
Many if not most of the flips from 2002 to 2008 offered dramatic difference in “the product”. New kitchen, new roof, and other major improvements. So 1st sale as a “fixer upper” was a comp for a fixer upper and 2nd sale was a comp for a different type of property, depending on how good the renovations were.
An investor buying and reselling a foreclosure with only modest changes, like improving neglected maintenance items, is more “like kind”. So the first comp, the foreclosure price, would normally be negated in it’s entirety, other than being a comp for someone buying at foreclosure vs. open market conditions.
It’s pretty easy to tell by looking at the pictures of the home in the mls before the foreclosure, and after the foreclosure. Most often the owner did try to sell it before it went to foreclosure, so you can compare the improvements, if any.
The one I mentioned was built in 2005, so the improvements after foreclosure purchase were not “dramatic” from a value standpoint, since everything was already “newer” and not replaced…only “fixed” and some paint.
sampai,
I just did some stats in Redmond on recent sales and only 5% were bank owned, none were short sales.
I think the woman is right, that the market is not reflecting short sales and bank owned sold prices as current “market value” unless they are in an area that actually has them.
An area without them is running at down 11% YOY. Areas that have them are done much more than that.
Here is a a far more entertaining video showing the REAL state of housing in America. I assure everyone we are no where near a bottom and the perceived bottom will be very long and drawn out over many years.
http://www.cnbc.com/id/30580830
Thank you Ray for the dose of reality.
They bull dozing new homes where you work are they, David? Is that reality where you sell real estate? If so, that’s big news. Please send us some photos and we’ll be happy to print “your reality”.
Re. foreclosures and short sales, I think that in places like California, Nevada, Arizona, and Florida – where more than 25% of Americans live – foreclosures and short sales are the comps. In the rest of the country, maybe not.
However, why would a savvy buyer buy a “normal” property at a huge premium when it’s possible to buy an REO or short sale at a lower price? Even if REOs and short sales constitute only 5-10% of the available inventory, buying a “normal” sale is downright irresponsible.
I also agree that financing is a huge concern. Both because of the issues around getting a loan in general (and jumbo loans in particular) and because appraisers may create a vicious cycle of dropping prices, just like they helped hike prices during the bubble years.