Newspaper headlines earlier this week reported a dramatic 19 percent decline in housing prices based on the Case-Shiller index of real-estate prices.
Stan Humphries, writing on the Zillow blog, notes that Zillow’s price index didn’t fall as much as Case-Shiller.
The difference is that Zillow’s index does not include foreclosures, but Case-Shiller does. Humphries notes that a staggering percentage of the transactions being recorded are foreclosures. In Las Vegas, 79 percent of the observations going into the Case-Shiller index are foreclosures. In Phoenix it is 68 percent. In contrast, only 11 percent of Boston transactions are foreclosures.
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And so what if they include foreclosures? Are these not real estate transactions which Americans are all free to be involved in? No?
According to Zillow, distressed properties sell for less than non-distressed properties. Excuse me while I say, “Duh”.
When a home slips into foreclosure does is stop being a house? According to Zillow it does.
I don’t know if the Case-Shiller system factors in condition of the house or just neighborhood / sq. footage,etc. I purchased a house recently and looked at foreclosures as well as homes owned by the seller. The foreclosures were dumps. They either tore them up before they left, or they manager their money as well as they take care of their home.
I really don’t care as much about what houses in my neighborhood sell for, but how much my house is worth. I realize the two TYPICALLY go hand in hand, but with the market weighted towards foreclosures I could see how the numbers would be skewed.
Even still, Zillow can be wildly wrong: it forecasted that our house (in the Boston area, so fewer foreclosures) had gone up in value since we bought it in June 2007. Mortgage appraisers say it’s gone down by 20%. (My untrained look at comps and the market says it’s gone down, but by more like 10-15%.) That’s the difference between having more than enough equity to refi, and being in serious negative equity…
Zillow appears to not address the point of whether or not lower priced homes make up a higher number of foreclosure sales to begin with. If this is the case, at least part of the reason that non-foreclosure sales sell at higher price ranges is that those homes have an overall higher market value from the start.
Instead, Zillow states that “you’re also looking at the depreciation of homes that were previously in the set of homes making up the black line, but went into foreclosure, thus becoming part of the set of homes making up the red line”.
That’s actually a big assumption, and I don’t see any data in their article to back that up.
These indexes also OVERSTATE housing gains by failing to compensate for renovations. I lived in a renaissance neighborhood where we all fixed up our houses. They used to cost $40-70k; now they sell for $300-$600k. When we sold, it looked like our house price tripled when we sold our house, but I added up the cost, and we didn’t make a penny for all of our work over seven years.
What zillow should exactly do is ZIP IT! Just because a house sold under a foreclosure does not count as sales? A sale is as sale and a house is a house. It is so ridiculous of zillow to pretend to exclude these sales when an individual only needs to log on to zillow’s website and look at the valuation- zillow’s own estimate is a total joke! No, actually, it is insulting!
But really folks, when I ned a good laugh, I log on to zillow and just read their valuations.