Lessons from Zillow Talk

  I just finished reading the new book Zillow Talk, written by its CEO and its Chief Economist.  It was full of the Freakonomics type of factoids that I love.  Many I already knew, as would most real estate agents, but others were new to me.  Also, Zillow uses all of its data to quantify things we know intuitively.  They also use statistics, of course, to try to prove things we don't necessarily think are true.  That's the beauty of statistics!

We had a lot of fun at a recent sales meeting with where to bet on getting the most appreciation on a home (near Starbucks), what neighborhoods gentrify quickly (gay ones), and what real estate agents sell properties fastest (women).  It was interesting to note that, statistically, newer agents perform just as well as older agents.  The question that the figures don't answer is why that is.  Speculation ranges from the fact that they are more eager and have more time to devote, to the likelihood that newer agents are younger, and more technologically advanced.  Good to know, though, if you want to use your nephew.

One of the most striking propositions was that there is a best time to list.  We know that, of course, and always thought it was right about now.  When Zillow analyzed the sales data from all over the country, however, they determined that the absolute best time to list your home is about 30 days after the bulk of spring listings comes onto the market.  As they put it, "between the time you fill out your NCAA bracket and the time that the winner at Augusta slips on the green jacket."  That's important news for all prospective sellers:  Get ready to list at the end of this month, for best results!

Market Statistics

I just gave an interview to a reporter about last year's numbers for the state of Connecticut. The Commercial Record showed that sales were about even with 2008, while prices were down about 10% from 2008 to 2009. She wanted to know whether that surprised me. It did not.

The above results are typical for markets that are in moderate recovery. When they decline, they decline first in units and then in prices. On the way back up, we see units increasing before we see prices returning. This is also because, when the economy is not strong, it's people at the lower end of the price spectrum who are most likely to buy or sell property, either because they are first-time homebuyers, or because they are forced to sell. These reasons account for the decline caused by a change in the mix of units changing hands.

The other piece of the decline is caused by the value of the same house going down in this market. Most houses, especially when they are competing with foreclosure sales, are selling for less than they would have a year ago. That's the part of the decline I would call same-sale price loss.

If you add those two explanations together, you can see that the 1% a month loss in value that I've been blogging about is not going to go away any time soon. On the other hand, we should see unit sales beginning to rise faster than they did in 2009, particularly as long as the government continues to give incentives to homebuyers. And that's good news.