There's More to Buying and Selling Than the Click of a Button on Spreadsheets: Zillow

The real estate industry news has lately had quite a few stories about Zillow's "pause" in buying homes.  As the days went by, the "pause" was just another word for Zillow's decision to stop buying homes--why? because it made too many bad decisions about pricing, the market, and a third reason, what I consider to be its faulty reliance on its own automated valuation tool.  Zillow only recently became a real estate brokerage (in 2021) after many years of being a third party data aggregator, showing listings online in the way many companies did by obtaining permission from the various MLS's across the country, and by then offering advertising of these listings to the Realtors who listed them in the first place (for a price of course)  so that prospective buyers and sellers would have another portal by which to find listings and possibly a future agent.  You've probably heard of "Zestimates", their early automated valuation tool which was typically inaccurate, for various reasons.  One of the major reasons was that, as a non-broker, Zillow was not using the full information gained by subscribers to the Realtor MLS, but drawing from the "bare bones" information of the public property tax records.  Value of a property can be in the subjective eyes of the beholder, aside from the schooled requirements and standards used in the professional appraisal industry, and this intuitive factor was quite elusive to Zillow's valuation tools.  

And it continued along this same path after becoming a licensed brokerage (something it used to claim would never happen) and Zillow proceeded to buy, buy, and buy more properties with the intention of "buy, fix and sell".  Until in recent weeks it hit the "pause" button, and now its leadership says:

“We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated, and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility,” CEO Rich Barton said in a statement.

Barton said that Zillow will instead focus on “creating an integrated and digital real estate transaction that solves the pain points of buyers and sellers while serving a wider audience.” (Quote from Realtor Magazine, Nov. 3, 2021, their sources from “Zillow Stock Dives After Analyst Highlights Two-Thirds of Homes Bought Are Underwater,” MarketWatch (Nov. 1, 2021); “Zillow Quits iBuying, Will Lay Off 25% of Staff,” The Real Deal (Nov. 2, 2021) and “Zillow Quits Home-Flipping Business, Cites Inability to Forecast Prices,” The Wall Street Journal (Nov. 2, 2021) [Log-in required.])

Ultimately, I think that the reference to "the pain points of buyers and sellers" is an acknowledgement that the purchase and sale of homes is indeed a human process, one that is full of an unfolding series of steps connected to what can be quite emotional associations and psychological
factors whether one is acquiring a home, or leaving it after many years.  

Make no mistake, automated valuation tools are widely used, not just by Zillow, and have been for a number of years.  But some can be much more accurate, especially when used in conjunction with market knowledge that comes from experience, "feet on the ground", and solid professional knowledge connected to working people.

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

Average Selling Prices for Long Beach, Lakewood, Cerritos, Huntington Beach plus 4 Counties, October 2021

 All these average prices are for single family homes for the month of October, 2021, based on data from CRMLS Infosparks:

Graph also includes Riverside County.  As the market moves increasingly towards the "luxury" market (home prices over $1,000,000), what will happen to average prices in the lower priced areas?  Already San Bernardino has risen from an average price of about $350,000 in 2019 to over $500,000--the average home price for Los Angeles County as a whole exceeds the average for the entire local MLS system (CRMLS).  Average days on market is well under 30 days for these figures.

October, 2021

Long Beach
 $926,773                 Avg Days on Market :20

Lakewood
$774,909                  Avg Days on Market :14

Cerritos
$1,034,148               Avg Days on Market :15

Huntington Beach
$1,372,754               Avg Days on Market :18

Cypress

$1,026,296               Avg Days on Market: 12

Los Alamitos

$1,129,167               Avg Days on Market: 14 

 

Los Angeles County
$1,309,422 (4th highest average price in last 5 years, all in 2021)

San Bernardino County
$529,915   (2nd highest average price in last 5 years)

Orange County
$1,518,637 (2nd highest average price in last 5 years)

 

 For a market evaluation of your property (house, condo, multiple units), please contact me or go directly to my website for your own automated estimate delivered directly to your inbox.

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996

Annual Housing Market Report by California Association of Realtors (October 7, 2021)

California Association of Realtor Annual Market Report was presented at the annual trade conference last week, held online for the 2nd year--and here are some of the highlights.

Takeaways:

As of August 2021, 67% of all sales closed over list price (up from about 50% at beginning of 2021).

Median price of single family home in August was $827,940.

Median down payment by repeat buyers was 20%, and 32% of first time buyers have 20% down or more.

Number of sales down to 414,860 in August.

People are buying larger homes, median is over 1800 sq ft.

Years in home before selling is now over 10 years, due to affordability challenges, relocation questions, low rate on current mortgage, low property taxes, hit on capital gains--not as many people move compared to 2000.

Million dollar home market is now 28% of sales.

23% of Californians can buy a median priced home -- affordability issue for California.

California is not issuing enough new housing permits.

Homeownership rates vary by ethnicity. 

All time low levels of housing inventory in December, 2020.

Technology, iBuyers and corporate consolidations, as well as changes to MLS portals, and other industry legal issues all involve new ways of doing business.

California housing crisis:  In 1986 population was 27 million--in 2020 population was 40 million; number of Realtors in 1986 was 112,000 and in 2020 there were 206,000 Realtors; in 1986 there were 394,000 home sales and in 2020 there were 412,000 home sales; in 1986 256,000 housing permits were issued and in 2020 100,000 housing permits were issued.   So, almost double the number of Realtors, and 13 million more people, but much slower increase in home sales and big decrease in housing permits.

Overall price outlook for 2022 as of August 2021:  in 2021 the median home price increased 6.8% -- the median price for 2022 is projected to be a decrease of 5.2%, putting median home price at $834,000; with the 30-year fixed rate mortgage not over 3.5 for 2022.

For the complete Power Point on this presentation, please contact me.

See:  Investor buyer have contracts too

Julia Huntsman, REALTOR, Broker | www.juliahuntsman.com | 562-896-2609 | California Lic. #01188996