If you pay any attention to real estate matters on the ‘net you are probably one of the people who made www.zillow.com one of the most popular internet real estate sites — within about a month of launching its beta site. Any way you look at it *that* is an impressive debut for any site.
What is Zillow and Why Might You Care?
Zillow is one of a rash of new sites that try to aggregate and present in usable form data about real estate transactions and listings — from many sources — to permit anyone to estimate the value of their home or apartment. The people behind it are (a) very internet savvy (including the Expedia founders) and (b) well capitalized (they are said to have started with $32 million in Venture Capital funding).
*That* is enough to tell me this is something to take seriously.
You might care about Zillow if you have been frustrated by the difficulty of getting hard data about Manhattan values, including comparable sales history. (You have been frustrated — no doubt — if you have ever tried to do this.) Other sites try to do the same or similar things, like Trulia.com and Property Shark, but this effort is comprehensive and ambitious. The feature that has attracted the most attention is the Zestimator — their way to estimate the value of a property.
Zillow’s data is likely to get better (who knows how much) and the folks seems smart and motivated and well-funded enough to improve the algorithms and other math voodoo to improve their results.
But the data in beta has some *serious* limitations for Manhattan lofts and apartments. The key numbers Zillow reports in Manhattan are 13% for Error Percentage and 41% for 10% Range, meaning that half of the time they will "Zestimate" a value that is off by 13%, higher or lower, and that the Zestimate will be off by 10% only 41% of the time. So: half the time they will get the value of a hypothetical $1,000,000 apartment as within the range of $870,000 to $1,130,000 and half the time they will Zestimate that $1,000,000 as either worth less than $870,000 or more than $1,130,000.
They believe that they will Zestimate within the range of $900,000 to $1,100,000 almost exactly four times out of ten.
See the definitions and Manhattan numbers at http://www.zillow.com/howto/DataCoverageZestimateAccuracyNY.z#table.
Nationally, by the way, they believe that their 50/50 error range is 7.2% of the true value and that 62% of the time they come within 10% plus or minus.