Zillow’s Typical Error in Metro Phoenix is $13,650

[CORRECTION: The typical Zillow Zestimate error for metro Phoenix is $13,650 not $12,896 as I previously had it. My mistake was I used the City of Phoenix median sale price instead of the Metro Phoenix median sale price. Sorry for the confusion!]

Real estate agents hate Zillow’s estimates of home values, called Zestimates, because many are very inaccurate but mainly because many home buyers and homes sellers will fall in love with their inaccurate Zestimates. Home sellers fall in love with high Zestimates and home buyers fall in love with low Zestimates and it adds unnecessary drama to the home buying and selling process.

Here’s how it plays out, the Zestimate on a seller’s home is WAY too high but wishful thinking kicks in and the home seller really likes that high estimate and thinks up a bunch of reasons why it might be right. An economist would say that the homeowner “anchored” on the high Zestimate price.

We real estate agents can try to show homeowners why the Zestimates for their homes are way off but they won’t usually buy it. They think we’re just trying to get them to price their houses below fair market value so they’ll be fast and easy sales for us greedy real estate agents.

This never happens to home sellers when their Zestimate is low. Home sellers immediately dismiss low Zestimates as being inaccurate but they fall in love with high Zestimates. Home buyers, on the other hand, might fall in love with that low Zestimate the home seller immediately dismissed.

Zestimate Error Rate for Phoenix

Zillow is very good, however, about publishing the error rate of their Zestimates. I think it’s partly a CYA move but in metro Phoenix, the median error for Zestimates is 6.5%. They calculate the error by looking at actual sale prices of homes compared to their Zestimates immediately before the sale.

In addition, Zillow says the median sale price in metro Phoenix is $210,000.

Apply 6.5% to $210,000 and we find that Zillow Zestimates in metro Phoenix are typically off by $13,650 but you don’t know if it’s $13,650 too high or $13,650 too low. And it’s worse than that because HALF of Zillow Zestimates are off by MORE than $13,650, sometimes a LOT more than $13,650.

What’s the Typical Zillow Error for My Home?

You can fine tune the typical Zestimate error by putting your home’s price range into the equation. If your home is around $300,000, for example, just multiple $300,000 by 6.5% to get the typical error for Zillow Zestimates in that price range in metro Phoenix.

Zillow is very clear that Zestimates are not appraisals. In fact, Zillow says that for a home in the $300,000 price range in Metro Phoenix, their typical error is $19,500, but you don’t know if it’s $19,500 too high or $19,500 too low. And it’s worse than that because HALF of Zillow Zestimates are off by MORE than $19,500, sometimes a LOT more than $19,500.

I’m going to publish a LONG article on Zillow Zestimate errors on my national blog next week but the takeaway is the paragraph above.


I’ll be on KJZZ (91.5) this afternoon between 2:00 and 3:00

I did a short interview about the Phoenix real estate market with Steve Goldstein at the KJZZ studio yesterday morning. It was originally scheduled to air yesterday but it was moved back to today (Friday, June 19).

Before radio interviews on KJZZ, I used to feel like I was going to have a heart attack. Now, I’m just nervous.

I’m able to show a little more personality when I’m not crazy nervous. And showing my personality more is a good thing… I hope. :)

ADDED: You can listen to it here. It turned out pretty well. Let me know what you think in a comment.


Intel to lay off hundreds in Chandler!

The Phoenix Business Journal reported today the “reductions” would be impacting generally no more than a few hundred employees in Chandler. Intel currently has about 11,000 employees in Chandler.

Man, I bet those were great jobs! This could really hurt some families.

I wonder if it will have an impact on home prices in Ocotillo – a favorite area for Intel employees to live – and the surrounding areas of Chandler.


Phoenix home prices jump in May 2015

Want the video to be more clear visually? Click the “gear” near the bottom right of the video or watch it on YouTube.

New Charts and Analysis from the Phoenix MLS

Even more charts! As mentioned in the video, now you can see the brilliant analysis from the geeks at the Phoenix MLS.

Phoenix MLS Analysis and Statistics

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Average Price Per Square Foot


Impact of 15% of homes being underwater in Phoenix

Underwater homes explain part of the unexpectedly strong home price increases we’ve seen in metro Phoenix in 2015.

Zillow estimates that 19% of the Phoenix area homes with mortgages are underwater and separately they estimate that 78% of Phoenix area homes have mortgages on them, therefore, 15% of Phoenix homes are underwater (19% of 78%).

Not many of those 15% are likely to do short sales or walk away now, this late in the game. They’ve likely been underwater since 2008 but they’ve made their payments every month the last 8 years. Why would they decide to do a short sale or walk away now?

My guess is that these are reliable, salt-of-the-earth people who wouldn’t walk away or do a short sales unless their financial circumstances changed and they weren’t able to make the monthly payments. They seem to be willing to make payments on their underwater homes as long as they’re able.

Supply of Homes Reduced 15%

These 15% may want to buy a different home because of changes in their family circumstances – marriage, divorce, new kids, kids move out, a better job – but they don’t want to do a short sale and they don’t want to lose money when they sell so they don’t sell.

The underwater homes effectively reduce the supply of homes for sale by 15% in metro Phoenix. That’s actually a significant reduction and it keeps the supply of homes for sale tighter than it would be otherwise.

Demand for Homes Increasing

On the demand side, the number of people coming out of the foreclosure/short-sale penalty box (AKA, boomerang buyers) is increasing every year which increases the number of people who are able to buy homes each year, if they’re willing.

And so Phoenix home prices are unexpectedly strong this year.


Opendoor Review

This is going be a weird post. I’m going to compare Opendoor to hiring a real estate agent to sell your home the traditional way.

Opendoor as I Understand It

Opendoor is a start-up out of San Francisco that will buy your home themselves, take ownership of the house, fix it and flip it. One of the founders, Eric Wu, is from Phoenix (Ironwood High School) and metro Phoenix is where Opendoor is most active.

Opendoor is buying about 2 houses a day here right now and this is where they’re refining their business model.

How Does Opendoor Work?

Opendoor will send you an offer online to buy your house sight unseen.

You know how Zillow has an algorithm that “Zestimates” the value of your home? Opendoor has something like that but far better than Zillow’s because Opendoor will actually make you an offer to buy your home based on their algorithm.

As an economist, I would like to say, that’s a pretty bad ass algorithm if they’re willing to put their money where their math is.

The offer is only subject to an inspection of the physical condition of the house. They don’t do an appraisal, they’re trusting their algorithm to determine the value of the house.

I assume Opendoor will lower their offer price if the condition of the home turns out to be below average. (I can see this inspection step could potentially open the door, so to speak, for games to be played with the price.)

The Fees

Opendoor’s gotta make money, they can’t just pay you fair market value and expect to quickly resell it and make money. So Opendoor has fees.

Opendoor has 3 different fees, some flat, some variable. In metro Phoenix, in total the fees are 8% to 10.5% of the price of the home.

If you hire a real estate agent to sell your house, you’re likely to pay 6% so Opendoor is more expensive by 2% to 4.5% of the home’s value but there are advantages to using Opendoor.

Advantages – Opendoor

It’s fast. Opendoor can close in as little as a week!

It’s certain. About 30% of homes listed for sale by real estate agents in a normal market don’t sell. You, the home seller, can go through all that trouble and if the home doesn’t sell you have to start all over again with another agent or change your plans about selling the home.

It’s super convenient. You don’t spend time and money prepping the home for sale and you can choose the date you want to complete the sale. You want to close on a certain day so you don’t have any overlap with two mortgages, or exactly when your next home is ready, or exactly when you need to leave for your new job, no problem.

No appraisal contingency. This contingency adds stress to the traditional home sale. If the appraisal comes in lower than the price in the contract, it opens a can of worms, a stressful can of worms for the home seller.

No financing contingency. I’m ALWAYS worried when I represent a home seller that the buyer will flake out and cancel the contract (supposedly because they couldn’t get financing) at the last minute after the seller has already moved out of the house. (Or at least the buyers were able to convince their loan officer to say they couldn’t get financing so they could buy a different house.) It’s phenomenally expensive and stressful for the home seller when the buyer cancels at the last minute.

Advantage – Real Estate Agent

You might keep as much as 2% to 4.5% more of the home’s value when you use a real estate agent to sell your home.

That amount could be a large part of your equity, if you don’t have much equity.


  • Opendoor = More convenient
  • Real Estate Agent = Less expensive

When to Consider Opendoor

You Inherited a House. Especially if the proceeds will be split between the heirs. The higher cost of Opendoor would be split between the heirs and they would likely get their money sooner than if the executor hired a real estate agent. It may not be worth the executor’s time to maximize the return on selling the house when the executor only gets a portion of the increased proceeds. (FYI, if the inherited home is underwater or has little equity, talk to an estate attorney BEFORE you accept the bequest (you don’t have to accept a bequest), otherwise you could end up being on the hook for any shortfall.)

You’re Holding On By a Thread Emotionally. You don’t have a moment to spare with work, the kids and everything else and you’re barely holding it all together. Opendoor is more expensive but phenomenally less stressful, if you have enough equity to swing it.

You Have A Great New Challenging Job. You just want to move on and don’t want selling your house to be taking up mindshare when you need to be focusing on your new, very challenging, amazing job.

You’ve Sold Homes Before and You Hated It. You’re willing and able to pay more to avoid all that drama and to simplify your life.


Opendoor is a cool new option for selling homes that could work well for some home sellers.


I’m not an expert on Opendoor so let me hear what you know about it in a comment below.


Phoenix Real Estate Market at a Glance – May 2015

Prices Up 4% So Far This Year

The median home price in metro Phoenix was up 4% from January through April, 2015. That’s a full year’s worth of “normal” appreciation in only 4 months.


I expect that metro Phoenix home prices will continue strongly up through June, possibly through July, and then prices will level off for the rest of 2015.

It’s a fascinating market right now. No one I know expected such strong price increases January-April. I can’t wait to see how the rest of the year plays out.

Like last month, I’m a little worried that the inflation-adjusted price is getting too high. That’s bad for homebuyers and long-term market stability. You can CLICK HERE and then scroll down to see the inflation-adjusted median price chart.

Phoenix Real Estate Market at a Glance


Note: When this post was first published in May 2015, the chart only had sales data through April 2015.

What do you see? What’s happening around you? Please leave a comment.


Phoenix Real Estate Market at a Glance – April 2015

Most Popular Charts on Phoenix Real Estate (?)

The most amazing thing this month is the three “Phoenix Real Estate Market at a Glance Charts” now have over 150,000 views, at least, according to Tableau. Wow!

I’ve been updating the charts every month but I haven’t even written a post about the charts here on this blog since last May!

I wonder where all the views are coming from. They’re not coming from this website. I’m getting 1/10th the number of visitors I used to get to this website so only a small part of those 150,000 views are coming from this website. Are people finding the charts directly on Tableau’s website? I wonder if people have embedded the charts on other websites? (Which is fine with me, my name is on the bottom of every chart.) I just wonder where all those views are coming from.

I only started publishing them using Tableau in 2012. Before that (2007-2012), I published the charts as static images (.jpg and .png) created in Excel.

Anyway, I’m very grateful the charts are useful to people.

Hey, tell your friends about the charts!

Back to the Phoenix Real Estate Market

See all three full-size charts here.

Note: When this post was first published in April 2015, the graph only had sales data through March 2015.


I don’t have a good feel for what’s happening in the market.

I didn’t expect prices to increase as much in 2015 as in 2014 but through March the median home price increase is similar to last year’s.

Sales. The price increase is being driven by a “high” number of sales. Home sales in March were up 17% from March 2014. That’s a lot.

Lending standards have eased a bit. That’s gotta help a bit. Is that why sales are up?

Are people feeling more confident about their income?

Are more Millennials buying their first homes?

Is it just a one month fluke? Nah. The number of home sales has been higher every month this year versus last.

Inventory. The number of homes hitting the market each month is running less this year than last and that also helps keep inventory down and prices strong.

On the other hand, coming into 2014 we had huge upward momentum in home prices in Phoenix. The median price had increased over 50% over the previous two years.

This year the market had a lot less upward momentum going in. Prices “only” increased 6% in 2014.

Conclusion. Last fall I thought the price increases this year would be lower than in 2014 and that was the conventional wisdom.

Now with tighter supplies of homes for sale being counterbalanced to some degree by less upward price momentum coming into 2015, I’ll say we’ll see price increases this year similar to last, in the 6% ballpark but with higher than 6% more likely than lower because of the tight inventory.

On the other hand, I’m a little worried that the inflation-adjusted price is getting too high. That’s bad for buyers and market stability.

What do you see? What’s happening around you? Please leave a comment.


Phoenix home prices flat through January but…

Today Case-Shiller published their home price index through January, 2015.

You can see that Phoenix home prices have been pretty flat for over a year.

Case-Shiller March 2015

Tight Supplies

All the talk in the Phoenix real estate industry is the tight supply of homes and what that means for current and future home prices in metro Phoenix.

A quick tour of the inventory of homes for sale in Valley cities shows that, in general – and except for Paradise Valley, Scottsdale and Fountain Hills – the months supply of homes for sale is running lower than last year at this time.

This suggests to me that home prices in most areas of metro Phoenix will increase more this year than they did last year.

Future Prices

But I really won’t have a good handle on price trends for 2015 until I see the final numbers for March. March is the bellwether month, March sales and prices set the tone for April, May and sometimes June.

Is all the excitement just the usual high season rush or is it a change in the market?

What do you see in your neighborhood? Are prices moving up? Leave your comment below.