San Gabriel Valley Home Values:
Zillow vs The True Value Of Your Home
In Many Cases, Zillow’s “Zestimates” Do More Harm Than Good
Here’s an interesting question: who would you trust more to estimate the value of your home in our San Gabriel Valley real estate market? Would you choose a non-biased, impartial, completely scientific computer program in possession of all the data necessary? Or would you choose a human, fallible, Realtor who possibly needs your listing so badly they might just sell you a pie in the sky evaluation to get your name on a contract, or conversely, maybe doesn’t like working in your neighborhood and will provide a low-ball value just to move the property quickly and get a fast commission check?
Well, it seems, on the face of it, that the first option… the computer program… might be the wise choice. Heck! We’re living in the computer age, right? Estimating the value of your home based on the data available about the market in the area seems like the perfect thing for our techy age. However, you might want to re-think that.
Zillow is the most popular real estate information site in the U.S. for the public. As part of its service, Zillow provides “Zestimates” of every home in the database based on good, and usually current, information. Anyone, buyers or sellers, can access the Zillow home prices on the value of any home. Sellers can look up their own and Buyers can look up a home they’re thinking of buying. The problem is that many, many times, these “Zestimates” can be grossly incorrect. The CEO of Zillow says that their “Zestimates” have “a median error rate of 8%”. However, many areas are showing errors of up to almost 30%. That can be HUGE!
When the public is led to trust information like this it can throw a monkey wrench into real estate transactions and relationships. Buyers can insist a property is listed too high when it’s exactly on the market. Sellers can tell a Realtor they KNOW their home is worth more than tthe Realtor’s analysis shows, because Zillow told them so. This type of problem can lead to problems all over the place, unless the public is made more fully aware of the problem.
Here’s a recent article from the real estate section of the Los Angeles Times. It’s written by Kenneth R. Harney and provides a lot of specifics anyone interested in San Gabriel Valley real estate should understand:
L.A. Times Feb. 8, 2015 5 AM
“In Carlsbad, Calif., Jeff Dowler, an agent with Solutions Real Estate, did a similar analysis on sales in two ZIP Codes. He found that Zestimates came in below the selling price 70% of the time, with disparities ranging as high as $70,000. In 25% of the sales, Zestimates were higher than the contract price. In 95% of the cases, he said, “Zestimates were wrong. That does not inspire a lot of confidence, at least not for me.” In a second ZIP Code, Dowler found that 100% of Zestimates were inaccurate and that disparities were as large as $190,000.” …
Zillow Zestimates Or Experienced Experts?
So who do you trust with evaluating a home? The answer here is obvious. We may be living in an incredible age of technology and computer advancements, but you still need a good old-fashioned human expert who knows what they’re talking about to come up with a good, reliable valuation on a home. Whether you’re a Buyer who wants to make sure you’re not paying too much, or a Seller who wants to get every possible dollar out of selling your home, experienced and reliable Realtors and Appraisers are by far your best bet. Zillow may be a good tool to use to find a “starting point” for the discussion, but it is definitely not to be used for a reliable conclusion.
San Gabriel Valley Home Sales:
Market Predictions For 2015
Zillow’s Chief Economist Sees A Calmer, More Solid Market In The Coming Year
As we come to the end of 2014 people are wondering just what to expect from the coming year. Will 2015 see a re-birth of the crazy and volitile market action of 2013? Or will we see a continued calming of the waters? 2014 has seen a slowing of the insane action of 2013, and that type of “market solidifying action” is generally what we’re expecting in 2015.
For instance, the figures for Median Prices in California show an incredible 27.5% increase in 2013. This year that slowed to a more reasonable, but still very large 11.8%. The California Association of Realtors is predicting that 2015 will see a still positive, but much more normal rate of increase at 5.2%.
L.A. Times Dec. 2, 2014 6 AM
“In his predictions for 2015, Zillow chief economist Stan Humphries said he expects home values to rise 2.5% next year — positive territory but well below the 6% clip seen over the last 12 months. That slower pace, coupled with home builders shifting to construct more houses at lower price points than they have been, should help pull more first-time buyers into the market.” …
A More Reliable And Stable San Gabriel Valley Home Sales Market Seen For 2015
Yes, the real estate market is slowing down. And, yes, this is actually good news. As counter-intuitive as that might seem, rapidly moving and volitile markets provide opportunities for speculators, but actual buyers and sellers are better served by reliable, solid markets built on solid foundations. That type of “foundation building” is what we’ve been seeing the market do recently, and the more “normal” type of market action is what we can now expect for the coming year. The reverberations of the giant crash of a few years ago seem to be shaking themselves out, leaving calmer waters to navigate in the immediate future. This is good news for both buyers and sellers.
From Brion Costa, as well as the rest of us here, we wish you and yours a joyous Holiday Season and a Happy New Year!
Arcadia Home Sales – “The city, population 57,600, projects that about 150 older homes—53 percent more than normal—will be torn down this year and replaced with mansions.”
Arcadia Home Sales:
City Is Preferred Area For Chinese Millionaires
Influx Of Funds Is HUGE Benefit … But There Is Loss As Well
There is really nothing that “new” about the fact that “Asian money” has been moving into the San Gabriel Valley. This has actually been going on since the 1980’s, and in total has been a supportive factor to the area.
Now, however, we’ve recently seen a huge increase in activity of very wealthy Chinese buyers relocating to the area from overseas. In fact, at this point, 60% of all Chinese milllionaires have already emigrated to the U.S., or say they plan to in the very near future.
Located in the San Gabriel Valley, our Los Angeles suburb of Arcadia is “ground zero” for these buyers. The “classic” Arcadia homes of about 1200-2400 square feet or so are disappearing faster than a magicians rabbit. They are being purchased for $1 million or so, torn down by the new owner … usually a developer … who then builds an 8,000 square foot mansion that is then sold to a wealthy Chinese buyer. The city estimates that there will be over 150 such transactions this year, most of which will never see the local multiple listing service.
Why the interest in the area by these very wealthy Chinese buyers? Well, there are lots of them. First is that most of them really just want to get their money out of China. Government policies there are unreliable. No one is sure what they’ll be from day to day. That uncertainty exists everywhere, but U.S. laws and regulation, as well as the government itself, are considered much more stable and reliable. Then there are considerations such as schools and universities. Most wealthy Chinese would much rather their children attend the great Arcadia schools and U.S. colleges and universities, rather than attend classes in their homeland.
For some really great background and insight into exactly what’s going on here, we want to share a comprehensive article by Karen Weise, from Bloomberg Business Week:
Bloomberg Business Week October 15, 2014
“A year ago the property would have gone for $1.3 million, but Arcadia is booming. Residents have become used to postcards offering immediate, all-cash deals for their property and watching as 8,000-square-foot homes go up next door to their modest split levels. For buyers from mainland China, Arcadia offers excellent schools, large lots with lenient building codes, and a place to park their money beyond the reach of the Chinese government.”. …
Some “Cultural Tension” … But The Beat Goes On …
As with all change, some of this is not easy. There are those who bemoan the way the area has changed over the last decade or two. And yes, that’s true. On the other hand, nothing actually stays the same in this world, and without the influx of cash these buyers have brought to the area … much of which has gone to infrastructure improvements such as a $20 million performing arts center at Arcadia high School … the area could very well still be mired in recession. Many of the folks selling the smaller, older homes we speak of have been “property rich and cash poor”. While they have sold the home they may have intended to be their last, most of them are still in the area, just relocated a few miles away where things are less expensive. And, now they have a couple of million dollars in their bank account.
The biggest danger here … and what we should probably be most concerned about, rather than the loss of a “small town ambiance” that was destined to disappear anyway sooner or later … is the question of what could happen if this inward flow of Chinese funds was suddenly cut off. The Chinese government is not predictable in this regard. It’s pursuing some policies that encourage their nationals to purchase property here, but it also pursues other policies that discourage it. China is quite capable of completely cutting off these funds at any time. If that happens, values in the area could plummet because no one else but this type of buyer is really capable of purchasing in the area.
We’ll be following this story, and we’ll share the best, most reliable information. So keep your eyes on this space.
San Gabriel Valley Home Sales – “Pending home sales in California hit their highest level in eight months in March and the percentage of short sales plummeted to levels not seen since 2008, according to the California Association of Realtors. …
San Gabriel Valley Home Sales:
Final Numbers For March
Number Of “Short Sales” Drops Sharply
When we look at “Pending Home Sales” we are looking at the activity on the market Right Now. “Closed” sales are those properties that have actually closed escrow and been recorded. These are the actual “done deals” and the usual number we pay really close attention to, as it takes into account all the influences which might cause a property to “fall out” of escrow.
However, the “Pending Sales” number is also important. It shows us exactly what is happening on the market at the moment. An escrow may take anywhere from 3 weeks to 3 months to complete, depending on the property and the makeup of the transaction itself. In many cases a transaction will record in April, but the Buyer actually made the offer in February. The market activity that precipitated that offer is actually 3 months old by the time the recording of the sale occurs. Thus, we’re looking at “market history”, not “current conditions”.
The Pending Home Sales number is the number of escrows opened during the month. It tells us how many buyers wrote offers and how many properties they put into escrow. This is a more current and immediate number to look at.
We have some new numbers out, and they’re very good in several respects, but reflect a market that is very “narrow”. It’s “narrow” in the sense that some sectors are good, but many are fairly stagnant. The market is still moving along, but there is not a wide coalition of driving factors. Rather, our current market movement is provided by a very small base of very active buyers.
Here’s a comprehensive article from Kevin Smith in the San Gabriel Valley Tribune:
http://www.sgvtribune.com Thu, 24 Apr 2014 19:33:23 GMT
Pending sales — a forward-looking indicator of future home sales activity — were still off 9.9 percent from the revised 126.9 index recorded in March 2013. But the year-over-year decline in the index has been tapering over the past few months, CAR reported. … The share of equity sales — or non-distressed property sales — has also risen steadily over the past year. …
Activity Has Actually Slowed Since Last Year
The market action seems firm, but activity has slowed since the first of the year. At the beginning of 2013 there was a surge in prices and activity, but then interest rates rose and slowed things down. The article above quoted the owner of our firm here in Monrovia, Tom Adams, as saying, “A lot of it (market activity) is offshore money … Asian investors are really the only thing that is keeping California’s housing market alive right now. We’d be in dire straits if it wasn’t for that.”
(Photo from the San Gabriel Valley Tribune – SGVN/Staff Photo by Sarah Reingewirtz)