What's up with the Zillow home value forecast for Austin?
April 26, 2013 3:54 PM Subscribe
Zillow predicts just a 0.1% rise in home values over the next year in Austin, and actually predicts depreciation in several areas near the center of the city. What's going on?
I'm looking at houses and condos within 5 or so miles of the University of Texas. The Zillow listing for each place includes a "market guide" that predicts what will happen to home values in that area of town over the next year. I've been getting predictions like these:
Zillow predicts 78731 home values will fall 1.2% next year, compared to a 0.1% increase for Austin as a whole.
Zillow predicts North University home values will decrease 1.5% next year, compared to a 0.1% increase for Austin as a whole.
Zillow predicts South River City home values will fall 0.9% next year, compared to a 0.1% increase for Austin as a whole.
I don't understand how this can be right. I'm constantly hearing that Austin real estate is hot, that we gain 150 new Austinites every day, and that property values will be soaring over the next decade. The one factor I can think of is that as morgage loan interest rates rise, home prices fall, but I would have thought that with such a strong influx of people, Austin would be an exception to this. Is Zillow's algorithm missing something? Or is there something I'm not understanding?
Thanks for any insights you can give me. In case it helps, here's what Zillow has to say about their forecast calculations:
I'm looking at houses and condos within 5 or so miles of the University of Texas. The Zillow listing for each place includes a "market guide" that predicts what will happen to home values in that area of town over the next year. I've been getting predictions like these:
Zillow predicts 78731 home values will fall 1.2% next year, compared to a 0.1% increase for Austin as a whole.
Zillow predicts North University home values will decrease 1.5% next year, compared to a 0.1% increase for Austin as a whole.
Zillow predicts South River City home values will fall 0.9% next year, compared to a 0.1% increase for Austin as a whole.
I don't understand how this can be right. I'm constantly hearing that Austin real estate is hot, that we gain 150 new Austinites every day, and that property values will be soaring over the next decade. The one factor I can think of is that as morgage loan interest rates rise, home prices fall, but I would have thought that with such a strong influx of people, Austin would be an exception to this. Is Zillow's algorithm missing something? Or is there something I'm not understanding?
Thanks for any insights you can give me. In case it helps, here's what Zillow has to say about their forecast calculations:
They're probably taking into account new construction, of which there is quite a bit. Right now the rental market is super super tight, so rental prices are super high, so people may as well buy, but there are a whole lot of very large apartment buildings being built in desirable areas, so some of that pressure will come off.
I'm just a random homeowner who lives right next to a lot of that new construction, but that'd be my best guess.
posted by restless_nomad at 4:18 PM on April 26, 2013
I'm just a random homeowner who lives right next to a lot of that new construction, but that'd be my best guess.
posted by restless_nomad at 4:18 PM on April 26, 2013
Not to take anything away from The World Famous and restless_nomad, because I agree with their assessments: we're still in a housing bubble, and if federal road dollars keep flowing then neighborhoods are less important and can be replaced in greenfield developments out of town, but...
Zillow's data can also be highly suspect. For instance, it believes that my sub-800 square foot 1947 two bedroom one bath cottage is 3,030 square feet, covering over ¾ of the lot (which size it under-estimates by a hundred or three square feet), and worth a quarter of a million more than any of my neighbor houses.
So, yeah, possibly suspect data, definitely still in an under-priced mortgage bubble. You might look at who's telling you that property values are going to be soaring over the next decade; undoubtedly people with skin in the game...
posted by straw at 4:24 PM on April 26, 2013
Zillow's data can also be highly suspect. For instance, it believes that my sub-800 square foot 1947 two bedroom one bath cottage is 3,030 square feet, covering over ¾ of the lot (which size it under-estimates by a hundred or three square feet), and worth a quarter of a million more than any of my neighbor houses.
So, yeah, possibly suspect data, definitely still in an under-priced mortgage bubble. You might look at who's telling you that property values are going to be soaring over the next decade; undoubtedly people with skin in the game...
posted by straw at 4:24 PM on April 26, 2013
Best answer: My theory is that the Austin market is changing too fast for outside trackers like Zillow to keep track. The sale stats speak for themselves that the market is definitely hot - no doubt about it.
Austin Market stats June 2012
Austin Market stats Mar & Apr 2013
Circle C Ranch neighborhood stats Apr 2013
And finally, here is a Austin realtor cautioning Austin buyers against using Zillow (of course, there is conflict of interest here, so take it as you will).
Is this a mini bubble? I doubt it as the Austin market did not in fact inflate and burst before the recession like CA or many other markets. During the recession, the values stayed flat or slightly down, but have recovered since last year. There is solid reasoning behind the recovery (jobs, cost of living, education etc), so I personally do not think this is a bubble.
Austin in Top 10 lists
But of course, is this what people in a bubble thought while they were in it? That is for each one to judge for themselves I guess.
One reason why future growth can go down would be new home starts. But locations like the UT area and areas relatively close to downtown have no new land, so most of these new starts must be in the suburbs. This brings to mind the old real estate adage "location location location". With the traffic as bad as it is in Austin, I think these central areas will continue to rise in value.
posted by thewildgreen at 4:24 PM on April 26, 2013
Austin Market stats June 2012
Austin Market stats Mar & Apr 2013
Circle C Ranch neighborhood stats Apr 2013
And finally, here is a Austin realtor cautioning Austin buyers against using Zillow (of course, there is conflict of interest here, so take it as you will).
Is this a mini bubble? I doubt it as the Austin market did not in fact inflate and burst before the recession like CA or many other markets. During the recession, the values stayed flat or slightly down, but have recovered since last year. There is solid reasoning behind the recovery (jobs, cost of living, education etc), so I personally do not think this is a bubble.
Austin in Top 10 lists
But of course, is this what people in a bubble thought while they were in it? That is for each one to judge for themselves I guess.
One reason why future growth can go down would be new home starts. But locations like the UT area and areas relatively close to downtown have no new land, so most of these new starts must be in the suburbs. This brings to mind the old real estate adage "location location location". With the traffic as bad as it is in Austin, I think these central areas will continue to rise in value.
posted by thewildgreen at 4:24 PM on April 26, 2013
Moreover, if you're gaining 150 new Austinites every day, that's 54,750 new Austinites per year, which is just obviously wrong.
The Austin metro area added 67,230 people during the 15-month period (which ranked 10th in the nation), or 4,482 a month. Travis County had the majority of that gain, with 38,858.
That's from 2010, I think, but if anything the growth is larger now. That doesn't invalidate your larger point, just pointing it out. The growth is nuts.
Zillow's projections seem very conservative to me. But, the general "up up up!" trend in the market up where I live (north Austin, near the Domain) seems unsustainable. If I were aiming I'd split the difference.
posted by dirtdirt at 4:34 PM on April 26, 2013 [1 favorite]
The Austin metro area added 67,230 people during the 15-month period (which ranked 10th in the nation), or 4,482 a month. Travis County had the majority of that gain, with 38,858.
That's from 2010, I think, but if anything the growth is larger now. That doesn't invalidate your larger point, just pointing it out. The growth is nuts.
Zillow's projections seem very conservative to me. But, the general "up up up!" trend in the market up where I live (north Austin, near the Domain) seems unsustainable. If I were aiming I'd split the difference.
posted by dirtdirt at 4:34 PM on April 26, 2013 [1 favorite]
Response by poster: Well, six weeks after I posted this question, Zillow is predicting appreciation rates around 2% for those zip codes and for Austin as a whole - a dramatic difference. I think thewildgreen was right that Zillow can't keep track.
posted by Mila at 9:59 AM on June 9, 2013
posted by Mila at 9:59 AM on June 9, 2013
This thread is closed to new comments.
www.zillow.com/help/how-are-forecasts-calculated
posted by Mila at 3:57 PM on April 26, 2013