How Accurate is the Zillow Zestimate?
By Tim Ford, Real Estate Broker
As buyers and sellers try to settle on a price to buy or sell a home, they sometimes turn to the internet to look for values. One of the more commonly used websites for home values is Zillow. For those unfamiliar, Zillow is a website which advertises homes for sale. They’ve also been accumulating a database of homes. One can punch in an address, and whether or not the home is for sale currently, Zillow will often have photos from the last time the property was on the market, along with other information like year built, square footage, etc.
They also offer a “Zestimate”, which is their estimation of what a home is worth. So, how accurate is the Zestimate? To find out, for the past few years, this article has been analyzing sales by comparing the actual sold price to the Zestimate. The data is always interesting. The following information pertains to the 186 closed transactions of single family homes, sold both inside and outside of Bozeman city limits, between January 1st and May 1st of 2023.
This year, the biggest change from past years is how often Zillow was unable to produce a Zestimate or find the address. Of the 186 single family home sales in the first 4 months of 2023, Zillow could not produce a Zestimate for 101 of the sales, and couldn’t find the address of 10 additional sales, which equates to 59% of the sales. Last year, the number of closed sales that Zillow was unable to produce a Zestimate for or find the address of was only 25%, and the year before it was even lower at 5.7%.
On their website, Zillow states they have data on more than 110 million homes and calculates a Zestimate on 100 million of those. In years past, Zillow often had difficulties finding the address or producing a Zestimate for new construction homes. That was not the sole issue this year as only 38 of the 186 sales were new construction, or just over 20%.
Zillow states the nationwide median error rate for off market homes is 7.49%. They also break the accuracy down by state. For Montana, they claim to have a median error rate of 9.37%, and to be within 5% of the sales price 28.18% of the time.
When the Zestimate is compared against the actual sold price of the remaining 75 sales that they could produce a Zestimate for, the average difference came in at 9.6%. The median error rate was 5.62%. The Zestimate was within 5% of the sales price 28 out of the 75 sales, or 38% of the time. The Zestimate was more than 10% off for 29 of the 75 sales, or 39%. The Zestimate was more than 20% off for 12 sales or 16% of transactions.
Bozeman’s current median sold price is for single family homes is $865,874. Multiplying that against the average difference of 9.6% equates to an average potential inaccuracy of $83,124.
For most of the years that this article has completed this comparison, the Zestimate was usually split fairly equally between high and low, or more than the actual sold price and less than. For example, in 2021, 47% of Zestimates were low and 53% were high. Last year, however, 74% of the Zestimates were low. That trend continued this year as 80% of the Zestimates were low.
Zillow goes on to state, “The Zestimate is not an appraisal. It is a computer-generated estimate, given the available data. We encourage buyers, sellers, and homeowners to supplement the Zestimate with other research, getting a professional appraisal, or requesting a comparative market analysis (CMA) from a real estate agent.”
I have also included recent sales data for the first 4 months of 2023. In addition to the 186 homes sold both inside and outside Bozeman city limits, another 116 home sales are currently under contract or pending as of the date of writing. This compares to 107 home sales pending at this same time last year.
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The included data reflects sales of homes in the greater Bozeman area, including Four Corners, Gallatin Gateway, Bridger Canyon, and Bozeman city limits. The data includes home sales reported through the local Big Sky Country MLS, and does not include private party sales, Condominiums, or Townhouses.
2023 Real Estate Market Data
January 1st through June 1st, 2023
|Total Sales – Bozeman||311||341||268||254|
|Median Sales Price||$520,000||$700,000||$901,000||$877,000|
|Average Sales Price||$658,711||$916,518||$1,239,521||$1,035,443|
|Average Days on Market||69||23||20||53|
|Median Days on Market||29||5||4||30|
Total Sales – Bozeman
January 1st through June 1st
|Year||# Homes Sold|