Speaking with a good friend and very savvy client this morning, I happened to comment that "Zillow is directionally correct 50% of the time" for overall prices in a given local market. Of course this is because Zillow uses mathematical algorithms that fail to address property condition, changes in sales mix, shortages in inventory, and similar qualitative and quantitative factors not available without a modicum of local expertise.As an example, relying on Zillow, one could easily conclude that property values in Manhattan Beach have suffered to the tune of 5-8% in recent months. This dramatic but misleading conclusion results from what I call the "tyranny of averages." By this I mean that averages of non-homogeneous groups (e.g., newer homes vs. older, desirable homes vs. teardowns, better locations vs. commercially-impacted streets, markets including builders vs. markets without significant building activity) are little more than hash totals until underlying factors are revealed.
In the Manhattan Beach Tree Section and in East Manhattan, few newer, larger, highly-desirable, well-located homes have been available in the inventory of homes for sale in recent months. I have well-qualified buyers for both RIGHT NOW, and have yet to find suitable properties to match their needs. As a result, Tree Section statistics are skewed toward smaller, less-desirable properties that have been marching through the ranks. Zillow interprets this as meaning Tree Section sales volumes and values are down, an uninformed conclusion.
The reality: South Bay Brokers' sales are up 18% year-over-year from 2010. Of course that's a composite number too, but I can give you the details! In fact, many such details can be found at the South Bay Market Data section of this very Beach City Digs Blog!
So as frequently mentioned in this blog, watch out for averages. You'll find them rampantly reported in the general press, which is a great place for real estate ads but seldom for actionable real estate news.
Instead, rely on a qualified real estate professional who knows and understands the micromarket, the underlying factors, the prevailing trends, and how to have peace of mind dealing with them all. -David
