How Accurate is the Zillow Zestimate?
Tim Ford | Tuesday Jun. 1st, 2021
For the past few years, I’ve been analyzing the accuracy of the Zillow Zestimate in the Bozeman market. If you haven’t heard of Zillow, it’s one of the many websites that utilizes an MLS feed with homes for sale. It also offers a “Zestimate,” which is its computerized model that generates a home value for individual homes.
Many buyers and sellers ask how accurate this Zestimate is. On its website, Zillow is now breaking down how accurately it fairs in most major markets. Scrolling through the data, Zillow states it’s within 5% of the sold price for around 80% to 85% of listings and within 10% of the sold price for approximately 95% of listings. For the state of Montana, it stated the Zestimate was within 5% of the sold price for 84% of listings and within 10% for 95.9% of listings.
So how does the Zestimate fair locally here in Bozeman? To find out, I looked up the actual sold price of all homes sold inside Bozeman city limits during the first 4 months of 2021 and compared each sale against the Zestimate for that particular home.
During these 4 months, January 1st through May 1st, 2021, 121 single family homes sold inside Bozeman city limits. Of those homes sold, Zillow either could not find the address or could not produce a Zestimate for 7 homes.
Including all of those remaining 114 sales, the Zestimate inaccuracy averaged 8.8%. What is very interesting is that in past years, the Zestimate had been improving in its accuracy. This is the first year the average has become more inaccurate compared to the previous year. Last year for the same period, the average inaccuracy was 4.13%.
One might assume it’s because prices have been rising so rapidly that the Zestimate has had difficulty keeping up. This may be the case; however, it was split fairly equally between being too high or too low, with 54 out of 114, or 47% of Zestimates being lower than the actual sold price and 60, or 53%, of the Zestimates being higher than the actual sold price. This correlates with the majority of the years I’ve been tracking this, with the exception of last year, when the Zestimate was high 88% of the time.
At this average of 8.8% and considering that it’s high or low roughly half of the time, if we look at the median sold price of $687,500, that could give a swing of $60,000 in either direction, ranging from $627,500 to $747,500.
To compare that to national averages, the Zestimate for the first 4 months of sales inside Bozeman city limits was within 10% of the sold price for 66% percent of sold listings and within 5% for 50% of sold listings.
The data shows that while the Zestimate may be accurate some of the time, it’s inaccurate often enough. Buyers and sellers can use it as a starting point, but additional information is needed to really narrow down a value. According to Zillow, “It is not an appraisal and it should be used as a starting point. We encourage buyers, sellers and homeowners to supplement the Zestimate with other research such as visiting the home, getting a professional appraisal of the home, or requesting a comparative market analysis (CMA) from a real estate agent.” This seems to be especially apparent in the current climate with rapidly changing real estate pricing.
I have also included recent sales data for the first 4 months of 2021. In addition to the 255 homes sold both inside and outside Bozeman city limits during these 4 months, another 163 home sales are currently under contract or pending as of the date of writing. This compares to 149 home sales pending this same time last year.
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.