How Accurate is the Zillow Zestimate in 2022?
Tim Ford | Wednesday Jun. 1st, 2022
A very common question in the Real Estate industry is, “How accurate is the Zillow Zestimate?” If you’re unfamiliar with Zillow, it’s one of the many websites that utilizes an MLS feed showing homes for sale. They also offer a “Zestimate,” their computerized model which generates a value for individual homes.
According to Zillow, the nationwide median error rate for off market homes is 6.9%. They are also now breaking down their data state by state. For Montana, they claim that the Zestimate had a median error rate of 2.0% and was within 5% of the sold price for 80.4% of listings, and within 10% for 94.4% of listings.
So, how does the Zestimate fare here in Bozeman? To find out, I looked up the actual sold price of all homes sold inside Bozeman city limits during the first four months of 2022 and compared each sale against the Zestimate for that particular home. From January 1st through May 1st, 104 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 26 homes.
Including those remaining 78 sales, the Zestimate inaccuracy averaged 9.84%. The median error rate was 6.81%. I’ve been tracking these numbers for some time and, for quite a few years, the accuracy was improving. Last year was the first time the inaccuracy was higher than the previous year, and that trend continued this year. In 2021, the average inaccuracy was 8.8%, compared to 4.13% in 2020. The median error rate last year was 4.8%, compared to 1.7% in 2020.
In past years, the Zestimate has been split fairly equally between being too high or too low. Last year, 54 out of 114, or 47% of Zestimates were lower than the actual sold price, while 60, or 53%, of the Zestimates were higher than the actual sold price. However, this year 74%, or 58 out of the 78 Zestimates were low. Bozeman’s current median sold price for homes both inside and outside city limits is $900,500. Pitting that against the average inaccuracy of 9.84% gives a potential $88,609 average difference between the Zestimate and market value.
To compare it to National averages, according to Zillow, the Zestimate is within 10% of the sale price in 95.1% of sales. However, in Bozeman it was within 10% of the sold price in just 60% of the sales. Zillow states the Zestimate is within 5% of the sold price in 82.2% of sales. However, in Bozeman it hit within the 5% range for just 37% of sales.
According to Zillow, the Zestimate “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 four months of 2022. In addition to the 198 homes sold both inside and outside Bozeman city limits during these four months, another 107 home sales are currently under contract or pending as of the date of writing.
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.