Talking about the "real estate bubble" is a popular parlor game these days. Now you can find your own estimates for how over-or-under valued your neighborhood is thanks to a new web site called Zillow.
Zillow is a free service that's very easy to use. Simply enter an address, street or neighborhood together with a city, state or zip code, and Zillow searches through the information it has compiled on more than 60 million residential properties in the U.S. to provide you with an approximate valuation of the property.
Results are displayed on a map that you can zoom in or out or drag around. If you requested information on a specific property, its "zestimate" is displayed in a pop-up box, showing estimated price, number of bedrooms, baths and square feet, and links to see more details or view information about comparable homes.
Zillow calculates this estimate by taking "zillions" of data points, mainly from public records, and entering them in a formula. Want more specifics? See the what's a zestimate page for details.
Other nearby properties are displayed on the map, each with their own estimated price. Simply click on the icon for any property to see its zestimate.
Zillow relies on different sources of data than the proprietary MLS databases used by realtors. This means that while many of the estimates are reasonably close to an accurate valuation, others are less so.
Unsurprisingly, estimates for large urban areas such as Los Angeles-Riverside-Orange County and the Northern Virginia-Suburban Maryland-Baltimore region are more likely to be within 10% of a realistic selling price than more rural, less populated areas.
Zillow offers a nice chart that displays median error, accuracy and data quality estimates for the top metropolitan areas it has compiled data for. Beneath this chart are estimates for all 50 states.
With this beta version of the site, Zillow estimates that for the entire nation there's a median error of just 7.2%, with 62% of all estimates falling within 10% of an actual selling price. This makes Zillow a useful tool for monitoring real-estate values, but it's far from a 100% accurate indicator that you can unfailingly rely upon.
However, Zillow also offers another cool tool called "My Zestimator" that lets you supplement and refine zestimates for any house, whether you own it or not. With this tool, you can update facts about the house, add information on home improvements, and refine a list of comparables.
And you needn't worry about your local tax authorities using the data you provide to hit you up with a larger bill. Once you've entered additional information and updated the zestimate, Zillow doesn't let you save it. You can print it out, but there's no option to keep the data for future use.
Zillow joins a growing number of hybrid tools that merge real-estate information with maps and other tools. About a month ago, Gary Price wrote a SearchDay article called Terrific Real Estate Search Tools that covered many of these new applications.
Just as online travel services opened up a whole new world to travellers, allowing people to search on their own for information about flights, hotels and other travel related products and services, we're seeing a similar trend in the real estate arena, long dominated by agents and brokers who have traditionally held information very closely.
Interestingly, Zillow was created by Rich Barton and Lloyd Frink, founders of pioneering online travel service Expedia.com. Sites like Zillow will certainly have an impact on the real estate industry, but Zillow's goal isn't to put professionals out of business. Quite the contrary, the company plans a number of programs aimed at real estate professionals.
Even if you don't own a home, it's fascinating to play around with Zillow and observe the striking differences between property prices, both between different regions, and even at the neighborhood level. And Zillow's also a great source of information for speculating on the current state of the so-called real estate bubble many pundits are worrying about.