Why Are Home Prices Rising?
As we head into the second year of the coronavirus pandemic, many people are looking for new housing. Despite home sales dipping 18% in April 2020, home prices are rising. Between working from home and the nationwide move away from large cities, house prices have soared 7.4% compared to 2019.
There is a simple explanation: supply and demand. Even though plenty of people are buying homes, the number of new listings dropped by almost half in mid-April.
So whether you are buying or selling, you shouldn’t rely on Zillow for an accurate price. Speak with a licensed loan officer and real estate agent instead. You’ll find out how much your current home is worth, or what you can comfortably afford in this market.
Zillow lists information about homes for sale and rent in the U.S. and Canada. These listings include criteria such as price, number of bed/bathrooms, square footage, and so on. The Zestimate feature uses information from nearby comparable listings and public data to estimate an unlisted home’s value.
Especially now, though, the Zestimate is not going to be accurate. In standard market conditions, Zillow only advertises the Zestimate to be within 10% of the actual home value. The tool is meant to be used as a starting point in valuing your home. Now, with so many factors manipulating home values, the available data will not be accurate.
Let’s take a look at the factors you’ll need to consider when valuing your home that the Zestimate usually gets wrong.
Buying a Home Inaccurate Home Pricing
Historic data can only do so much to describe the current market. You may be using Zillow to compare neighborhoods in your area and determine which will suit your needs and budget. However, if homeowners in a neighborhood have started holding onto their homes longer, these values will not be accurate.
Further, COVID-19 has increased demand for single-occupancy homes in lower-density neighborhoods. That quaint town an hour outside of the city might not be the affordable suburb it was five years ago. A licensed real estate agent can tell you exactly what they are seeing in the current market.
Inaccurate Mortgage Affordability
Mortgage affordability calculators are, again, a good starting point. Zillow can only calculate what a mortgage payment might look like based on the Zestimate purchase price and the down payment details you provide. A licensed loan officer can take a look at your finances and discuss your home budget with you.
A loan officer can take into consideration local assistance programs, various mortgage types, and tax breaks you might qualify for. Based on your income, you may need CMHC mortgage insurance which caps your monthly payments. Even if you think you could swing a $1900 mortgage, the hard numbers might not work out. A loan officer will find a budget that works for you without putting you at risk.
Selling a Home
Inaccurate Home Data
Zillow uses the date and price of the last sale to determine a home’s Zestimate. However, this data may not be accurate for your home. Zillow can’t take into consideration changes in home value that occur without selling. For example, if you’ve added amenities to the property or renovated the interior, the Zestimate will not reflect this value.
While you can manually adjust certain details about your property, this will not immediately change the Zestimate. In fact, Zillow cautions that it may not change the Zestimate at all. If you have made any changes to the property since it was last listed, or the assessed value has changed, your Zestimate will likely be too low.
Inaccurate Market Data
In a market like this, home prices are much higher than they were even one year ago. Depending on your area, your Zestimate might be 15% lower than what you could get for your home. It is best to go through a licensed real estate agent who can compare your home to other homes being listed in the area and price it accordingly.
Zillow Doesn’t Know You
For buyers and sellers, a licensed real estate agent should be the first person you call when you start the process. A good agent can recommend a loan officer to buyers, give sellers an accurate idea of their home’s value, and give personal advice. Zillow knows data, but Zillow doesn’t know you.