Discussing Zillow getting sued for crappy Zestimates, low inventory of homes, foreclosures, mortgage rates, another reason for the housing crash and more…
It was bound to happen: A homeowner has filed suit against online realty giant Zillow, claiming the company’s controversial “Zestimate” tool repeatedly undervalued her house, creating a “tremendous road block” to its sale.
A Zestimate “is not an appraisal,” the company says on its website, but instead is “Zillow’s estimated market value” using its proprietary formula. Another way of looking at the Zestimate error rate: Roughly one quarter of the time, the value estimate is off by 10 percent or more of the selling price, and wrong by 20 percent or more 10 percent of the time.
The 5 percent median error rate may sound modest, but when computed against median sales prices, the errors can translate into tens of thousands of dollars — hundreds of thousands in high-cost areas.
While I am not a fan of Zillow, it is effective in reaching buyers. The Zestimate, on the other hand, is crap in my opinion. Another serious problem is if buyers are relying on Zillow to find out about homes, they may be too late.
With the low levels of inventory in some price ranges/areas, serious buyers need to be Pre-Approved and work with a buyers agent so they don’t miss any homes. The good ones go quickly…
Speaking of Tight Inventory
If you have been reading this blog for any length of time, you already know that the housing market is shifting ever more towards a complete recovery. It appears that this year could be the year that the real estate market finally takes off.
House prices have increased.
Home sales have also increased.
Both foreclosures and short sales have decreased considerably.
But, there’s one important thing that could make the recovery incomplete: there ain’t enough homes for sale.
Even though home buyer demand appears like it’s going to stay solid through the summer, the number of homes for sale just isn’t keeping up.
It isn’t just me saying this. Check out what a few real estate or housing experts think:
Lawrence Yun, Chief Economist at NAR said:
Sellers are in the driver’s seat this spring as the intense competition for the few homes for sale is forcing many buyers to be aggressive in their offers. Buyers are showing resiliency given the challenging conditions. However, at some point — and the sooner the better — price growth must ease to a healthier rate. Otherwise sales could slow if affordability conditions worsen.
Tom O’Grady, Pro Teck CEO said:
The lack of inventory is very real and could have a severe impact on home sales in the months to come. Traditionally, a balanced market would have an MRI (Months Remaining Inventory) between six and 10 months.
This month, only eight metros we track have MRIs over 10, compared to 27 last year and 48 two years ago—illustrating that this lack of inventory is not being driven by traditionally ‘hot’ markets, but is rather a broad-based, national phenomenon.
Ralph McLaughlin, Chief Economist at Trulia said:
Nationally, housing inventory dropped to its lowest level on record in 2017 Q1. The number of homes on the market dropped for the eighth consecutive quarter, falling 5.1% over the past year.
Freddie Mac said:
Tight housing inventory has been an important feature of the housing market at least since 2016. For-sale housing inventory, especially of starter homes, is currently at its lowest level in over ten years. If inventory continues to remain tight, home sales will likely decline from their 2016 levels. …all eyes are on housing inventory and whether or not it will meet the high demand.
As you can see, it isn’t just me that is saying inventory is tight. While this is great for anyone looking to sell, it means that buyers must be prepared and ready to make an offer.
The middle class, can, broadly speaking, align with the rich or with the poor.
If it aligns with the rich, the policies it favors benefit the rich exponentially more than they do the middle class. Tax cuts went primarily to the rich, by magnitudes, for example. Real estate prices rising faster than wages made some middle class families rich, but benefited the rich magnitudes more than the middle class.
The middle class not only justifies its existence ethically by helping the poor, doing so safeguards its own existence.
The right thing to do, ethically, is almost always the right thing to do in policy terms. Those who believe otherwise almost always pay a frightful price for their attempt to be clever in service to their greed and selfishness.
So very very true. The way people are manipulated by politicians and the rich makes it very hard for some people to understand truths such as this…
- 30-year fixed-rate mortgages averaged 4.05% with an average 0.5 point
- This is up from last week when it averaged 4.02%
- Last year at this time, 30-year fixed-rate mortgages averaged 3.57%
- 15-year fixed-rate mortgages averaged 3.29% with an average 0.5 point
- This is up from last week when it averaged 3.27%
- Last year at this time, 15-year fixed-rate mortgages averaged 2.81%
Sean Becketti, chief economist, at Freddie Mac said:
The 10-year Treasury yield jumped 8 basis points this week while the 30-year mortgage rate rose 3 basis points to 4.05 percent. Mixed economic reports over the last few weeks have anchored the 30-year mortgage rate around the 4 percent mark.
Awesome news and gives more people the opportunity to take advantage of the historically low mortgage rates. If buying a home makes sense for you, then my suggestion is to sit down and talk with a mortgage professional ASAP. Find out what is possible for you and investigate all your options.
Many argue that government policies aimed at increasing first-time homebuyers caused the housing crisis. This narrative persists despite considerable evidence to the contrary. Our Housing Credit Availability Index suggests the presence of risky products, not increased lending to riskier borrowers, was a significant contributor to the crisis.
New data from the government-sponsored enterprises (GSEs) now suggest a further culprit: mortgage refinance activity. At the height of the boom, mortgage refinances (refis) were more likely to default than mortgages taken out to purchase a home, mostly because many people were treating their homes as ATMs through cash-out refinances.
Eighty-four percent of GSE refinances in 2006 and 2007 were cash-out refinances. These refinanced loans suffered from sloppier underwriting, so for any set of observable risk characteristics, these refinance loans defaulted more often than purchase loans.
Interesting but as they say in the article, there is plenty of blame to go around. Most of the blame does go to the banks despite their dubious claims they were forced to make crappy loans.
FHFA just reported that serious delinquencies, short sales, deeds-in-lieu, third-party sales, and foreclosures in February 2017 were all down from the previous month. However, foreclosure starts did increase from the previous month.
If we compare February 2017 to February 2016, we see that short sales, deeds-in-lieu, third-party sales and foreclosures ALL decreased.
While this is talking about the entire US, it is great news. Check out some of the charts:
Well, that’s it for today!