You've probably checked out Zillow.com's "Zestimates" at some point -- those free estimates of a home's value -- so you might have given some thought to how accurate they are. That's the subject of much debate, actually.
The latest volley comes from professors Daniel R. Hollas, Ronald C. Rutherford and Thomas A. Thomson, arguing in The Appraisal Journal that they're really Overzestimates:
The authors -- from the University of Texas at San Antonio -- pitted Zestimates vs. 2006 sale prices of about 2,000 houses in Arlington, Texas. "Zillow indicates that this market is one where its data has its highest accuracy rating," they wrote, adding later: "The likelihood is that in [a] more ... volatile market with a lower accuracy rating Zillow would misprice at a higher rate and larger amount."
Zillow roared back with a response:
"In addition to being limited to only one city in the U.S., the study does not compare sales and Zestimate values during the same time period; it looks at sales in 2006 compared to Zestimate values in January and February 2007 – apples and oranges as it's two separate periods of time," Zillow spokeswoman Jill Simmons wrote in an email to me. "It's unfortunate that this study has been structured in such a misleading, and limited fashion."
Here's how the authors describe their methodology:
And here's how Zillow describes (for a non-mathematician audience) how it arrives at its figures:
How does the Zestimate of your home -- or homes near you -- match up with your sense of value?