Zillow announced a slight drop in their home value “Zestimates” for the first time in a decade—which stands out mainly because Zestimates are not exactly the gold standard for accuracy.
If you’ve ever heard a seller say, “But Zillow says my house is worth (fill in pie-in-the-sky estimate),” you’ve probably had to bite your tongue or take a deep breath before responding.
Zillow’s News in a Nutshell
Zillow reports that U.S. home values dipped 0.1% from June to July, marking the first drop in the raw Zillow Home Value Index since 2012. That was the year home values dropped after the housing bubble and consequent bust of the aughts (2000-2009).
Home values went down in 30 of the 50 largest U.S. metros, but they’re still up 16% from July 2021. And with mortgage rates hovering above 5%, prices are still high enough to keep many potential buyers on the sidelines.
Zillow admits as much. And it doesn’t come as a surprise for anyone staying on top of market slowdown updates.
But, it does show that everyone in the industry is feeling the shift.
There’s a Meme for That
Actually, where Zillow is concerned, there are quite a few.
In honor of this news, we combed Instagram for some of the best #Zestimate memes to honor this moment in Zillow history.
Behind those lower Zestimates
All joking aside (for now), what Zillow is experiencing with the tiny drop in their automated home value estimates reflects some of what we’re seeing in the housing market:
- Days on market is increasing
- Buyer demand cooling and sellers backing off
- More negotiating power for buyers who can still afford to shop for homes
- Drops in home prices are biggest for metros most Americans can’t afford anyway
- Former pandemic hotspots are also seeing a (predictable) drop in home values
What we’re not seeing is a return to anything that feels “normal.” The extreme price growth during the early- and mid-pandemic months isn’t likely to reverse itself.
On top of that, mortgage rates are still considerably higher than at the beginning of 2022, though they’ve dropped slightly. And many financially-stressed buyers are still unable to afford the mortgage payments that go with those rates.
As for sellers, some are enjoying the drop in new listings, as seller competition cools a bit in August and houses are still selling at (or a little above) the asking price. The drop in the supply of homes for sale is likely to keep prices rising, if more slowly than before.
The bottom line
Whatever happens with the housing market, you can bank on Zillow Zestimates remaining a topic of conversation with your sellers.
What data are you sharing with your clients to help them understand the market?