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What's the Zillow Home Value Index?


Before we tackle the Zillow Home Value Index, be sure to learn about the Zestimate home valuation, since this is the building block for the Zillow Home Value Index. A Zestimate is Zillow's estimate of the current market value for a home. We have tens of millions of Zestimates - one for most homes. Our data is refreshed regularly to reflect real estate transactions that could affect you - even if you're not buying or selling a house.

OK, so what's the Zillow Home Value Index?

The Zillow Home Value Index is the median Zestimate valuation for a given geographic area on a given day.

> See the Zillow Home Value Index in your area

Say again?

Essentially, it is the middle point. Exactly half the Zestimates for a region are below this number and half the Zestimates are above it. It is expressed in dollars and is for a particular geographic region (e.g., Zillow Home Value Index = $125,441 for Baltimore on Aug. 18, 2009).

Can you give me another example?

Sure. Let's take Seattle. On Aug. 19, 2009, the Zillow Home Value Index for single-family homes in Seattle was $373,714, which means half the homes have values less than $373,714 and half have values greater than $373,714.

So, how do you create the Zillow Home Value Index?

With lots of data. For example, suppose there are 101 homes in your county. Zillow would create a Zestimate for each of these homes. We then arrange all 101 Zestimates from lowest value to highest and, starting from the smallest value, we would pick the middle one - the 51st - and this would be the Zillow Home Value Index for your county on that particular day.

What's the difference between this and averaging the figures? Wouldn't that be more logical and helpful?

The median Zestimate is much less sensitive to extreme values than the average Zestimate (here, "average" refers to the mean). Look at these two examples and you can see why.

Example 1:

$230,000, $232,000, $242,000, $243,000, $250,000

In this series of Zestimate numbers above, the Zillow Home Value Index is $242,000 (the value in the middle) and the average is $239,000 (add all the numbers together and divide by 5).

Example 2:

$230,000, $232,000, $242,000, $243,000, $923,000

If you change just one number by a large amount, it skews the data. In the numbers above, the Zillow Home Value Index is still $242,000, but the average is now $374,000. Therefore, the median of $242,000 is arguably a better representation of all five numbers than is the average of $374,000.

Since housing data has lots of extreme values in it, the median is a better representation of the general level of the housing market than the average.

Where do you get the data to create the Zillow Home Value Index?

We receive this data from counties and other municipalities, though not all jurisdictions make it available. However, we are adding data all the time. So be sure to check back.

How does the Zillow Home Value Index affect my home?

In many ways! If the Zillow Home Value Index for your county is $215,000 today and was $210,000 yesterday, this means that a typical home in your area is worth more today than yesterday. So, if you're thinking of selling, you can evaluate your own home relative to the surrounding market, or if you're buying, you can learn what's happening in other markets.

How is neighborhood appreciation calculated?

The rate of appreciation on these levels of geography - ZIP code, county, state, U.S. - is based on the Zillow Home Value Index. Cumulative appreciation is the simple ratio between today's Zillow Home Value Index and the Index for a reference period (e.g., the Zillow Home Value Index one, five or 10 years ago).

How often is the Zillow Home Value Index updated?

The Zillow Home Value Index is updated at the same time that we update Zestimates. These updates reflect new real estate transactions that affect an area's Zillow Home Value Index.

Is the Zillow Home Value Index the best indicator of tracking real estate markets?

We feel it is, because with the Zestimate, we have an estimate of the current value of every home in the area and, thus, can estimate what the median sale price of the whole area would be if every home were sold on the same day: It would approximately equal the median Zestimate, or Zillow Home Value Index for that area.

If someone didn't use the Zillow Home Value Index, what would they use?

One popular method is using the median sale price of homes over a certain period of time, such as a month. While interesting, this measure is problematic because it is influenced by the mix of housing sold in the period of time associated with the metric.

For example, if high-end homes were not selling very well, but mid-range homes were, then the median sale price will be lower than it should be. It will not be an accurate reflection of the "general" level of home values because the median is taken from the set of mid-range home sales that happened in the period, ignoring the high-end homes that didn't sell. The median sale price would be a perfectly accurate reflection of home values in an area if every home were bought and sold in the particular time period. Since this is highly unlikely, the median sale price is biased to the extent that the homes sold in a given period are not completely representative of all the homes in the area.

OK, I think I got it. So, how do I find the Zillow Home Value Index for where I live?

Go to the "Homes" tab and enter your address. Then click on the address in the map bubble, then "See home info," the "Zestimate & Charts." The Zillow Home Value Index is located under "How This Home Stacks Up." Remember -- a Zillow Home Value Index can apply to the following geographic levels: ZIP code, city, county, state and U.S.

> See how the Zillow Home Value Index compares to the Case-Schiller and OFHEO Indexes

By Diane Tuman
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