Zillow's Market Heat Index Methodology

What’s the metric?

Zillow’s market heat index is a time series that aims to capture the balance of for-sale supply and demand in a given market. It relies on the listing-based metric inputs: (1) buyer leads per active home listing, (2) percent of listings with a price cut, and (3) percent of listings going pending in 21 days as inputs, which are a mix of ‘leading’ and ‘realized’ measures. This mix allows for the metric to pick up on early signals via the leading metric, but also remain rooted in actual market behaviors with the ‘realized’ metrics. It is the addition of this leading metric, which is derived from Zillow-only data, that provides the key differentiation from competitors and the ability of this metric to respond quickly to changing markets.

How to interpret the data

The metric assumes an index value ranging from 0-100. A higher value indicates the market is more competitive (more buyers relative to sellers).

We consider:

• A score of 67 or above to be a “strong sellers market.”
• A score from 56 to 66 to be a “sellers market.”
• A score from 48 to 55 to be a “neutral market.”
• A score from 38 to 47 to be a “buyers market.”
• A score of 37 or below to be a “strong buyers market.”

The index values are calibrated so that 2019 market conditions — a representative pre-pandemic baseline — anchor the center of the distribution. This makes scores comparable across markets and over time. For example:

• Region A has a higher temperature than region B, so region A has more buyer competition than B and more supply pressure in the region.
• Region A is up 10% month over month, indicating the competition in the region is increasing. This suggests there are more buyers looking at homes.
• Region A is down 5% year over year, indicating that compared to last year it is slightly easier to buy a home.

More information on the metric’s three inputs

• User engagement on Zillow’s active home listings: A leading indicator of housing demand. When the value is low, there are fewer buyers indicating they are interested in available homes. If the value is high, it suggests a high level of interest and competition amongst potential buyers for each home listing.
• Share of for-sale listings with a price cut: A high percentage means sellers are frequently reducing their prices, suggesting a cooling/cool/cold market. Conversely, a low percentage signifies that sellers can maintain or even increase their asking prices, indicating a warm/hot market.
• Share of for-sale listings going pending within 21 days: A measure of market speed. A high value demonstrates a fast-moving market where homes are selling rapidly (hot), while a low value indicates a slow-moving market (cold), with homes taking longer to sell.