The Internet (read: inexpensive information dissemination) comes to the notoriously informationally-challenged housing market. The WSJ reports on a new website, zillow.com, which, as the WSJ says,
uses data such as tax records, sales history and the actual prices of “comparables” — homes in your area that are similar to yours — to come up with an estimate, which it calls a “Zestimate” [of a house’s market value]. It backs up the estimate with lavish data — aerial photos and maps showing prices in a neighborhood; loads of charts and graphs displaying historical data and price movements, as well as details on the size and room totals of a home. It even allows you to enter information, like the types and prices of recent renovations, that might change an estimate.
I know the site works and works well because it values my house at a level far higher than I would have expected.
Prof. B worries about the privacy implications. I guess. Just like it’s worrisome that my neighbors know exactly how much I paid for that bag of apples I brought home from the store the other day by going to the store and looking at the price. (I know, I know: “house” does not equal “bag of apples”).
Anyway, I think whatever the costs to privacy, the benefits are potentially substantial. Housing markets are extremely thin and information is scarce. The ratio of price to purchaser income is relatively large, repeat players are few and far between (except realtors, and we all know how helpful they are), and values are idiosyncratic. This site, if reliable, will provide some corrective and inject more information than one would expect from such illiquid markets.
