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maxblackmore's review
3.0
Spencer Rascoff is a co-founder of Zillow. Stan Humphries is an economist and runs the analytics group at the company. They shared some interesting insights from Zillow’s data analysis regarding residential property investments in the US. One of the innovations Zillow had was using hundreds of simple models rather than complex models to better utilize hyper local data.
Some of the interesting insights are:
1) The single most important factor that determines buying versus renting is how long you plan to live in a home - which is location dependant. The breakeven horizon takes longer in some of the metros (such as DC and Boston, both ~4 years in 2014), but shorter in others (1.4 years in Dallas-Ft.Worth).
2) Homes adjacent to the city center (typically less expensive) often tend to appreciate faster than those in the city center (typically more expensive). The spread between them tends to shrink over time. One exception is Seattle where neighborhoods are more homogeneous.
3) Neighborhoods are most likely to gentrify if they have: 1) older homes; 2) low home-ownership rates; 3) some access to more popular neighborhoods. For example, when a sub-par neighborhood had more than 17% of its homes >40 years in 1980, then it would appreciate faster than half the neighborhoods in the county 47% of the time.
4) Properties near Starbucks appreciate faster and are more resilient in recessions.
5)The bottom 10% homes in more affluent neighborhoods tend to underperform (a.k.a don’t buy bad houses in good neighborhoods). For example, those affluent buyers in Park Slope are not looking for a $375k co-op. However, the worst homes in the hottest neighborhoods do tend to outperform. But it is very hard to get the timing right. The correct strategy: buy a decent home in the right neighborhood.
6) In gentrifying neighborhoods, new high-density developments such as condos and apartments will drive up prices for cheaper properties.
7) NYC, SC and NM offer more egalitarian education and thus school quality does not drive home value much. The Rust Belt states of OH, PA and MI are at the other end of the spectrum. The relationship between school quality and home value is exponential. For example, in PA, moving from 5 to 6 in GreatSchools ratings represent a 15.4% increase in home value. But moving from 8 to 9 represents a 60.1% increase.
8) 5/1 ARM and 7/1 ARM can be great for people with shorter investment horizon because of the lower interest rates in the initial years.
9) The foreclosure market is much more efficient than people think, especially in liquid markets. In markets with lower velocity, the foreclosure discount would be higher. For example, Cleveland had 25.8% foreclosure discount in 2012; Pittsburgh 27.4%.
10) Ask the inspector for advice on additional inspections as some areas may not be covered.
11) Mid-range bathroom renovations offer the highest ROI; kitchen renovations (regardless of level) offer the lowest.
12) There is typically a sharp spike in Zillow visitors making contact with real estate agents in the early spring, ramping up in the third week of April, and continuing into July. Nationally sales peak at the end of June. Listings spike between the third week of February and the beginning of March. Homes listed in the last week of March sold the fastest and for the most money. Warmer weather markets peak in the late spring and colder weather markes peak in early summer.
13) The lucky number 8 will have a 1.5% premium in markets with >10% Chinese descendants.
14) On average sellers overprice their homes by about 6.9%. When a listing is overpriced, it tends to sell for LESS than its estimated market value.
15) The top 1% agents sell at least 22 homes per year. The top 10% sell an average of 7 homes per year. Male agents tend to get higher sales price (+0.4%) but female agents sell faster (+2%).
16) In pro-gay neighborhoods, every additional gay couple (out of 1,000 households) raise property values by 1.1%. In anti-gay neighborhoods, every additional gay couple decreases property values by 1%. Over the past 40 years, home prices gay neighborhoods steadily outperformed the average.
17) Homes in named streets tend to be more valuable than numbered ones (+2%). But in Atlanta and New York, they turn out to be equal. Street and Avenue were favored in the 1950s; Courts, Ways, and Circles were favored in the 1980s.
18) Canadians and Brits are the most active foreign buyers in NYC.
19) Riverside, LA and Phoenix are the most volatile markets. Home values in Riverside swing an average of 2.9% per quarter; LA, 2.6%; Phoenix, 2.4%. Possible reasons could include: 1) their transient employment bases; 2) buying interest among the retired population (who could prolong their stay in their existing homes if the economy is in a bad shape); 3) interests among foreign buyers. Also volatility of this magnitude could easily create negative equity, which in turn worsens market conditions.
20) More walkable neighborhoods offer higher returns and are more resilient in downturns. Affluent areas tend to offer higher, more stable returns, whereas less affluent areas tend to offer lower, more volatile returns.
21) Coastal housing markets do not have a “storm and flood discount” likely because of moral hazard (the government always rebuilds).
22) Bubble indicators: 1) Negative equity; 2) demands driven up by low mortgage rates.
Overall it is a light read and fairly interesting.
Some of the interesting insights are:
1) The single most important factor that determines buying versus renting is how long you plan to live in a home - which is location dependant. The breakeven horizon takes longer in some of the metros (such as DC and Boston, both ~4 years in 2014), but shorter in others (1.4 years in Dallas-Ft.Worth).
2) Homes adjacent to the city center (typically less expensive) often tend to appreciate faster than those in the city center (typically more expensive). The spread between them tends to shrink over time. One exception is Seattle where neighborhoods are more homogeneous.
3) Neighborhoods are most likely to gentrify if they have: 1) older homes; 2) low home-ownership rates; 3) some access to more popular neighborhoods. For example, when a sub-par neighborhood had more than 17% of its homes >40 years in 1980, then it would appreciate faster than half the neighborhoods in the county 47% of the time.
4) Properties near Starbucks appreciate faster and are more resilient in recessions.
5)The bottom 10% homes in more affluent neighborhoods tend to underperform (a.k.a don’t buy bad houses in good neighborhoods). For example, those affluent buyers in Park Slope are not looking for a $375k co-op. However, the worst homes in the hottest neighborhoods do tend to outperform. But it is very hard to get the timing right. The correct strategy: buy a decent home in the right neighborhood.
6) In gentrifying neighborhoods, new high-density developments such as condos and apartments will drive up prices for cheaper properties.
7) NYC, SC and NM offer more egalitarian education and thus school quality does not drive home value much. The Rust Belt states of OH, PA and MI are at the other end of the spectrum. The relationship between school quality and home value is exponential. For example, in PA, moving from 5 to 6 in GreatSchools ratings represent a 15.4% increase in home value. But moving from 8 to 9 represents a 60.1% increase.
8) 5/1 ARM and 7/1 ARM can be great for people with shorter investment horizon because of the lower interest rates in the initial years.
9) The foreclosure market is much more efficient than people think, especially in liquid markets. In markets with lower velocity, the foreclosure discount would be higher. For example, Cleveland had 25.8% foreclosure discount in 2012; Pittsburgh 27.4%.
10) Ask the inspector for advice on additional inspections as some areas may not be covered.
11) Mid-range bathroom renovations offer the highest ROI; kitchen renovations (regardless of level) offer the lowest.
12) There is typically a sharp spike in Zillow visitors making contact with real estate agents in the early spring, ramping up in the third week of April, and continuing into July. Nationally sales peak at the end of June. Listings spike between the third week of February and the beginning of March. Homes listed in the last week of March sold the fastest and for the most money. Warmer weather markets peak in the late spring and colder weather markes peak in early summer.
13) The lucky number 8 will have a 1.5% premium in markets with >10% Chinese descendants.
14) On average sellers overprice their homes by about 6.9%. When a listing is overpriced, it tends to sell for LESS than its estimated market value.
15) The top 1% agents sell at least 22 homes per year. The top 10% sell an average of 7 homes per year. Male agents tend to get higher sales price (+0.4%) but female agents sell faster (+2%).
16) In pro-gay neighborhoods, every additional gay couple (out of 1,000 households) raise property values by 1.1%. In anti-gay neighborhoods, every additional gay couple decreases property values by 1%. Over the past 40 years, home prices gay neighborhoods steadily outperformed the average.
17) Homes in named streets tend to be more valuable than numbered ones (+2%). But in Atlanta and New York, they turn out to be equal. Street and Avenue were favored in the 1950s; Courts, Ways, and Circles were favored in the 1980s.
18) Canadians and Brits are the most active foreign buyers in NYC.
19) Riverside, LA and Phoenix are the most volatile markets. Home values in Riverside swing an average of 2.9% per quarter; LA, 2.6%; Phoenix, 2.4%. Possible reasons could include: 1) their transient employment bases; 2) buying interest among the retired population (who could prolong their stay in their existing homes if the economy is in a bad shape); 3) interests among foreign buyers. Also volatility of this magnitude could easily create negative equity, which in turn worsens market conditions.
20) More walkable neighborhoods offer higher returns and are more resilient in downturns. Affluent areas tend to offer higher, more stable returns, whereas less affluent areas tend to offer lower, more volatile returns.
21) Coastal housing markets do not have a “storm and flood discount” likely because of moral hazard (the government always rebuilds).
22) Bubble indicators: 1) Negative equity; 2) demands driven up by low mortgage rates.
Overall it is a light read and fairly interesting.
yodamom's review
If you are thinking of buying or selling a home you need to read this book. Do not go into such a huge investment at the merry of another persons input alone. this book is filled with all kinds of hints of what to look for in your next investment or what to focus on when selling. I found it fascinating and wish I had read it 20 years ago after dealing with some less then helpful agents and losing money
amandae129's review
4.0
An interesting book for those who are buying or selling a house. The best part was the chapter on the federal mortgage interest tax deduction and how it actually does not help most people and how the government could better offer assistance to home buyers.
kymme's review
4.0
Helpful, data-based info on buying and selling homes, with some unexpected humor and mini history lessons. Kinda wish I'd read it *before* we listed our house.
rick2's review
2.0
Freakonomics but in real estate.
Owners of Zillow share their advice for selling and buying a home backed by data. Same issues here as with Freakonomics. Interesting correlations but I’m wary of the proposed causations.
For example. Homes that end in 9 before the zeros end up selling for more. A home priced at 149,000 will end up selling for more than the same home priced at 150,000. Their advice “price your home with a 9” fails to take into account a whole suite of other factors. Are homes priced at 149,000 more likely to be sold by a professional (realtor, investor) who will maximize their knowledge of how to sell a home? Are those homes sold by owners who work in marketing or business, and perhaps know how to negotiate a sale better or present their home for maximum value. Do homes sold for a round number come from less motivated sellers? Or perhaps there’s entirely different reasons. However the authors seem happy to propose their answer and move on. This lack of true investigation is frustrating, but understandably outside the scope of this short book.
The facts are fun nonetheless. And there are plenty of amusing contradictions to conventional wisdom around home purchases.
Owners of Zillow share their advice for selling and buying a home backed by data. Same issues here as with Freakonomics. Interesting correlations but I’m wary of the proposed causations.
For example. Homes that end in 9 before the zeros end up selling for more. A home priced at 149,000 will end up selling for more than the same home priced at 150,000. Their advice “price your home with a 9” fails to take into account a whole suite of other factors. Are homes priced at 149,000 more likely to be sold by a professional (realtor, investor) who will maximize their knowledge of how to sell a home? Are those homes sold by owners who work in marketing or business, and perhaps know how to negotiate a sale better or present their home for maximum value. Do homes sold for a round number come from less motivated sellers? Or perhaps there’s entirely different reasons. However the authors seem happy to propose their answer and move on. This lack of true investigation is frustrating, but understandably outside the scope of this short book.
The facts are fun nonetheless. And there are plenty of amusing contradictions to conventional wisdom around home purchases.
karang's review
3.0
This book really is for those looking to buy a house, sometime in the next few months. Since it's a deep look at Zillow data, I think some of it might be irrelevant now (book was written in 2015).
heykellyjensen's review
These books are my kryptonite. This one wasn't as great as other real estate books I've read, but interesting enough to dip in and out of.