Fear not your home value's 'zestimate'

House floating on blue water

In June, Zillow.com announced a big expansion and “improvement” of its real estate database. More listings! More accurate information! This would be a bigger and better Zillow!

Good for me, too, as I constantly check Zillow to see what similar houses in my area are selling for.

Except its "Zestimate" of my house -- how much they guess my home is worth -- dropped by about $60,000, which would mean I’m underwater on my mortgage. I know it’s not completely accurate, but it’s at least some scale to measure if my investment is doing well or not.

I had about five minutes of panic when I saw the new number.

How could that be?

I live in a popular suburb with an honest-to-God downtown, a train to a major city, nice park, good schools.

I didn’t buy my house at the bottom of the market, but I didn’t buy it at the top, either, and I paid significantly less than other buyers at the time for similar homes in the area (The previous owners had to get out and accepted my low ball offer.).

The new, improved Zillow is telling me that I have no equity in my home?

There’s a reason the panic only lasted five minutes.

First, I’m not trying to sell my house right now, and don’t see putting it for sale in the near future. I’m transitioning it into a rental property, and will use it as such for a long time.

Second, it’s just an estimate, drummed up by a computer program that -- no matter how sophisticated -- doesn’t know the local market.

It could factor in a recent bankruptcy sale on my block more that it would actually affect the price. There’s a foreclosure a few blocks over. Is that weighing the Zillow estimate down?

Third, I’m apparently not the only one who’s seen a wild swing in Zillow estimates. Stan Humphries, Zillow's chief economist, told NPR the database change did impact its estimates. "Most were under 10%, but some did see larger changes," he said.

So don’t panic if you see a big swing in your Zillow estimate. It’s not a perfect tool, but it’s still better than anything we had before.

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