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Brier Dudley's blog

Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

February 14, 2007 at 12:44 PM

Zillow and WSJ: Honeymoon’s over

Continuing a refreshing trend of newspapers watchdogging Web 2.0 startups’ reliability, instead of just announcing their latest funding rounds, the Journal analyzed how Zillow had valued 1,000 homes that sold recently.

Seattle software developer Alex Bosworth noted that the Journal basically launched Zillow. A year ago, Zillow chose the financial paper as the vehicle to introduce its online real estate valuation service. Bosworth also noted that Zillow’s online traffic has fallen over the past year, just like real estate, based on Alexa traffic numbers.

The Journal concluded that “Zillow’s ‘Zestimates’ often are very good, frequently within a few percentage points of the actual price paid. But when Zillow is bad, it can be terrible — off the mark by more than 25% on one in 10 homes. In one case it was off by $2 million.”

The poster house illustrating the story was a 7,600-square-foot house recently built in Fall City. Zillow valued it at $661,756, but it sold last month for $2.69 million.

Zillow must have known the story was coming; it raised that house’s valuation by $2.15 million on Feb. 5.

The story was a good idea, but the Fall City place seems like an odd one to highlight. It was a tricky one to value because Zillow draws on public records, which take time to capture the value of new construction. The $661,756 estimate seems like a blend of the median value of homes in that area, adjusted up for the size of the property, but not up enough to reflect the value of the construction.

Still, it’s probably not the valentine that Rich Barton was expecting today.

Comments | More in | Topics: Startups, Web

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