I've been meaning to analyze Zillow's home price estimate accuracy for a while - especially since my brother keeps talking about those damn Zestimates. He's not the only one, though. A lot of people put way too much stock in what Zillow has to say about their home values.
So I decided to look at some recent closings (like in the last week) in some of the key Chicago neighborhoods that we work in and to compare the price that homes sold for to what Zillow thought they were worth. The key idea is that the best indication of what a home is worth is what a buyer and a seller mutually agreed to sell it at. And I wanted to compare that to the current Zestimate in order to gauge Zillow's accuracy before they have a chance to adjust their Zestimate based upon the latest sale. We ran the analysis for both condos and single family homes in neighborhoods like Lincoln Park, Near North Side, The Loop, etc... However, I excluded condo sales in buildings with over 40 units in them because those should be a lot easier to predict.
The results for the 36 closings we looked at with good data are in the table below but, to summarize, the errors ranged from 5552% (not a typo) to -52%. On average the error was 30.4% based upon the absolute values and when I throw out that one really big error.
You just can't rely on a computer for something like this. A great example is my parent's home in Dallas, which Zillow estimates to be worth $658K and we currently have on the market for $525K.