John Rebchook is a former Rocky Mountain News reporter with more than 30 years of experience in writing and communications... Forbes.com this week published another article on the Denver-area housing market, but many in the local observers wished it had focused its national spotlight on how well the market is performing. The second article, published Monday, comes in the wake of an April 5 article that pilloried the Denver market as the second-worst in the nation, based on data supplied by Zillow.com. Many in the residential real estate community – and even Denver Mayor John Hickenlooper – questioned the veracity of the Zillow information, which showed a 27 percent increase in the unsold inventory, as well as about twice the number of unsold homes on the market as tracked by Metrolist.
Below is the article posted on Monday by Francesca Levy. She even mentions me in the piece, although I would not describe myself as a “critic.” Rather, I am messenger giving others a forum to voice their opinions. In this case, however, it was difficult finding someone supporting the conclusions of the first article.
Forbes article
“An April 5 article that ranked the Denver metro area’s real estate market as the nation’s second worst-selling elicited objection from the city’s real estate community. Some Realtors and real estate bloggers disagreed with the housing inventory numbers, provided by Zillow.com, that contributed to the rankings.
Many felt that Zillow’s numbers, which showed a 27% year-over-year increase in homes for sale on the site and an inventory of over 42,000 unsold properties, were inflated, because the site hosts multiple same-property listings, and transactions may not be recorded as quickly as they occur. This means properties could be on Zillow, but no longer on the market.
Zillow’s metric measured inventory from January 2009 to January 2010, the latest available when the article ran. Metrolist, a firm that collects and analyzes Colorado real estate data, shows a March 2010 inventory of 20,073.
Zillow.com confirmed that double counting was possible. Zillow spokeswoman Katie Curnutte says that Zillow’s numbers represent the homes for sale on the site, and that data from January will differ from any count that’s more current. She added that the company regularly takes on new partners who provide the site with listings, skewing year-over-year comparisons.
“It can be difficult to derive any assumptions about market conditions from the year-over-year numbers,” she says.
Zillow provided Forbes.com with year-over-year homes-for-sale numbers for each of the metropolitan statistical areas examined; each metro was scored by the same measures. Since Zillow has acknowledged that these numbers may have been artificially increased, Forbes.com has decided to limit the use of year-over-year homes-for-sale statistics from the data provider.
“Though Zillow’s numbers allowed us to compare the number of homes for sale across the country’s metros,” says Lucy Maher, executive editor, Forbes. “We recognize that these numbers may not have given us an accurate look at local inventories.”
In addition to the number of homes for sale on Zillow.com, used to measure inventory, the story looked at home price data from the National Association of Realtors; and sales rates from Moody’s Economy.com. The article looked at each of the country’s Metropolitan Statistical Areas with a population of more than one million.
Metrolist’s data looked at the housing market two months later. What’s more, it may not account for all foreclosures and new home sales. Still, Metrolist spokeswoman Melissa Olson says that those differences alone can’t explain why Zillow reported over twice as many homes for sale than Metrolist.
“In the Denver market, new home sales and foreclosure sales are not significant enough to make a doubling effect,” she says.
Critics including John Rebchook, who writes about local real estate in his blog InsideRealEstateNews.com, Krystal Kraft, a local Realtor who first raised her objections to the story via Twitter, and Denver Mayor John W. Hickenlooper also voiced their objections to Zillow’s data.
“It was hard for me to imagine we could have gotten into such a desperate environment without anybody noticing, and without me hearing about it,” says Hickenlooper. “When I first read the story I talked to brokers who said a year ago we had a six-month supply of homes and now we have a five-month supply, so we’re actually doing better.”
The National Association of Homebuilders, a lobbying group, reports that because of a lack of overbuilding in Denver during the housing boom, signs that home prices are normalizing and foreclosures falling below the national average, they anticipate that, on the whole, Denver real estate will steadily emerge from the recession.
“We don’t expect the Denver market to be either best or worst, but rather to be pretty middle of the pack, improving with a broad swath of United States housing markets,” wrote Donna Reichle, NAHB spokeswoman, in an e-mail. “Our forecast for the Denver housing market is for recovery continuing this year from the early 2009 bottom and gaining momentum through 2010 and beyond.”
Local response to article.
“I thought it was interesting,” Hickenlooper said Tuesday afternoon. “They didn’t go as far as describing the health of the Denver housing market as we might have liked or desired. But they did explain, and they were very open about, what the problem was. I would have liked to have heard some more positive descriptions of our real estate market. But I have no complaints.”
Hickenlooper said it is difficult to measure if the first article caused any damage to the market.
“Anecdotally, you do hear about transactions that deals that didn’t close that might otherwise not have closed because of the article,” he said. By the same token, Hickenlooper said, it is difficult to know whether the second article will erase doubt from prospective buyers who were influenced by the first one. “The thing now is to put it to bed in an official way and put it behind us,” Hickenlooper said.
Peter Niederman, an owner of the Kentwood Cos., said he was pleased with the second article, ‘but I was hoping that she would go into detail about how great the Denver market is. The main thing that came out from her second article is that she realized that Zillow might double-count information and isn’t the best source of information on the local housing market. She admits it and was quick to do it, which is commendable.”
Niederman, however, said he wished she had pointed to statistics that showed the improving market. “We probably started the year with eight months of inventory, and now we’re at about five months,” Niederman said. “That is a very good place to be. Those are good numbers. I like the trend.”
Like Hickenlooper, Niederman said it is hard to quantify the impact of the first one, and the second article, for that matter. “You do hear rumblings that some deals might not have happened, or people have had second thoughts, of course,” Niederman said. ‘”If a real estate broker who may be working with a buyer who read the article, can now show him the second article, which provides some ammunition, or cannon fodder, to say this may be the best time to buy.”
Word getting out
Tom Clark, executive vice president of the Metro Denver Economic Development Corp., said he wants to get the word out about the second article.
“I think it is great,” Clark said. “We plan to give it wide distribution.”
He said that he was disappointed and surprised by the first article, because he had always held Forbes in high regard. “Whenever I was interviewed by Forbes in the past, it was always old-school, with the reporters calling me back to check their facts,” Clark said. “Of course, that was Forbes, the magazine, and not Forbes.com. But I would think that the same standards would apply.”
Clark said in this fast-paced information world, it may be tempting to use information from any source, without checking its accuracy first.
“We have always been kind of suspect of Zillow, which is why we don’t use their information,” Clark said. Many Denver-area Realtors have said since the first Forbes.com article came out, that they frequently find that homes they have listed on Zillow remain there after they have been sold, giving credence to the notion that Zillow over-counts unsold homes on the market.
David Simonson, a broker with RE/MAX Professionals, said he is “excited” about the second article. He said he has found Zillow to be “problematic” for years, and thinks using MLS statistics from Metrolist paints a much better picture of the market than Zillow does. He said about two years ago, a buyer almost backed out of buying a $600,000 house that had been appraised twice, because Zillow estimated its value at only $483,000. Also, he said he has had problems with other brokers pretending on Zillow that they were listing homes in which he was representing the owners.
Somewhat surprisingly, perhaps, none of the buyers or sellers Simonson was dealing with were troubled by the first article. He said his clients shopping for expensive homes do their own extensive due diligence, while those at the lower-end find what a national publication says irrelevant. ”I did get a few phone calls from people who were neither selling nor buying, who wanted to know how the MLS could get it so wrong,” Simonson said. “These are the people who glance at the headlines before rushing to work. I explained to them that they got the “wrong one, wrong,” Simonson said. “I told them that Zillow is very user-friendly, but is not a good real estate-evaluation tool. I told them the MLS is good data, with no leeway or emotion involved. It factually tells you what 20,000 Realtors in the Denver area are doing.”
Unintended benefit of first article
Larry McGee, principal of the Berkshire Group, said that the second article will not immediately reverse any damage done by the first one, such as people being spooked from buying homes or suffering buyer’s remorse.
“I do think the first article was bad,” McGee said. “I do appreciate the fact, personally, they reconciled the fact that they did have a problem. I do think they threw Zillow under the bus. I think we all know now that Zillow’s approach to listing active inventory is not very good for statistical analysis. They don’t vett the information, they don’t purge it, they get information from different sources, which constantly changes. Zillow does serve a purpose. We probably list all of our active listings there. The problem is it is very hard for the typical broker to change the status once the home has been sold, so it languishes there for months.”
Now that Forbes.com has indicated it will not use Zillow’s year-over-year data for inventory comparisons, it should save other cities in the country suffering the problems faced in Denver, he said. “Since it looks like Forbes learned from the mistake it made in Denver, other cities probably won’t have to go through what we did,” McGee said.
But even the first article had an unintended positive consequence, McGee said.
“I think the best thing that came out of this is that a widely disparate group of people came together with no other interest than to make things right, came together,” McGee said. “Without any leadership, a sort of grassroots movement started and I was happy to have something to do with it. There is something extraordinary positive about that. That may even be more important than the article.
(To see what all of the fuss is about, please visit these blogs: Forbes writing another article on Denver, Hick not buying Forbes’ take on Denver housing market, Forbes article criticized)
Contact John Rebchook at JRCHOOK@gmail.com or 303-945-6865.
As a member of the Realtor myself – I knew they were off the track when I heard the radio reference the 1st article. Most of my counter parrts had the same reaction. The problem is as stated in this article : John Q Public hears the radio and assumes it is spot on.
Twain stated there are three types of lies: "Lies, Damn Lies and Statistics"…we can now add Zillow to that list. As Realtors, our Sellers and Buyers have been dealing with misreps by Zillow stats for several years now, while witless underwriters looked to them and came away with bad data. (GIGO). As talking heads, Forbes and their esteemed representative should be much more responsible.
Every realtor, including this one knows that real estate is “local.” Forbes made the mistake of thinking that they could use a single metrics and apply it to every market and get an “accurate” result. I find it humorous that Denver appears to be the only city that bitched about being included on this list. No mention was made about any of the other cities complaining about it. Is this odd or Interesting?
Brokers have to explain away and climb over Zillow to work effectively with Sellers and Buyers. Appraisers have to deal with Zillow and their ilk; AVM’s, mass appraisals, assessor databases, etc. Washington and other “too big to fail” lenders and organizations think the “one size fits all” approach works. Apparently the recent bail-outs, TARPS and financial failures have NOT turned on the lights for them. “Boots on the ground and eyes looking through the crosshairs” do have a better idea of what is happening locally. It seems after all, it is about – Location!, Location!, Location!; or, in this case Locale, Locale, Locale. If they want local information they should go to local sources. The bigger they get, the less facts and reality have meaning to them.
I also wish there would have been more information supporting the fact that the Denver Real Estate market is performing very well compared to many other places in the U.S. Out of 20 U.S. cities in the most recent Case-Shiller Index, Denver was one of just four that showed a year-over-year increase in prices. The Denver market is considerably stronger than a lot of markets.
As a side note, we had represented a buyer who purchased a home; 3 months later it was still posted on Zillow as an active listing. I had to contact Zillow to remove it. It's no wonder their data is incorrect.