Zillow's take on North Shore home values (Chicago, Evanston: days on market, sales)

[Ophidian14]

Home Value Graphs & Charts for 422 Woodlawn Ave, Glencoe, IL 60022 - Zillow

Ignore the spikes to $1.38m and $1.25m on that chart for a moment. What's more interesting to me is the outright COLLAPSE that supposedly has taken place in the last year and a half or so.

That is, this property is nearly back to its 2000 purchase price, and has lost around 40% from its peak values. So what gives? Chet? Is the North Shore the next Florida or Nevada?

[chet everett]

The chart is more an indictment of the silly "fully automated" algorithms that Zillow allegedly relies on. I believe they also try to tweak both the individual valuation and the algorithms themselves on an irregular basis. Thus instead of having a known set of inputs their calculations take in and throw out data points as the "tweaks" change.

My basic take on Zillow is that it is a toy or parlor game -- somewhat fun to spark a conversation but useless for anything that needs a serious valuation.

I have limited experience in Glencoe, but I know that like other desirable areas the tear down game ran prices into the stratosphere in several ways -- an older truly undesirable home might become available in a top notch location in town (say east of Greenbay Rd, blocks from the Lake Michigan) the value was purely "land value". Then a few months later when details of that sale were widely available the effect was folks that had homes that might have been in slightly better shape but not as desirable location used that as a comp to overprice their older homes. Teardown buyers used the "land value plus non-bombed out" residence value (which was a mistake as the teardown should STILL have relied just on land value and stuff further from the Lake is always worth a lot less...). More months go by, the builder of the first teardown may now may be ready to list a brand new home on the site of the first teardown. The values appears to have tripled or more. The seller of the second teardown tries to list for the same inflated price, and may even have some support as NOW the sellers of other desirable homes are going off the prices of the NEW construction and a whole cycle of price escalation feeds itself. Some builders really did put lots of goodies into those "second effort" tear downs too -- boom in home theaters, high tech comfort systems and high end materials really meant some places were barely profitable north of $2M. Lots of foolishness.

The MLS and public records cannot adequately describe just how much "stuff" you got with some of these houses -- Zillow does not know the difference between a totally tricked 4 bed 3 ba place that has outdoor fireplace that overlooks Lake Michigan and a 4 bed 3 ba place that overlooks the tracks on the wrong side of Greenbay Rd with "outdoor living space" that amounts to a few telephone poles.

So I think the "run up" that did happen was, for most part, "real" for the well done teardowns but completely beyond the capability of Zillow (and even some owners / real estate agents) to appreciate.

Unfortunately there are a handful of complete nutty (borderline stupid...) folks that signed up for the tricked out house. If they also signed up for the tricked out assortment of vehicles with similarly insane car payments and did not plan for the property tax bills that may annually exceed the cost of a new German luxury/ sports car AND the firms they work for no longer is throwing barrels of bonuses to everyone the harsh reality that they signed up for an unsustainable lifestyle is smacking them hard. They may be asking some "peak price" to sell their place but the market of buyers is much smaller, a bit wiser and a whole lot less reckless. There are still people that have amazing wealth, and while they can afford to buy some of these places with cash on hand the mood of today has shifted. These folks (and their advisers) know that signing up to be the most expensive home in an area is an invitation to support a huge portion of the services that rely on property tax and they only get the same voice as others that kick in a much more modest sum.

This same trend has been seen before. I remember lots of really wealthy folks in DuPage Co cheering even louder than the little old ladys that were supposed to be helped by the property tax caps back when those were enacted BACK IN '94.

Changes at the tippy top of valuation generally do not translate linearly, and that is the biggest error of Zillow and other automated services.

If you see a home that you like in Glencoe and it is not really odd / unique I bet you can find recent comps with the help of a local real estate agent in a matter of minutes via MLS records. Use that data to make offer and Zillow to laugh about what it "might have been"...

{finally it is really hard for me to say that prices that still exceed $800k on median have "fallen off a cliff" -- those original values of 10+ years in Glencoe were some of the highest medians in all of the region, and remain so. I think the "discriminating buyers" that have always been drawn to affluent areas never really looked elsewhere during the run up, but some of them just did not want to play the move up game. This is very different than other areas that never really were all that desirable / in demand but the lure of easy financing drove prices to ridiculous level in towns that had no history of luxury buyers. That is what is I consider the "cratering" of prices in some parts of the Chicago region, but as long as those folks are happy with their six car garages and 10,000 sq ft media rooms in the middle of nowhere then that is not my problem....}

Good Luck!!

[Suburban Mom of 2 Kids]

Thanks Chet for your explanation. I have always considered Zillow a "fun" tool to play with, but not necessarily based upon anything really "tangible"...you've provided a plausible explanation as to the logic behind.

Thanks again.

[Ophidian14]

Chet I knew you wouldn't disappoint ... so all things considered, do you think the figure of $813k is reasonable then? Says this house was built in 1999 so I'm assuming it was caught up in the "game"...

[chet everett]

Originally Posted by Ophidian14

Chet I knew you wouldn't disappoint ... so all things considered, do you think the figure of $813k is reasonable then? Says this house was built in 1999 so I'm assuming it was caught up in the "game"...

Honestly if you want to evaluate any individual house you need to get a decent buyer's agent, have them pull the comps, then go "kick the tires" -- is the place with the kind of features that are cheapie cosmetics or the solid stuff that people really spent money on. And even location that is west of Greenbay Rd is still in Glencoe, which means odds are your neighbors are pretty well off and unlikely to be forced in a downdraft for some paltry sum. It is not like there were even any massive builders active in Glencoe on the cheap -- the sales history may have spiked up 20% or so but not the huge gains that were seen in areas of "tract mansion" mania.

"Location" can be an effective shorthand for "the right kind of people" in many cases...

[Rlest8]

Very well said Chet. Public sites like Zillow, Trulia, etc. are no match for an agents's expertise and that expertise is free to a buyer. 422 Woodlawn is around the corner from me. Very nice neighborhood just west of Green Bay. I agree with Chet that while all locations have seen depreciation, certian suburbans areas have not seen the decline in prices that some others have. Good luck with your search.

[Ophidian14]

Chet thanks, next time you're in that neighborhood, can you swing by?

[cohdane]

I don't believe in Zillow. That said, the North Shore-- Glencoe included-- is sucking wind. Moved here two years ago and have been following trends closely. Inventory is up and prices continue to drop. Until that metric changes (and the glut of the million$ plus dead weight inventory clears), there's no calling a bottom up here.

You asked about Florida and Nevada. Right now, Glencoe's average days on market is right up there with Miami's. There are no more pay option ARMs to finance these fantasy homes. Interest rates are near historic lows, but the market is stagnant. Where do you think the prices are headed?

Redfin.com* and AltosResearch.com have real data. Study it and decide for yourself how much of a drop the North Shore has taken...and how much more of a drop is yet to come. It's gorgeous here. But the market is ugly.

*FYI, Redfin's sold data set includes all sales in the past 90 days.

[US-Traveller]

The North Shore has experienced the biggest price declines it ever has according to my agent. This was mostly due to the teardown phenominon, that led to a glut of inventory. Much of that inventory is gone and prices are stabilizing and days on market is declining. Glencoe was reportedly the hardest hit, along with parts of Glenview. Apparently Wilmette and Evanston have been the most stable. Lake Forest and Highland Park still have more inventory than their neighbors to the south in Cook. Winnetka has been hit pretty hard, some forclosures popping up east of Green Bay.