Zillow.com is a website that is often cited for its index of home values across the nation – but its surveys and data are interesting to local real estate observers, too. Recently it launched a new rental homes index that seeks to measure rental rates throughout the country. The index weighs rental listing prices as well as tax data and homes' sale histories.
The index has some value to prospective area tenants and landlords as well. Ultimately it might help identify local market trends (but their data only extends back to November 2010, so more time will be needed for its usefulness to be proven). It might, though, serve as a tool for comparing markets. For example, the index showed year-over-year median rent increases in nearly 70 percent of metro markets from January 2010 to January 2011, and it reports that rents have appreciated 3% during the same period.
Of course we all know that decisions based on data are only as good as the data itself. Unfortunately, Zillow's track record for accuracy in its market value numbers (it calls them "Zestimates"!) is less than stellar. Although these estimates of value are thought to come within 15% of true market values more than three-quarters of the time in some metropolitan markets, if you are interested in rental homes in that other quarter, you might be misled. And in many small markets, it misses the mark entirely. In some markets, the estimates are so far off base that Zillow doesn't even attempt to quantify their accuracy.
The other disadvantage to relying on an algorithmic index like Zillow's is that algorithms can't replace the local market knowledge that is any real estate professional’s stock in trade. The data we collect and analyze on area rental homes comes from our own knowledge…and what is more important, is put it into a context that allows local tenants and landlords alike to use the information to make sound decisions.
If you are considering buying an income property, you need to know the most recent and accurate information for the local rental homes market – so I hope you won’t hesitate to call me for a consultation.