Home appraisal sites track decline
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TEXT OF INTERVIEW
Vigeland: I really don’t want to spend the next few moments telling you about the latest rash of housing statistics. It’s still a horror show. Enough said.
So let’s talk about dinner parties. The ones where we used to jabber on about how much we paid for our homes and how much those online Web sites said they were now worth. Not what we talk about anymore, is it? And yet, Zillow, Trulia, and Cyberhomes.com still get our eyeballs. But we wondered what, exactly, they’re good for.
Let’s put that question to Nic Retsinas, Director of Harvard’s Joint Center for Housing Studies. Thanks for joining us.
Retsinas: Nice to be with you.
Vigeland: What role do these appraisal Web sites play in kind of the overall housing market?
Retsinas: Well, they give people a sense of what the value of their home is. Lest we forget, for most people, their net worth is concentrated in their home. And people of course are concerned about seeing an erosion in the value of their home, which they see as the principle part of their net worth.
Vigeland: And that really is the opposite of what we were using it for three or four years ago, which is to watch how our home values were going up and up and up, right?
Retsinas: In the past, it really was used to give some substance to bragging rights, “Gee, look how much my home has appreciated in value. Look how much richer, I am, how much richer I feel.” Unlike the stock market, where every day you know what the clearing price is of a share of Apple stock or IBM stock, a home isn’t as nearly as liquid an asset. And this is really a way to overcome that illiquidity.
Vigeland: I really have to question how they come up with these numbers, because I went on a couple of Web sites and looked at my own home. There was a $300,000 difference between what cyberhomes.com said my home was worth and what Zillow said it was worth. Do I just need to stop looking at this? What is really the point of these Web sites anyway?
Retsinas: You have to ask yourself why you’re looking at it, because until you’re ready to sell your home, it really has no value, until you find a willing buyer.
Vigeland: Well that’s true, and let me tell you why I was, it’s because we were thinking about refinancing. And I wanted to get some idea of what my home might be worth, before I paid for an appraisal. But this really doesn’t tell me anything.
Retsinas: It will give you an idea. The problem is it’ll give you a variety of ideas. All of these Web sites used data from sales in the general area where your home is. Some of them will apply a sort of rates of general market appreciation, some of them will factor in information about the economy.
The models are not particularly transparent, so it’s hard to say specifically what they look at. But they do not take into account whether your home is a better home, better kept or worst kept, than your neighbor’s home.
Vigeland: I guess mine just shocked me. $300,000, I could buy another home with that difference.
Retsinas: I mean we have these Web sites in other sectors too. The so-called “Blue Book” in terms of value of a used car, gives you some sense of what your used car is worth, but it doesn’t say that’s the price you’ll get if you bring it to a dealer. It doesn’t say that’s the price you’ll get if you sell it to a neighbor. It is an approximation. I think the real irony of all these sites is this obsession and this focus on the home as a financial asset and purely a financial asset. And now in a sense, we’re paying a price for that.
Vigeland: So what do you think the popularity of these sites say about the way we do think about property?
Retsinas: People are trying to translate the macro-information that they read and listen to everyday about what’s happening in the economy, what’s happening in the house market. And they want to ask that question, “What about me? What about my home?”
But it can influence behavior. For example, if you looked at these sights and your home was worth a lot more than you thought it might’ve been from listening to the headlines, you might say, “Well, I guess I’m a little richer than I thought I was. I guess I could be a little a freer with my spending than I thought I could be.” Or vice versa. And it’s the behavior, particularly the consumer behavior, that ultimately undergirds our economy.
Vigeland:Nic Retsinas is the director of Harvard’s Joint Center for Housing Studies. Thanks as always.
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