Zillow Talk: The New Rules of Real Estate Hardcover – Jan 27 2015
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"This book is fantastic. I am making every single person I know read it. Drawing upon an enormous database of housing trends and prices, Zillow CEO Spencer Rascoff and Chief Economist Stan Humphries arm would-be home buyers and real estate addicts like me with the information and data they need to understand the new world of real estate. Smart, empowering, surprising, and a little bit addictive, Zillow Talk is a guidebook for any would-be home buyer or seller. It's also an awful lot of fun."
-Richard Florida, author of The Rise of the Creative Class, University of Toronto
"I thought I knew it all when it came to making money in real estate, but ZILLOW TALK proved me wrong. This book is a game changer for both buyers and sellers."
--Barbara Corcoran, Real Estate Mogul and star of ABC's Shark Tank
"Spencer is one of the sharpest executives I've come to know, and fortunately for you, dear reader, he's in the residential real estate business. This book provides you with the breadth and depth of his knowledge on the subject, wide and deep as it is."
--Dick Costolo, CEO of Twitter
"ZILLOW TALK is an indispensable playbook for anyone interested in the new rules of 21st century real estate. Written by Spencer and Stan, the creators of the largest online database of housing information in the world, the authors transpose a wealth of statistics that only Zillow could provide, into an easy-to-read, jargon free guide to understanding the ever-evolving real estate market of the new millennium. Whether you're buying, selling, an industry professional, or you just love real estate, ZILLOW TALK is a must-read."
--Dottie Herman, CEO of Douglas Elliman
"A fun and engaging must-read for home buyers, sellers, and renters looking to make sense of the ever-changing real estate landscape as they plot their moves."
--Vera Gibbons, Personal Finance Expert and TV Commentator
About the Author
Zillow's CEO Spencer Rascoff was listed as one of America's most powerful CEOs under 40 by both Fortune and Forbes. He graduated cum laude from Harvard University and is an alumnus of Goldman Sachs and TPG Capital. He founded Hotwire, which he sold to Expedia at age 24, and was one of the founders of Zillow in 2005. He currently lives in Seattle with his wife (a pediatrician), three young children and their dog, Fido.
Stan Humphries is Zillow's chief economist and the creator of the Zestimate. Stan has built out the industry-leading economics and analytical team at Zillow and is a frequent commentator on housing trends for CNBC, Bloomberg TV, and Fox Business News. Stan has a B.A. from Davidson College, a Masters of Science in Foreign Service from Georgetown University and a Ph.D. in government from the University of Virginia. Prior to joining Zillow, he worked with NASA and the Peace Corps.
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For example, the early parts of the book deals with identifying areas of faster than normal price appreciation. The authors conclude that the cliche that one should buy near downtown for the best price appreciation is invalid because in many cities, areas 20-30 miles outside of downtown (farther suburbs) often appreciated faster than downtown areas. It is blatantly obvious to me that as a city grows, formerly remote, uninhabitated suburbs become developed and commutable, which increase land values. However, the driving factor of suburban appreciation is the main city's growth, and so to know if a surburban area will appreciate, you have to determine the growth prospects of the city itself. This was not mentioned in the book at all. Instead, the authors looked at the data and said basically "it looks like some suburbs appreciate faster than downtown areas, therefore buy in suburbs, except this is not always true." The last caveat was the most frustrating of all, because of course this data pattern is not always true because the authors never got to the underlying cause of suburban appreciation.
Another example cited in the book is that houses within 0.25 miles of a starbucks appreciate more quickly than houses farther from a starbucks. The appreciation seemed to happen after the starbucks entered an area. Ergo, argue the authors, starbucks CAUSED the price appreciation. Why is this? Authors shrug and say they don't know. I cannot imagine a stupider claim that conflates cause and effect. Starbucks is well known for being a harbinger of gentrification in its real estate choices. When determining where to open a store, Starbucks looks for demographic and housing trends that will (now or in the near future) support a core customer base for a store. They then open the store with the most favorable geographical and demographic trends. The cause of Starbucks location choices is its analysis of the market characteristics that predict gentrification. When these come to fruition, real estate appreciation is a byproduct. The secret sauce is what Starbucks is looking for, not the mere existence of a starbucks. In other words, if a starbucks opened a location on the south pole, would the authors expect an immediate explosion in south pole real estate prices? Or would the more logical conclusion be that Starbucks would never choose to open a store in the south pole? It would be one thing if the authors said "starbucks is really good at identifying gentrifying signals. We don't know what these signals are, but it's enough for buyers to piggyback on their analysis." That would be a fairly unthoughtful recommendation but at least it has some logic as long as Starbucks real estate division continues its good work. Instead, the authors actually said the opening of a Starbucks itself causes real estate appreciation.
There are too many similar examples to list. (Calling a house cute decreases selling prices. Or could it be that small houses are intrinsically less valuable, and small houses are often called "cute"?) The book is also also use infuriatingly imprecise economic terms and concepts. E.g. "scarce supply CAUSES increased demand," saying "economics kicks in" whenever supply and demand is the explanation for something, like economics is a faulty furnace that kicks on and off at whim. The sections on buying/selling your house is insultingly obvious and throws in a few meaningless correlations they found in their mindless datamining without explaining the root cause.
If it's not clear enough yet from my review, don't waste your time on this book. If you have any respect for economics, this book will only frustrate you to no end at how stupid the authors think you are.
Even if you accept their data mining conclusions are accurate, they are based on data for the whole country. Even different neighborhoods in a particular city can be vastly different. Maybe, on average for the whole country, renovating a bathroom adds more value than renovating a kitchen, but that has little relevance to the home you own in your neighborhood.
I admit, it's a catchy title. Who wouldn't want insider information on buying or selling your home. But the information in this book falls way short of this. Don't waste your time or money.
All in all, I think the back half discussions of public policy and real estate were the most interesting and potentially impactful, which the middle filler content on street names, price numbers, and such much less interesting. Thanks for taking the time to write it, I just thought it was going to be more insightful like Freakonomics.
The book is filled with useful topics. Should your buy or rent? Turns out it depends on which city you live in and how long you plan to stay there. Buying a home in Seattle, for example, makes financial sense after 1.9 years, while in Boston it takes 4.0 years. Or did you know that home prices appreciate faster when there is a Starbucks nearby? Apparently homes near these latte vendors appreciate faster. And what about street names? Suprisingly street name suffixes like “Way”, “Place” or “Court” correspond to higher home values than if you live on a “Street” or “Road.”
There are some must-read chapters in here for homeowners, as well. Real estate agents know first-hand that overpricing a home leads to negative results, but it is the most common mistake in real estate. Stan and Spencer crunch the numbers and show you why you’re not “leaving money on the table” by pricing it right, and the best strategy to follow when you do overprice your home. Anyone with a mortgage should read the section on fixed-rate versus adjustable-rate mortgages. Despite what you may think, the 30-year fixed mortgage isn’t the best option for everyone.
The authors even tackle a couple of thorny housing policy issues, with conclusions that don’t match what the media and politicians have told us for decades. Expanding home ownership into low income brackets via subsidies has been a recurring theme in US politics, and it turns out that the policy has historically done more harm than good for the folks it was purported to help. The ever-popular Mortgage Interest Deduction costs the government $100B and is actually highly regressive, helping the wealthiest of homeowners, but providing no benefit to the little guy it is supposed to help.
Overall, I recommend the book. It is an entertaining and informative read and gets you thinking about the housing market like a geeky economist. It has plenty of valuable insights for prospective or current home owners and is perfect for when you want to be the real estate smarty-pants at the dinner party or water cooler.
I thought for sure they were going to say that with Zillow people won't need realtors any more. They said just the opposite actually! They likened it to doctors: With Google, a patient can almost diagnose what ailment they have. However, the doctor is needed to walk them through all the steps to recovery, etc. Similar for the real estate world. Although I can search for any house in an area on my own, I still want a professional negotiator on my side who can walk me through the process of buying/selling a home.
I think you take this book for what it is - a book that shows a lot of corresponding statistics between subjects (some unlikely ones, too). They do point out frequently that they are not necessarily linking one to the other, nor showing "causation". Instead they point out some unusual parallels in our society.
If you are interested in real estate, work in real estate, are thinking of selling or buying a house, then it's well worth your while reading this book.
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