Do you know what Amara’s law is? And the Boston condo market

Boston Condos for Sale and Rent

Do you know what Amara’s law is? How it impacts Boston condo market

Borrowing this from Rob’s blog, this is known as Amara’s Law in technology spheres.

It goes:

“We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.”

When the zestimates first came out in 2006, their accuracy was really bad – wrong by 10% to 20% – and those of us in the business laughed them off as a joke. The idea of being able to find out the value of a home with one click was enticing though, so Zillow kept throwing millions of dollars into the project.

They found out that putting a value on a home isn’t so easy, and they still state today that their zestimates have a median error rate of 7.49% – which on a $3 million home is +/- $224,700!

From wiki:

While factors contributing to estimates are described elsewhere, Zillow seemingly overemphasizes home square footage as the major metric driving property valuation. This method may not be unique to Zillow, but unduly distorts value expectations. Listings in areas where land is priced at high premiums often reflect an identical Zillow estimate to that of nearby homes with comparable interior square footage, but where the home might be decades older. Condition, age of home, special features, and proximity to nuisances are insufficiently factored into the estimate. Zillow has made some effort to add balance by including an option for owners to provide their own value estimate, but these figures can be similarly unreliable as being opinion instead of quantifiable.

But homeowners have come to adore their zestimate.

Why? Because it’s been around so long, they believe it to be true.

But it is different now.

I’ve heard it twice in the last week from two different agents that their price is “right in there”, suggesting that they have evidence of their price being right and just get my buyer to pay it. But there they sit, unsold.

Having a zestimate, or having cherry-picked comps to support today’s list price is precarious – it ignores the current market conditions, which are squishy to say the least. The premium, fixed-up, and staged homes are selling briskly, and the others are sitting.

But because the zestimate has been around so long, people believe it must be right. Sellers certainly don’t want to take less! Include 1-2 older sales and sellers and listing agents want to believe the mythical nuclear buyers with 2.2 kids are right around the corner.

Peace be with you