Why Is My Home Value Dropping on Zillow?
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Richard Haddad Executive EditorClose
Richard Haddad Executive EditorRichard Haddad is the executive editor of HomeLight.com. He works with an experienced content team that oversees the company’s blog featuring in-depth articles about the home buying and selling process, homeownership news, home care and design tips, and related real estate trends. Previously, he served as an editor and content producer for World Company, Gannett, and Western News & Info, where he also served as news director and director of internet operations.
If you’ve been checking your home’s value on Zillow over the years, you’ve likely been pleased to watch it steadily increase. But lately, you may have noticed a decrease in the website’s famous “Zestimate” and found yourself asking, “Why is my home value dropping on Zillow?”
You’re not alone; homeowners throughout the country are asking the same question. As would-be buyers and sellers wrestle with high interest rates, Zillow’s latest forecast indicates a 1.9% decline in home values this year.
In this post, we’ll explain the gears behind Zillow’s Zestimate values and why they can sometimes turn backward.
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How does a Zestimate work?
Because you’ve been tracking your home’s value on Zillow, you’re already familiar with the Zestimate — Zillow’s estimated market value for a property. But how exactly is this number calculated?
Zillow uses a proprietary algorithm powered by machine learning models and statistical analysis to generate Zestimates for over 116 million homes nationwide. These automated valuation models (AVMs) process hundreds of data points, including:
- Home-specific details: Square footage, number of bedrooms and bathrooms, lot size, and location.
- On-market data: Listing prices, descriptions, comparable home sales, and days on the market.
- Off-market data: Tax assessments, prior sale prices, and other public records.
- Market trends: Seasonal fluctuations, local supply and demand, and broader economic factors.
The Zestimate is refreshed multiple times a week to reflect the latest available data. However, the model’s accuracy varies depending on how much reliable information Zillow has about your home and similar properties in your area.
Why is my home value dropping on Zillow?
If your home’s Zestimate has recently decreased, it’s natural to wonder why. After all, for most homeowners, your house is your largest financial asset. A decrease can be alarming, especially if you are making plans to sell your home. Here are five key reasons your Zillow home value might be trending downward:
1. Zillow updated its algorithm or data sources
Zillow frequently makes updates to its Zestimate model to improve accuracy. These changes might cause your home’s value estimate to rise or fall, even if nothing about your home has changed. Seasonal market shifts or new data points, like recent comparable sales, can also affect your estimate. Zillow updates Zestimates multiple times per week to reflect these kinds of changes.
2. Your home is missing key details on Zillow
If Zillow doesn’t have a complete picture of your property, your Zestimate might not fully reflect its true value. For example, if you’ve remodeled your kitchen or added a bathroom, but those added-value updates aren’t included in your Zillow listing or local tax records, they won’t factor into the estimate. Claiming your home on Zillow and updating its features — like square footage, amenities, and upgrades — can help improve accuracy.
3. Your home transitioned from off-market to on-market
Zillow’s algorithm treats listed homes differently from those off the market. When you list your home for sale, Zillow pulls in fresh data like your asking price, listing description, and comparable sales, which can cause your Zestimate to shift — sometimes up, sometimes down. Likewise, if your home comes off the market, Zillow stops factoring in listing data and relies more on historical records and public data, which may cause the estimate to drop.
4. Nearby home sales are pulling prices down
Zillow’s model compares your home to others in the area, sometimes across a wide region. If nearby homes are selling for less, especially homes similar in size or style, your Zestimate may reflect that shift. Even if your home has high-end finishes or unique features, the algorithm can miss these nuances without specific data.
5. The broader real estate market cooled
If your local market slowed down or shifted toward a buyer’s market, it’s likely your Zestimate adjusted to reflect softer demand. Factors like rising inventory, higher mortgage rates, or fewer buyers can all influence home values in your area, which in turn impacts your Zestimate.
While Zestimates and other online estimates are useful for tracking trends, they aren’t a substitute for a professional opinion. A local real estate agent can provide a personalized comparative market analysis (CMA) that considers your home’s unique features and current buyer demand. Some homeowners may also consider paying for a pre-listing appraisal.
Action tip: If you believe your home’s Zestimate doesn’t reflect its true value, you can claim your home on Zillow and update its details. While cosmetic changes like new paint may not move the needle, major updates like renovations or additions could improve the estimate.
How accurate is Zillow’s Zestimate?
On its Zestimate homepage, Zillow explains that the accuracy of its home value estimate tool depends on the location of your home and the availability of data in an area. Zillow reports its median error rate for on-market homes (listed for sale) nationwide is 3.2%, meaning estimates for half of all on-market houses are within 3.2% of the final sale price, and half are not.
On-market Zestimate (3.2% median error rate) example:
For a home listed at $500,000, half of Zestimates will fall within $16,000 of the eventual sale price (3.2% of $500,000). This means the Zestimate could typically range between $484,000 and $516,000.
If your home is off-market (not listed for sale), Zillow places its median error rate much higher, at 7.52%, but explains that this is “still close enough to do your preliminary planning.”
Off-market Zestimate (7.52% median error rate) example:
For an off-market home valued at $500,000, half of Zestimates will be within $37,600 of the home’s actual market value (7.52% of $500,000). So, the Zestimate could typically range between $462,400 and $537,600.
The Zestimate tool’s accuracy is computed by comparing the final home sale price to the Zestimate that was published on or just prior to the property’s sale date.
Error rate observation: It’s interesting to note that in older consumer posts dating back just a few years, Zillow advertised a much lower median error rate for on-market homes at just 1.9% or 1.94%. This isn’t surprising given the dramatic shifts in the U.S. housing market since home prices peaked in May 2022.
Zestimate accuracy can fluctuate by city or region
On Zillow’s website, the company explains that some areas have more detailed property information available, such as a home’s square footage and the number of bedrooms or bathrooms, while others do not. As with any AVM, the more data available, the more accurate the estimated value will be.
For example, in Colorado cities like Denver, Colorado Springs, and Fort Collins, Zillow has previously cited lower on-market median error rates of 1.3%, 1.12%, and 1.20%, respectively. But in locations like San Francisco, where less data may be available, it has cited a higher on-market median error rate of 3.41%.
Other home value estimator tools to compare
While Zillow’s Zestimate is widely recognized, it’s a good idea to compare home value estimates from multiple sources. Different tools use varying data sets and models, and some may have more accurate information for your address than others. So, checking a few can give you a broader sense of your home’s potential value.
Here are some popular home value estimators you can explore:
- HomeLight Home Value Estimator
- RE/MAX Home Value Estimator
- Chase Home Value Estimator
- Bank of America Home Value Estimator
- Realtor.com Home Value Estimator
- Redfin Home Value Estimator
- Bankrate Home Value Estimator
- Eppraisal Home Value Estimator
- For Sale by Owner Home Value Estimator
Get a clearer picture of your home’s value and expert advice
While Zillow’s Zestimate and other AVMs can provide a helpful starting point for understanding your home’s current value, it doesn’t always tell the whole story. Shifts in market conditions, incomplete property data, nearby sales, and changes in Zillow’s algorithms can all cause your home’s estimated value to rise or fall.
If you’re concerned about your home’s value dropping on Zillow or simply want a more accurate assessment, consider connecting with a top local real estate agent. A professional can provide a comparative market analysis tailored to your home’s unique features and local buyer demand.
An experienced agent can also offer expert guidance on home improvements or timing strategies to help increase your property’s value and maximize your sale proceeds. They can also advise you on which repairs are worth making before you sell, and which ones to skip.
Partner with an expert today
HomeLight’s free Agent Match platform makes it easy to find top-rated real estate agents in your area based on actual sales data. And if you’re looking to buy your next home before selling your current one, HomeLight’s Buy Before You Sell program can help you make a smooth transition without the stress of juggling two transactions at once.
Whether you’re preparing to list or just keeping an eye on your home’s value, HomeLight is here to help with a network of top-rated professionals and seller resources.
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