By Kent Lardner for Lending Central

The Wall Street Journal did an analysis of the Zillow valuation model for 1,000 home sales in early 2007. It found that “the median difference between the Zillow estimate and the actual price was 7.8 percent.”

According to The Wall Street Journal test results, when it was wrong it was very wrong, off by 25 percent for one in 10 properties. This is certainly the case here in Australia too. You could be testing a model and find the first 9 properties return amazing results, all within a few percent of the sale price, then the next one could be 20% or more off target. It’s these few large errors that have such a significant impact on the forecast standard deviation (error estimate).
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