Six years ago, when I sold my old house and bought this one, I'd never heard of Zillow.
At the time, I was doing what financial gurus said was smart. I sold the smaller home that I owned free and clear, and used that money as a down-payment on a larger house. I had remarried, had two children, and the old 2 bedroom 1 bath house (900 sq ft) did seem a bit small. Putting down $80,000 on the $372, 500 home (Appraised at more than $400k) eliminated me having to pay the mandated mortgage insurance, which all the gurus also said was smart. I used the rest of the money to pay off credit debt and to pay off my auto loan and my ex's auto loan. (Not surprisingly, he's now an ex). Because of my excellent credit, and my ex's 6-figure income, we were able to get a 5% interest loan.
That was back in 2003. By 2004, home prices had started to go up. This was about the time I discovered Zillow [Editor's note: According to the Zillow website and its representatives, Zillow went live in Feb., 2006]. I'm guessing that's when a whole lot of other people discovered Zillow. I was very surprised and pleased to see that the home I'd purchased for $372,500 was now worth significantly more. In fact, by June of 2006, Zillow said my home was worth $624,000. I was offered $600k to sell the home, but declined. On second thought, maybe we should blame the gurus a little, too, because if I recall correctly, it was about this time that they started suggesting that people take the money out of their 'home equity' and invest it in the stock market. It sounded logical. Take out a home equity loan at 6-8%, fix your house up a bit, invest it in the stock market and get returns of at least 10%. Win-win. Soon, you'd be on your way to being the next Donald Trump. Of course, somehow those experts were wrong about the stock market, too.
I think a lot of people thought that way. My ex did. He wanted things. A new boat, a new truck, vacations, gadgets. That's one of the reasons he's now an ex. But I didn't budge. I refused to take out any of our so-called 'equity'. So a lot of those gadgets got put on my credit card. And then the inevitable. Divorce. Not just divorce, but nasty, dragged out divorce. Divorce that through lawyers drained me of the $40,000 I had left from my malpractice lawsuit. A typical divorce that is still not sorted out, but which results in no child support. Money that was supposed to have lasted me for years for my disability gone. It was about this time that the housing market started flattening out.
Eventually, I got full custody of our credit card bills- and the house. (3 years later, our child custody is still not resolved). Which meant that I essentially got back my original $80,000 down-payment AND $279,000 of mortgage debt. Or did I? By that time, the bottom was falling out of the market altogether. By February of last year, according to Zillow, the house was barely worth what I paid for it. Talking to 6 different real estate agents, every one of them declined to represent me unless I was willing to sell the home for less than what I OWED on it.
Goodbye $80,000 down-payment! That only represented 15 years of fulltime work invested in my old house. Obviously I'm kicking myself that I didn't just keep my old house, but that's a different story.
Two blocks away, on my street, a house has sat on the market for 6 months. Their asking price is $200k, which is a tad below what Zillow says it's worth. This is a house that 4 years ago would have sold for $500k- and maybe it did. I keep seeing homes that have sold even in the last couple of years at rock-bottom prices back up for sale, obviously due to default. I finally talked to an honest real estate agent (the one that sold my old house for me), and he said that 75% of home sales in our county are foreclosures- and that did not include short-sales (selling for less than what you owe). So when I read these cheery interviews with realtors in our local paper, I get a little cynical. Things only seem to be looking up for realtors and investors.
I asked my realtor-friend point-blank: Isn't it true that if I can't keep up with my mortgage payments, my only real option is to go to foreclosure or do a short sale (foreclosure leaving you with bad credit and short selling leaving you with nothing but a bad taste in your mouth and possible carry-over mortgage debt on a property you no longer own)- with the outcome being that some investor will buy my house for less than what I owe? And that then I could hopefully rent my own house back from them for less than what my previous mortgage was, but for more than their new mortgage is- putting income in their pockets? And he said-- yes.
You'd think that with the prices so far down, that there'd be a whole lot of hard-working people who've saved their money being able to finally get into an affordable home. So why isn't that happening? Why is it that I keep seeing houses being bought, and then rented out by property management companies? A house on the next block, and the house directly behind me have recently sold for a fraction of what they were worth 3 years ago. Both have been extensively gutted and are being expensively being remodelled. Not something people just trying to get an affordable home do. But my neighborhood is one of the oldest and nicest. In nearby neighborhoods, homes that have been on the market for 2 years are finally being bought at pennies on the dollar- and then getting a slap of paint put on and a fresh 'for rent' sign on the front lawn. Because of Zillow, I can track how much any particular house has sold for, and what it's mortgage payment is. Comparing that to how much is being charged for rent on these recently bought homes makes it clear SOMEONE is making a profit off this. How is this not a land grab? How is this not a transfer of wealth from the bottom to the top?
No doubt it has something to do with the rules for buying foreclosures and short sales. Funny how lenient banks were with some people a few years ago (I was not one of them). Now, to buy a foreclosure, you can't just be pre-qualified, you have to be pre-approved. Before you even look at a house. Who could do that, other than an investor? To buy a short sale, you have to have cold, hard, cash. Who could do that, other than an investor? Whether this info is correct or not depends on whether the 6 real estate agents I've spoken with were telling the truth. I'm not a realtor nor an investor. Very soon I may not be a homeowner, either.
Recently, I found a home nearby being short-sold. It was in poor condition, but was only $69k. A check on Zillow showed it had been bought less than 5 years ago for $300k. Within a couple of hours of when it appeared on our local MLS, my fiance and I drove over to look at it. There was already a real estate agent there, drawing up papers for a woman driving a Mercedes Benz. He refused to show us the house, saying he was already accepting a cash offer. Zillow later showed the house sold for $60k. Within weeks, after minor landscaping, the house was up for rent. not surprisingly, the rent was quite a bit more than needed to cover the $60k selling price.
All of which makes me wonder- why shouldn't Zillow and all those rabid-talking financial gurus be held responsible for the mortgage meltdown? Everybody who isn't having a mortgage payment problem right now seems to gleefully point to supposed sub-prime loans, or specifically and racistly point to minority loans as the problem. But nobody looks at the yuppies who just followed what gurus and companies like Zillow implied to them- to use their home 'equity' like a cash cow to fund better paying investments. There are at least 3 homes nearby that are in foreclosure sales, and they have half-completed remodels done. Obviously they borrowed against their equity and then got stuck when the bottom fell out. Even though I never caved into that temptation, I understand why they did what they did. Every financial authority at that time was screaming that the best thing any homeowner could do was to take out their home equity and use it to improve their home, because it would just raise the value of their (and the entire neighborhood's homes) home value. It was extolled as smart and common sense. And checking sites like Zillow only reaffirmed that this approach was working.
The financial gurus are now all over the place claiming that the stock market is rebounding, and singing the virtues of those who have extra cash to 'invest' in buying up foreclosures. Who does it benefit to turn things from the dream of every hard-working person to own a home back into a land of landlords and rentors? Investors.
I think Zillow is culpable because they should have been responsible enough to have reported WHY home values were going up. Not because they were valued more, because current property taxes had risen, or because of actual appraisals- but because banks were more willing to hand out home equity loans which just SEEMED to make the homes more valuable. Essentially, they were reporting that homes were worth more because there was more debt on them. Cars values don't rise when you borrow against them! I also think all those gurus are responsible as well. If they are so smart, why didn't they see this coming? My guess is that they did, and they rode that all the way to the bank. No matter to them- they have a new market to sell their advice to- and it isn't the working people like it was before.
It is time to stop finger-pointing at the supposed sub-prime lending as the blame for all of this. They did not cause the housing bubble. Over-inflated valuation of homes based on nontangible variables is what caused it. I know several people in my neighborhood who are trying to sell their homes just for what they paid for them- one has been on the market for over a year- and none of them were sub-prime. Like me, they all put down a substantial down-payment, had good credit, got low interest rates, and did not borrow against their equity. And, like me, they all suffered from either a significant illness or medical problem, divorce, or unexpected unemployment. Therefore, like me, because they wisely made such a large downpayment to avoid the mandatory mortgage insurance costs.... we have no mortgage insurance, either.
I received a cheerful email from Zillow today. It informed me that my home value has increased by something like .5% this month. That's heartening. It means in a couple of months when my home goes into foreclosure, whoever buys it will have .5% more equity.
It is absolutely criminal that our government has chosen to pay the banks off. They could have used that same money to just pay off people's mortgages, and all the supposed 'toxic' debt.
Think about it. If they'd paid off people's mortgages, that money would have gone to the banks. They'd have gotten paid and couldn't complain. People wouldn't lose their homes, wouldn't be in foreclosure. Home values would still be low, but who cares? People really shouldn't borrow against intangible equity anyway. Instead, our government gave the banks billions, and they still claim toxic debt and are still foreclosing, taking homes from the middle and lower classes and essentially handing them over to the 'investors'.
Something really stinks about this picture, and it isn't 'sub-prime' loans. That is such an easy scapegoat- and it draws focus away from the real culprits.
I have been contacted by two different Zillow representatives- one in my comments below and one in a personal email pointing out that Zillow did not start until February of 2006. I have researched and seen nothing to the contrary, so I will at this point change that perception if that is what I gave.
In my defense, in my original article I never stated that I looked up Zilow before 2006, only that after having bought my home I saw Zillow at 'about that time'. After looking at Zillow again, I realize why I had that perception. If you click on a home's 'chart', it brings up a chart that shows your home BEFORE their 2006 start. It implies that they have been tracking your home since before they started. An easy mistake on my part, but one that Zillow may want to change if they don't want people thinking they were around before 2006. Maybe start their charts at February 2006 when they claim they started?
I will note that neither Zillow representative contested much of anything else I said about Zillow. And any Google search will reveal many complaints about the inaccuracies of Zillow evaluations, none written by me. I did not fall for the Zillow reflection of inaccurate home valuations, but I am being indirectly affected by them now.