Source: Zillow —
The Zillow Home Value Index (ZHVI) now incorporates the more accurate neural Zestimate.
Starting with Zillow’s January 2023 data release, and for all subsequent releases, the full ZHVI time series has been upgraded to harness the power of the neural Zestimate, which is the Zestimate displayed on home detail pages nationwide. The neural Zestimate employs a neural network that leverages a deeper history of property data — such as sales transactions, tax assessments and public records, in addition to home details such as square footage and location — to react more quickly to current market trends.
Importantly, the way the Zillow Home Value Index is calculated has not changed, just the Zestimates used to construct it. Because the Zestimates that make up ZHVI are now more accurate, the new ZHVI will better reflect market changes at the national and local levels.
How ZHVI Works
The Zillow Home Value Index (ZHVI) is designed to capture the value of a typical property across the nation or the neighborhood, not just the homes that sold, and we do so by drawing information from the full distribution of homes in a given region.
ZHVI measures monthly changes in property-level Zestimates, capturing both the level and appreciation of home values across a wide variety of geographies and housing types (e.g., all single-family homes in ZIP code 98101). This is how we focus on actual market price changes, and not changes in the kinds of markets or property types that sell from month to month.
Why Use ZHVI
The Zillow Home Value Index is optimized to achieve three main objectives:
- Timeliness: Data for a given month is published within weeks of the month ending. Other housing indices often publish monthly data at a significant lag of one month or more after the close of a given month.
- Comprehensiveness: ZHVI draws on Zestimates calculated on more than 100 million U.S. homes, including new construction homes and/or homes that have not been listed for sale in many years. This offers a fuller picture than indices that rely solely on data recorded only on those homes that sell in a given period.
- Visibility: Because of the way the ZHVI is constructed, it gives users the ability to observe dynamics in very small regions and/or among very specific subsets of homes. The increased responsiveness and accuracy of the neural Zestimate, now behind the ZHVI, should improve small area price signals, making ZHVI even more actionable for users.
Mechanically we do that by taking an aggressively trimmed-mean (middle third) of Zestimates and chaining back with a repeat-Zestimate index. Ever heard of a repeat sales index? Like that, but instead of the same property finally selling again to make a matched pair of home prices the model can use, the ZHVI synthesizes changing neural Zestimates on all individual properties each month, providing insight in neighborhoods and housing segments where other methods fail for lacking enough of the “right kind” of data.
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