Monday Morning Cup of Coffee takes a look at news coming across HousingWire’s weekend desk, with more coverage to come on larger issues.
First and foremost, our thoughts are with all those affected by Hurricane Harvey. The hurricane made landfall on Friday evening, stalling over parts of Southeast Texas, just hours away from HousingWire’s headquarters outside of Dallas.
A report issued Friday by CoreLogic suggested that wind and storm surge from Harvey could cause insured property losses of between $1 billion and $2 billion for both residential and commercial properties.
The report, based on the storm’s projected path as of 10:00 a.m. Central on Friday, does not include projected insured losses related to additional flooding, business interruption or contents, because the rainfall is expect to last for several days.
But the damage likely far worse than CoreLogic’s report suggested, as the early projection of the storm showed that Houston would avoid much of the heaviest rain.
But that’s not the case.
The storm settled over Houston over the weekend, creating flooding of “historic proportions” in the nation’s fourth largest city. The images emerging on Sunday from Houston are horrifying and tragic.
In some areas, waters rose to nearly 20 feet.
From the National Weather Service, issued on Sunday morning:
This event is unprecedented & all impacts are unknown & beyond anything experienced. Follow orders from officials to ensure safety. #Harvey pic.twitter.com/IjpWLey1h8
— NWS (@NWS) August 27, 2017
If you want to help the victims of the storm, the Houston Chronicle has details on how to donate to the Red Cross and other information.
As our Kelsey Ramírez reported on Friday, both Fannie Mae and Freddie Mac issued bulletins late in the week, reminding mortgage servicers and homeowners of the government-sponsored enterprises’ disaster relief policies.
“Relief, including forbearance on mortgage payments for up to one year, may be available if their mortgage is owned or guaranteed by Freddie Mac,” Yvette Gilmore, vice president of single-family servicer performance management at Freddie Mac, said.
Fannie Mae has similar disaster relief policies. Click here for more on the housing industry’s response to Harvey.
On Saturday, the Board of Governors of the Federal Reserve System, the Conference of State Bank Supervisors, the Federal Deposit Insurance Corporation, and the Office of Comptroller of the Currency issued a statement providing financial institutions with some guidelines about how to handle the aftermath of Harvey.
The agencies said that they “recognize the serious impact of Hurricane Harvey on the customers and operations of many financial institutions and will provide regulatory assistance to affected institutions subject to their supervision.”
Click here for the full bulletin from the agencies.
In other news, the real estate industry has long had its issues with the “Zestimate,” the property value estimation tool that appears on every listing on Zillow.
While Zillow describes the Zestimate as a “great starting point” for determining the value of a home, homebuyers and sellers often believe that the Zestimate listed on a home is the true market value of the home.
And that causes issues when the true market value differs from the Zestimate’s projection.
Just last week, a judge in Illinois dismissed a lawsuit brought by a number of homeowners who claimed that the Zestimate undervalued their homes and cost them money when they tried to sell their house.
MarketWatch’s Andrea Riquier gives us more details:
The suit claimed that home buyers read the estimate as an appraisal regardless of whether it was an official appraisal and expected to negotiate accordingly. Zillow, for its part, had stressed that the Illinois statute made clear that calculations formulated in the way that Zestimates are can’t be used as official appraisals.
The judge, in dismissing the suit, agreed. “Zestimates are not false, misleading, or likely to confuse,” the ruling read. “The word ‘Zestimate — an obvious portmanteau of ‘Zillow’ and “estimate’ — itself indicates that Zestimates are merely an estimate of the market value of a property.”
Zillow has consistently tinkered with the algorithm that powers the Zestimate over the years, improving its accuracy, measured by how close the Zestimate is to the eventual sale price of a home, from 14% in 2006 to 5% as of a few months ago.
But a 5% error rate is still a 5% error rate, which leads to problems like lawsuits in Illinois.
Zillow wants so badly to make its Zestimate even more accurate that earlier this year, it launched a contest to improve the algorithm that powers the Zestimate, offering $1 million to anyone who could markedly improve the Zestimate’s accuracy.
But Zillow isn’t sitting on its hands and waiting for someone else to improve the Zestimate. Its analysts are also still working to make the Zestimate more accurate.
In fact, as part of an announcement about the Zestimate contest, Zillow said Friday that it just released a “major” update to the Zestimate that brings the error rate down from 5% to 4.3% nationwide.
Zillow said that it accomplished this latest improvement by moving its data into the cloud.
“To establish these new gains in home valuation accuracy, Zillow transitioned all its data to the cloud and can now compute the Zestimate in near-real time,” Zillow said. “Now, Zillow can process three times as much data as before, which allows its data scientists to experiment and iterate faster than ever, creating more accurate valuations.”
As for the contest itself, Zillow said that it is very encouraged by the response.
According to Zillow, more than 15,500 people have downloaded the competition dataset since the contest launched in late May. Additionally, more than 2,500 competitors from 76 countries have submitted an average of 350 entries a day to the contest.
“The Zestimate is trying to answer an incredibly complex and important question, and with the strong contest submissions we're already seeing, we are on pace to reach our goal of becoming one of the world's most impactful machine learning competitions,” Stan Humphries, Zillow Group chief analytics officer, said. “In the meantime, we think homeowners will be pleased with the new enhancements we've made to ensure they have a trusted starting point when monitoring the value of what is often the largest purchase of their lifetime.”
The contest runs through Jan. 15, 2019.
And in other online real estate news, it’s been fascinating to watch investors’ response to Redfin, which went public one month ago.
The online real estate brokerage, which also recently expanded into mortgage lending and buying homes directly from homeowners, priced its initial public offering at $15 per share. Investors loved the stock in early trading, pushing Redfin above $20 per share in its first day of trading.
Since then, Redfin’s stock has continued to climb, closing Friday’s trading at $24.89 per share, an increase of nearly 66% from where the stock opened back in July.
And while the company’s executives were, shall we say, rather pleased with the results on that first day, the fun part for the rest of us starts very soon, because Redfin is about to have to start revealing its quarterly financial results.
In fact, Redfin announced Friday that it will report its second quarter financial results on Sept. 7, 2017 after the stock market closes. That means investors and the rest of the housing industry will soon get a good look at what Redfin’s got going on under the hood.
Should be interesting.
And with that, have a great week everyone!
