The Zillow Home Value Index (ZHVI) is a metric created by Zillow to track the typical home value in a given region. Here’s what each version means:
1. Zillow Home Value Index (average price)
- Definition: This usually refers to the typical home value in a region, not the average in the mathematical sense, but more like the median or a smoothed estimate.
- Use: Helps track overall housing market trends for an area (city, ZIP code, state, etc.).
- Example: If the ZHVI for San Francisco is $1.2 million, that’s Zillow’s estimate of what a “typical” home is worth in San Francisco.
2. Zillow Home Value Index (normalized)
- Definition: This is a version of the ZHVI that has been adjusted to a baseline, often so you can compare changes over time or across locations more easily.
- Normalization methods can include:
- Setting a base year (e.g., 2000 = 100) and adjusting all values relative to that.
- Rescaling to fall within a 0–1 range or 0–100 range.
- Use: Useful for analyzing relative growth or decline rather than absolute prices.
Summary:
Term | What it Represents | Use Case |
|---|---|---|
| ZHVI (average price) | Typical home value estimate | Understand market level in dollars |
| ZHVI (normalized) | Relative changes in home values | Compare trends across time or locations |
Get the Dataset Here : https://www.kaggle.com/datasets/feeldidaxie/king-county-house-sales-usa
Example on the King County Dataset
This scatter plot visualizes the relationship between two variables:
- X-axis (
zhvi_px): Zillow Home Value Index for a region — the “typical” home value. - Y-axis (
SalePrice): Actual sale prices of individual homes.
Interpretation:
- Clustered distribution:
- Most sale prices are concentrated under $2 million, regardless of the ZHVI value (which ranges from ~$310K to ~$430K).
- This indicates that ZHVI is not a direct predictor of the sale price of individual homes, but rather a general market indicator for the area.
- Spread in SalePrice:
- There’s a wide variation in sale prices at each ZHVI level.
- At any given ZHVI (e.g., $350K), you see homes sold from under $1M to over $6M — likely due to property size, type, condition, or location specifics.
- Outliers:
- A few properties sold for very high prices (e.g., $6M–$10M), which may be luxury or unique properties that aren’t well represented by the ZHVI.
- Weak correlation:
- The spread of dots shows no strong linear trend — suggesting that while ZHVI gives a regional estimate, it doesn’t strongly correlate with individual home sale prices.
In summary:
- ZHVI gives a regional benchmark, not an individual price estimate.
- Sale prices vary widely, even within the same ZHVI range.
- Useful takeaway: While you can use ZHVI to get a feel for a market, individual valuations require more granular data (property-specific details).