Internet search statistics and the housing bubble

We are often asked how a slowdown in the housing market would impact our business. Surely there would be less interest in homes posted for sale online but does that logic also apply to interest in Zestimates? Bill Tancer from Hitwise, the internet metrics company, believes the opposite is true and as Hitwise’s General Manager for Global Research, he probably has the data to prove it. In a Time magazine article, provocatively titled "Will the housing bubble burst in 2007?", Tancer wrote;

"On the supply side, bad real estate news is met with increased visits
to websites that calculate home values based on comparable sales, such
as www.housevalues.com and www.zillow.com.
During bad news days, sellers apparently feel the need for a comforting
pat on the shoulder, checking-in on home sales in their neighborhood to
estimate the current value of what’s likely their biggest investment."

In the article, Tancer discusses how data derived from the search habits of internet users can be a useful indicator of market trends. With 80% of buyers starting their home search online,  the web is now ground zero for new trends in the real estate industry.

One clear trend from Tancer’s analysis is that we are growing tired of discussing a housing bubble. Tancer says interest in the "housing bubble" search term is at a two year low — it now has just 4.4% of the popularity it had when bubble-hype reached its peak in June 2005. Thanks to Google trends, you don’t have to be Bill Tancer to figure that out — their chart (below) seems to mirror Tancer’s findings.

Like most discussions about a "housing bubble" however, Tancer’s analysis seems inconclusive on the subject of the immediate future of the housing market. One interesting observation comes from a comparison of searches for the term "homes for sale" to "homes for rent". Tancer says that the ratio between the two shows an increase in interest in renting. I pulled that comparison in Google trends (below) and agree that the gap between owning (blue line) and renting (red line) seems to have narrowed as of late but there’s a lot of seasonality in both data sets. It is clear that interest in renting has stepped up in each of the last three years but that phenomenon could probably be explained by recent growth in internet use amongst renters. It seems like a stretch to point to this comparison as conclusive evidence of a decline in demand for housing.

So, while it’s great to know that Zillow’s business model is resilient to changes in the real estate market, we are no closer to knowing what’s going to happen next. What do you think?