That is a good point, but I have seen it play out over the years. When prices were going up, you can see the house price estimates lag as the most recently sold homes would sell for a higher price and all the other ones in the neighborhood take a while to update. This was late 2010s to 2022.

Then once the prices started coming down, the opposite. I am looking at multiple homes right now, with multiple markdowns, and yet all the other homes around them have the same estimated Zillow price as many months ago, which the currently listed for homes obviously did not sell at. This is mid 2022 to now.