Zillow CEO on $1 million competition to improve "Zestimates"

A million dollar prize is in store for whoever can help online real estate giant Zillow improve their "Zestimate," an estimate of a home's worth based on algorithms. The company's CEO, Spencer Rascoff, revealed the Zillow Prize competition, explaining that his aim is to "try to unleash the scientific community's creativity and computational power."

"What I'm hoping is that people who have insights from other fields, whether it be self-driving cars or voice recognition – a lot of the advances in those other areas use artificial intelligence, a lot of the same technologies that improve the Zestimate," Rascoff said Wednesday on "CBS This Morning." "And somewhere out there there's a team of data scientists working on some other problem that can be applied to this important problem of figuring out what homes are worth."

The U.S. housing market is gaining strength on job growth and strong consumer confidence. In the first quarter of this year, sales of existing homes jumped to an annual adjusted rate of 5.6 million, up 3.5 percent from 2016 and the best performance in a decade.

Zillow is reaping some of the rewards. The company announced record revenue of more than $245 million in the first quarter. In March, it had an all-time high of nearly 180 million unique users at its six websites and apps.

It hasn't been entirely smooth sailing for the company, however. Zillow was hit with a class action lawsuit filed in Illinois, accusing Zestimates of undervaluing properties and claiming the company should not post the estimate online without consent. Rascoff said he's not concerned about what he called a "frivolous" lawsuit.

"Ultimately what a home is worth is what a buyer will pay for it. So the Zestimate is a great starting point," he said.

Rascoff forecasted "very strong" prospects for the housing market in the next two years.

"In certain areas, home values are up 12 percent. But even the slow markets are still appreciating a couple points. We're now back at peak value. So home values peaked in '07. Huge decline. We're now back past that peak," Rascoff said. "But it's not built on a foundation of sand. Previously home values appreciated to that high level in '07 because of a credit bubble. Now it's inventory constraints. There just aren't enough homes for sale. So it's much healthier recovery now than in '07."