Zillow seeks to sell 7k homes for $2.8B after flipping halt • Hacker News Board

Re: Zillow seeks to sell 7k homes for $2.8B after flipping halt

#331

Post by drnonsense42 » Tue, Nov 02, 2021, 5:44 PM UTC

VRay wrote: post #174

drnonsense42 wrote: post #127

Earlier quoted context omitted.

Real estate speculation has likely been around for thousands of years; it’s certainly not new. But, do you see any difference between A. individuals in the mid-2000s speculating on real estate based on individual whims and taking out mortgages they should not and B. large corporations with access to massive datasets previously unavailable, teams of PhDs trained to work on this, equipped with game-changing modeling ca…

those hedge funds don't have access to enough money to move the market that much $2.6 billion is chump change to a medium-sized city with a few hundred thousand residents, much less the US at large We just need to remove zoning restrictions so that market forces can bring houses back down to being an affordable, depreciating asset. https://www.worksinprogress.co/issue/the-housing-theory-of-e...

I agree that 2.6b is chump change relative to the US housing market. In fact, it’s not a large hedge fund, regardless of what they’re trading. I think the real concern here is if this model proves to be profitable and that 3b increases by several orders of magnitude across a much larger set of firms and funds. I’m not saying that will happen, but that is an alarming potentiality.

Re: Zillow seeks to sell 7k homes for $2.8B after flipping halt

#332

Post by trident5000 » Tue, Nov 02, 2021, 5:44 PM UTC

k3oni wrote: post #327

trident5000 wrote: post #319

Earlier quoted context omitted.

Right so even with AI technology and directly owning much of the housing data in the US, they still couldnt make a profit. Any time you buy a house to flip it you are paying a premium in hopes to make a greater premium. Instead they are making a loss. Thats not a good market signal.

From what i've read about all their investment regarding this issue, many of the homes they purchased also needed extra investment/rehab. I think they tried their hand at automation/ai purchasing as they had a lot of data but something fell really short of expectations. What Z did is a bit outside of the current market norms so i wouldn't really use it as a market signal, i'm looking at it more as their idea/system j…

Sure that makes sense, they thought they could power through not putting in the sweat equity and they were wrong. Thats definitely a reality.

Re: Zillow seeks to sell 7k homes for $2.8B after flipping halt

#333

Post by refurb » Tue, Nov 02, 2021, 5:44 PM UTC

the-pigeon wrote: post #296

game_the0ry wrote: post #255

Former real estate finance professional, here. If you were hoping this was a sign of the real estate market falling and perhaps its your chance to get a bargain, think again. > The company is seeking roughly $2.8 billion for the houses, which are being pitched to institutional investors, according to people familiar with the matter. Institutional investors (Blackstone, Blackrock, Colony, et al) will be being in bulk,…

This would be easy to fix with legislative that makes property taxes much higher for investment home properties. I don't think I've ever heard of a politician even talking about that though.

So you want to increase rent across the board?

Re: Zillow seeks to sell 7k homes for $2.8B after flipping halt

#334

Post by muttantt » Tue, Nov 02, 2021, 5:45 PM UTC

mikysco wrote: post #275

game_the0ry wrote: post #255

Former real estate finance professional, here. If you were hoping this was a sign of the real estate market falling and perhaps its your chance to get a bargain, think again. > The company is seeking roughly $2.8 billion for the houses, which are being pitched to institutional investors, according to people familiar with the matter. Institutional investors (Blackstone, Blackrock, Colony, et al) will be being in bulk,…

Aren't all these homes required to be listed on the MLS before being sold? My understanding is a home (at least in California) can't be sold unless publicly listed for X days on the MLS.

Not true. I sold a condo to Opendoor recently and it was unlisted, just a private transaction. They overpaid very generously too.

Re: Zillow seeks to sell 7k homes for $2.8B after flipping halt

#335

Post by [deleted] » Tue, Nov 02, 2021, 5:45 PM UTC

nradov wrote: post #191

JumpCrisscross wrote: post #146

Earlier quoted context omitted.

> Can I ask why? I'm also looking to buy a house and the Zillow offerings, from what I've seen, are not particularly competitive. I agree. (I'm not buying from them.) I am having to deal with sellers who change their ask at the last minute, have past financial issues (if something goes wrong and I have to sue, will they have assets?), want to stay through the winter, et cetera . In most home purchases, expedience isn…

Checking if the seller has assets in case you have to sue is just bizarre. That's not how residential real estate works.

[deleted]

Re: Zillow seeks to sell 7k homes for $2.8B after flipping halt

#336

Post by jurassic » Tue, Nov 02, 2021, 5:45 PM UTC

cs702 wrote: post #136

cletus wrote: post #15

This is a good example of the fallacy of youth: buying too far into hype and being all "the sky is falling" with negative news. It wasn't long ago that we were reading how Zillow et al were going to buy up all the housing stock and keep millenials and Zoomers homeless forever. The people saying this have obviously never gone through a "bust" cycle. This is unsurprising as we've now been in the longest bull market in…

> The people saying this have obviously never gone through a "bust" cycle. Yes, indeed. What's more, those people have a large, receptive audience: An entire generation that has never gone through a "bust" cycle. We're talking about nearly everyone in their early 20's to their mid-30's who joined the workforce after the global financial crisis. They have zero personal experience as to what it's like to be an asset ow…

It's ridiculous to suggest young people don't know anything about downturns. People who are now in their early-mid-30's were some of the biggest victims of the 2008 GFC because they bore the brunt of unemployment and delayed entry into careers (and other life milestones) as a result. If you're an employer, why would you hire a new grad when you could fill all your hiring needs with experienced hands? You wouldn't, and that was the reality in many industries back then. New grad unemployment reached nearly 15% in the period from 2008-2012, significantly higher than the overall unemployment rate. Then there was something like 20+% underemployment, with college grads working as baristas just to have some money coming in while they waited for the economy to thaw so they could start their lives.

Many young people had no opportunity to pursue a real career after taking on four years of educational debt through no fault of their own. "Go to college and get a good job" was revealed to be a complete farce. A few years later as things picked up, there was a fresh crop of new grads behind them without any awkward employment gap or strange jobs to explain. Even those who managed to make their way into solid careers missed out on the stock market and housing asset boom of the last decade because they did not have the deposits and credit history needed to contemplate buying a home until fairly recently when prices went vertical.

Re: Zillow seeks to sell 7k homes for $2.8B after flipping halt

#337

Post by mediaman » Tue, Nov 02, 2021, 5:46 PM UTC

BuckRogers wrote: post #299

mediaman wrote: post #283

Earlier quoted context omitted.

A note on the mortgage: I understand your aversion to debt, but choosing a shorter duration mortgage can increase the probability of default, even if it shortens the time to the point that you are debt free, because for any given amount of cash reserves you have it shortens the runway you have if you lose your income. As long as mortgage money is cheap, the most profitable course of action is to use the 30 year mortg…

I haven't done it for a while but when I last compared 15 to 30 year rates the interest was outrageous, pure usury, for the 30 year. But that isn't my main motivation to sticking to a 15 year, it's just a mechanism to limit how much I can borrow and spend. It caps me at a reasonable amount without me having to think about it, while granting a lower interest rate. It just nicely lines up with an amount that my spouse…

True, with a 30 year it looks like you're paying a lot of interest, and in nominal terms (i.e., the total amount during the loan), you are.

But consider a thought experiment where you could borrow $1m at a low rate of interest, suppose 3%, from a generous lender who requires no collateral and requires an amortizing repayment. You take the $1m and reserve, say, $100k in "no-touch" cash (your cushion) and invest the remainder in the market, and suppose that the market returns an average of 7% over the long run.

In this scenario, you obviously pay much more interest than not taking the loan. The interest you pay is nearly $500k, which sounds like a lot - almost half the loan! Yet you make a tidy profit over 30 years: after paying back the loan, you have a portfolio worth over $4 million, plus the $100k reserve you still have.

While that's just a thought experiment, the math works fairly similarly for a mortgage. So long as the market returns more (over the long term - it'll be bumpy short term) than the cost of money, you will be paid handsomely for assuming lots of long-term, fixed low-interest debt and investing the proceeds.

And this leads to a second surprising conclusion: you should not pay off your mortgage. Once you've built equity, releverage the house and borrow more, so long as you take the proceeds and invest it in an instrument that will pay more than the cost of money over the long run. If interest rates rise, the math might not work.

This is bad advice for some people, because a pile of savings and investments can be a tempting target to use for luxury vehicles, or boats or whatever, and that can upset the math, although eventually you make enough with it that might be OK. But for people who can live as if those investments were illiquid, it's quite a rewarding path.

And for some people, the psychological value of living in a house with no mortgage exceeds whatever financial gains come from continuing to pay for a mortgage. And while there's nothing wrong with that, it does come at a stiff financial cost.

Re: Zillow seeks to sell 7k homes for $2.8B after flipping halt

#338

Post by gruez » Tue, Nov 02, 2021, 5:46 PM UTC

lvs wrote: post #273

game_the0ry wrote: post #255

Former real estate finance professional, here. If you were hoping this was a sign of the real estate market falling and perhaps its your chance to get a bargain, think again. > The company is seeking roughly $2.8 billion for the houses, which are being pitched to institutional investors, according to people familiar with the matter. Institutional investors (Blackstone, Blackrock, Colony, et al) will be being in bulk,…

I'd like to see an analysis of how much institutional speculation is contributing to the market pricing exuberance in housing...

https://www.vox.com/22524829/wall-street-housing-market-blac...

Re: Zillow seeks to sell 7k homes for $2.8B after flipping halt

#339

Post by qorrect » Tue, Nov 02, 2021, 5:47 PM UTC

ajb wrote: post #324

VBprogrammer wrote: post #307

Earlier quoted context omitted.

Compound interest means that you will be paying a lot more money for the same house if you buy over 30 rather than 15 years. However, for someone disciplined, taking a 30 year mortgage and paying it off like a 15 year mortgage with significant over payments is a good strategy. It means if you need to tighten your belt you can always drop down to the normal payment for a spell without so much as having to speak to the…

The answer to this dilemma is to have an offset mortgage. Your savings offset the amount borrowed, and you only pay interest on the difference. Once you've saved enough to cover it, you pay no interest.

Why wouldn't you just buy the house outright at that point ?

Re: Zillow seeks to sell 7k homes for $2.8B after flipping halt

#340

Post by noahtallen » Tue, Nov 02, 2021, 5:48 PM UTC

tibiahurried wrote: post #246

anonymousab wrote: post #239

Earlier quoted context omitted.

> Eventually, it will come down to common sense People have been saying this for a long time in Canada, but there is no indication that things will change. People who waited and saved have simply seen that the price increases have far outpaced their saving rate. When it's in a government's interests to keep prices rising, then they're going to do things that keep those prices rising. Another outcome could simply be t…

> ownership of a house in some areas becomes so expensive as to be the exclusive domain of the wealthy I agree. In fact, I live in an expensive area, but planning on moving in few years when I will be retired. Then I will buy a mansion for little money. And still gonna have plenty of savings and investments to pass onto my kids. I don't understand the ownership at all cost. You need to run some numbers and understand…

I don’t think people are obsessed with ownership for the sake of ownership. There are a large number of benefits to owning which the individual might find valuable enough to pay for:

- more space

- individual outdoor space

- control over your own area. Can paint or remodel however you like.

- Dealing with terrible neighbors isn’t nearly as bad.

- location might be quieter and more desirable

If we compare renting a house to buying a house, the cost just doesn’t make sense for rent. It’s much higher than renting an apartment in cities