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

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

#361

Post by lostcolony »

qorrect wrote: post #339
ajb wrote: post #324

Earlier quoted context omitted.

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 ?

Fiscal cushion. If an emergency comes up, rather than having no money to pay for it, you instead can cover it, and just pay a little extra each month going forward until you recover.

That said, I don't think they exist in the US.

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

#362

Post by wayoutthere »

throw123123123 wrote: post #94
wayoutthere wrote: post #6

Turns out that mass flipping houses doesn’t work when you can’t hire contractors to do the work for a price that makes your budget assumptions hold. I am disappointed that they’re looking to offload them to institutional investors rather than individuals. Housing should probably not be an investment vehicle, but here we are.

Housing is an investment in the sense that you need a certain amount of capital to create one, and in that sense you want to allocate it the best way possible: the best value at the best prices. There's no better way to do that than with markets. Housing will always be expensive in one way or the other, but you can make it cheaper and more plentiful. And that should be the goal.

> Housing will always be expensive in one way or the other, but you can make it cheaper and more plentiful. And that should be the goal.

When housing becomes an investment, the goal is to get that sweet ROI which generally means working to restrict the supply of housing to make prices rise. Lobbying is a high-ROI activity.

And housing doesn’t need to be expensive. Japan is a good example. It’s only expensive because we instituted policies that make it an effective investment vehicle when it’s a necessity in life. Many cities outside the US have policies in place making property taxes very expensive for an investor who doesn’t live in the house. In particular many countries prohibit foreign investors from purchasing real estate without a local intermediary who is legally responsible for any shenanigans.

The free market works well for many things, but there are areas where the motive to create artificial scarcity create some dystopian outcomes (see also healthcare). We have to ask ourselves as a society if our belief in the free market is strong enough to accept the societal issues (crime, mental health, etc) that have been proven to come along with unstable housing.

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

#363

Post by xyzelement »

noahtallen wrote: post #330
xyzelement wrote: post #87

Earlier quoted context omitted.

> In less than 3 years the rent in our working class city went up 45%. I sympathize with that but I want to make sure people understand the dynamics. Prices are driven by supply and demand. If there's only one empty apartment in the city and you're willing to pay $2000/month, I am gonna have to pay $2100 month if I want to live there instead of you. That's sort of separate (though related to) prices of houses. What w…

> COVID, defund the police, rising crime, suburbs more attractive with work from home, etc. If there are any cities for which this is true, it’s cities like Seattle and Portland. Theoretically, they are not desirable to live in because of COVID, very high crime rates, not idea for working from home, huge public safety problems, etc. But rent is higher than it has ever been.

Again, that's supply and demand. In NYC there was a demand hit when COVID started and there were great deals on rent. That's gone away because people have sort of come back.

My point is purely logical - the way to get rent down is to either increase supply or decrease demand. If crime, etc gets bad enough, demand will drop and rent with it. The argument you're making (implicitly) is that things haven't yet gotten bad enough for people to move out.

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

#364

Post by pwned1 »

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.

We have that in Michigan. Non-homestead property taxes. All it does is make apartments more expensive for renters. The cost is just passed on to the renter.

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

#365

Post by vmception »

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…

This is the weirdest take on so many levels.

Like, in my filter bubble, I never saw any of that hype/doom. I saw Zillow and a few others making home buying and selling attractive and more efficient because it made the assets much more liquid. One of the most unattractive things to me about real estate was how long it takes to convert it back to cash, compared to other kinds of assets.

The second is that Zillow's $2.8bn position isn't a problem even for Zillow or for the real estate market. There is simply not enough information to suggest its a bust or about the folly of trying to corner a market and there is more information to say that its just reached their corporate risk tolerance. For example, the article doesn't mention anything about the delta between buying price and price they are trying to sell at. Is it 2% off, 5%, 20%? And secondly does it matter? Zillow issued $4bn in corporate bonds at like 2% interest rate to do whatever they want. They've spent half of it on houses and still make revenue. That's nooooooothing like someone overleveraged on a mortgage 20:1. This isn't even 1:1 leverage, its way less. This is a complete nothingburger and that's before we even know the difference in value of their purchase price and new listing price.

$2.8bn or 7,000 homes, is barely a dent in this several dozen trillion market.

"The youth" is still not going to be able to afford anything, no matter if some institutional investors buy this bit, or if there was a fire sale.

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

#366

Post by ineedasername »

VBprogrammer wrote: post #307
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…

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…

>Compound interest

Depends on how much better the same amount of money would perform if invested in an index fund. It could be more profitable to throw the difference in monthly payments into a vanguard account instead of a higher 15yr monthly payment.

Personally my view is exactly your second point: Buy small enough that you can consistently put $x extra each month against the principle + one full extra payment each year. It's a good middle ground to maintain flexibility

And absolutely-- buying the biggest you can fit into monthly expenses may even seem responsible: "I'm not living beyond my means!" but is a razors edge of risk for unanticipated expenses or more significant life disruptions.

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

#367

Post by foogazi »

muttantt wrote: post #334
mikysco wrote: post #275

Earlier quoted context omitted.

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.

> They overpaid very generously too.

How do you know without getting bids from the open market ?

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

#369

Post by brewdad »

PaulDavisThe1st wrote: post #310
cudgy wrote: post #215

Earlier quoted context omitted.

Scenario B and A are more similar than you acknowledge. Both are fueled by low cost capital driving prices to unsustainable levels. Scenario B will be a problem too if/when interest rates rise and companies have insufficient cash flow from rents to pay the new debt service. In fact, scenario B may result in a deeper crash, since selling will be swift and by many actors at the same time since they are using similar va…

> companies have insufficient cash flow from rents to pay the new debt service. If they are pouring their own capital into purchases, why would there be any debt? Are the entities (companies) in scenario B actually borrowing money?

Given the current interest rate market, I think it's safe to assume they are borrowing money to purchase homes. They aren't taking out individual mortgages but I would be shocked to learn that they aren't borrowing millions through other forms of financing and then paying "cash" for homes.

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

#370

Post by tomrod »

giantg2 wrote: post #35
zip1234 wrote: post #10

Earlier quoted context omitted.

They are not the problem with residential real estate prices. The real problem is people that prevent additional housing from being built.

"The real problem is people that prevent additional housing from being built." If you go deeper, it's about personal preferences and distribution of jobs. There are plenty of areas that allow houses to be built and have affordable houses. Many of those places may have limited job choices, although remote is becoming bigger. If companies didn't cluster as much, then overpopulation or constrained resources in specific…

Remote does resolve some of the advantages to clustering. Other factors connecting transaction costs and physical distance may prove harder to overcome, but here is hoping.
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