Earlier quoted context omitted.
Textbook arbitrage - congrats on the fortune
Unfortunately, I have a feeling that the bid-ask spread on that book is approximately $23 million.
So that’s why I couldn’t flip it
Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff
211–220 of 476 posts
Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff
#212Crazy. I recently sold a condo to Opendoor for significantly more than I would have even thought to list it for. When I negotiated with Opendoor after their initial offer, I pointed out a recently sold condo (days before, in similar condition, layout and finishes) in the same complex that sold for much higher than Opendoor offered. Within hours Opendoor came back matching that same selling price. The kicker? It was a…
My favorite story of algorithmic pricing gone mad was discovered by a postdoc in my grad school lab, leading to an out of print book being listed on Amazon for over $23 million: https://www.michaeleisen.org/blog/?p=358
I worked on software that did algorithmic pricing. It was a race to the bottom because some bozo wanted to be on the first page of sellers. So they’d price it one penny under the lowest price. The next seller would match it. Before you knew it, the product was worth dollars or cents. We also had people do it on purpose (we called it price bombing), but that was easy to negate since we filtered out competitors with low ratings. But there went that bozo, price matching and beating the price by a penny…
It was madness trying to code around people not thinking about their effects on the market and still turn a profit. Spoiler: we never did turn a profit on bozo powered listings, because at some point, it’s better to free the inventory space instead of waiting for the bozo to sell their items and let the price climb back up over the course of months or years.
Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff
#213Earlier quoted context omitted.
I've been noticing lots of "new lower price" emails from Zillow; I think the market has cooled off - but how much of it being hot was this investor competition?
A lot of people were jumping in with their rundown old houses asking rediculous (lose your ass) prices and I'm seeing them all revise as of late. This was seen mostly in rural areas--Im looking for a farm. I saw quite a few houses that sold a few years prior for much lower prices. The disparity in estimated values and previous sales versus the list price was astronomical in most cases. The banks will happily give you…
I'm not sure I follow your logic; if you're concerned with buying a house now, then prices from years ago are irrelevant. You can speculate that prices have risen too quickly and that they'll revert back to their earlier level, but that's ultimately just speculation. Comparable sale prices from the past few months are the thing to look at, to determine an offer that's likely to be accepted.
One thing to keep in mind about list prices: if the sellers do a good job of estimating the current market price, then the house will sell quickly. If you're checking listings infrequently, there's going to be some sampling bias in the listings you see; overpriced houses that aren't selling will be disproportionately represented in active listings.
Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff
#214Earlier quoted context omitted.
Because they would outbid people who actually want to live in those homes, essentially front-running the middle class to earn a massive profit.
> Because they would outbid people who actually want to live in those homes If they outbid everyone who actually wanted to live there, who were they planning to sell to? :P Buying things you think are underpriced and reselling them is not frontrunning. (Ever since GME, a lot of people learned the word frontrunning and started using it in every possible situation.) Zillow's plan was to act as a market maker. Market ma…
Lol at trying to explain these practices as some sort of Randian perfectly functioning market.
Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff
#215Earlier quoted context omitted.
I wonder how much of our economy, that alternately humming along and collapsing around us, is simply algorithms talking to eachother? How much economic movement is being generated by arbitrage ( https://www.ecomcrew.com/amazon-arbitrage/ ) ? How much online traffic is generated by advertising bots interacting with each-other? How much are housing prices being juiced by algorithms? I think the environmental crisis is…
Can you elaborate on what makes you think environmental factors are affecting the supply chain?
Well, first of all, an unequal food supply chain has generated survival diets close to civilization, spreading new diseases to the entire world (hi Covid!, next door to bird flu).
Second, there are droughts popping up all around the world, our fisheries are collapsing but our supply chain might be absorbing the problems of it until suddenly it doesn't anymore.
That is my deep worry -- that we are seeing the start of a generalized system collapse.
Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff
#216Earlier quoted context omitted.
I suspect the 'AI software' running these companies is using linear regression to predict housing prices and one of the inputs is the price of similar houses nearby.
Maybe some reinforcement learning algorithm running as well, where the maximum reward is winning the bid. Hence the algorithm just goes and lays waste on other bidders. Gotta get that infinite reward!
I doubt RL is involved. That would be soooo risky.
Bidding algorithms can model the price of winning the auction, you can maximize profit without fancy RL
Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff
#217Wondering if this is a tipping point? One thing is for sure, zillow’s competitors will get super careful.
And this should bring some sanity go the market
Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff
#218I wonder who's to blame more, the person who came up with this idea, or the one tasked with executing it.
Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff
#219Earlier quoted context omitted.
I suspect the 'AI software' running these companies is using linear regression to predict housing prices and one of the inputs is the price of similar houses nearby.
In fairness, I would think humans include nearby home prices as one of their parameters as well.
A Broker Price Opinion (BPO) is typically set by appraisal, comparable sales and comparable listings. Depending on how cookie cutter the neighborhood is, there are many different levels of "appraisal" from drive by photos to a deep inspection.
Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff
#220Earlier quoted context omitted.
This is an interesting lesson in algo trading run wild. Roughly, house prices have a fundamental ceiling, and it is determined by the size of the monthly payment that banks will allow the typical homebuyer to assume when approving a loan. If Zillow was the only iBuyer in a particular market, then that ceiling would likely have held, as all other non-zillow sales would still be operating under the loan approval constr…
> house prices have a fundamental ceiling, and it is determined by the size of the monthly payment that banks will allow the typical homebuyer to assume when approving a loan. In the more irrationally-hot markets, why assume that housing is even being purchased on a mortgage by your average home-buyer, rather than being purchased cash-in-hand by a private or corporate investor looking to park wealth they've already g…
If the current value of something is over a "fundamental ceiling" it means that it's already inflated. Why would an investor park their wealth in such an asset?