171–180 of 386 posts
While no doubt Zillow made many of these mistakes, I think the reality is more sobering that the author of the article realizes. The more grim possibility, is that Zillow got out of the house buying business, not because they weren't good enough at it, but because they _were_ good enough at it to realize that it was at the top. If buyers want more now for their house, than it can be sold for in a few months time (whi…
Real estate is one of the few markets where non-experts can make money, where it’s not a hyper-liquid winner-take-all game. Coupled with this is the fact that housing is a necessity and owning a home leads people to invest in their communities more than if they were renting, I think it’s a good thing if Zillow (and OpenDoor, etc.) fail at pushing everyday people out of the business of real estate investing. Here’s ho…
Opendoor's primary benefit is to enable people to move when they otherwise could not easily do so, creating more liquidity and matching supply and demand (often number of bedrooms in house to number of bedrooms now needed).
The challenge with moving is that most people need to sell their current house before they can afford (or even know what they can afford) to buy their next home. Opendoor lets a family buy that next home with its cash, then list their current home on the market or sell it to the company so they avoid the double mortgage or double move (home->rental->home)
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> what's your source for this archetype? I’d have to dig up the textbook sources, but the key bit is in the definition: market makers quote a two-sided market and make money from the spread [1], i.e. buying at the bid and selling at the offer. If it happens simultaneously, that’s ideal. Every second one is long or short, risk and cost are incurred. Market makers seek to minimise and manage these. In practice, arbitra…
> i.e. buying at the bid and selling at the offer. Really they _quote_ simultaneously the bid and offer (although there will be times when they do only one or neither). Saying they simultaneously buy/sell is wrong/confusing.
That wasn’t claimed. What was said is the archetype is simultaneity. That is 100% accurate for how the term “market maker” has been used, globally, since at least 1999. (Pre-GLB/LTCM and post-ECN, the term was used more broadly.)
Drift from simultaneity incurs cost and risk. Those costs and risks must be managed. If you aren’t thinking in those terms, you aren’t market making.
Zillow’s downfall mirrors that of the money-centre banks in securities dealing post-GLB leading up to the crisis. What does and does not constitute market making, which is risky but less so than leveraged day trading, was a huge area of policy concern. When non MMs think of themselves as market makers, there is a predictable set of risks they get downed by. Zillow, like so many others, fell prey to that misconception. (There is loose analogy in the ABS markets, where banks holding inventory of esoteric products, either badly hedged or hedged with a busted counterparty, got hosed.)
If you have a good business with high margins, why not grow that business instead of starting a new low margins business of flipping houses?
> They thought they needed to build a machine learning model when they really needed to build an entirely new organization, one that possessed the technical and cultural mindset necessary to succeed in this space. I totally agree. It's not impossible to imagine their model working: why couldn't you serve as a market-maker for homes at a large scale, especially with the unique insights Zillow could have based on their…
It's a pretty interesting discussion as I sold my house just this year, and was frequently watching Zillow trends and information. Originally the estimate on Zillow said my house was 20% over the value I actually sold my house for just last month. I listed with a traditional realtor for a 5% commission, because when I looked up the service and other fees for Zillow sales, I found they included around 20% of cost for…
The fact that a house is for sale at a given price, but has not sold after some time, is a strong signal that it's overpriced. The longer it's been sitting, the stronger that signal is. They'd be crazy not to include that data in the Zestimate.
Now, if it's extremely fast, eg they adjust the price down within a day or so, then it seems a little ridiculous. OTOH the Zestimate has always been a rough indicator at best.
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Cosmetic stuff, square footage requirements, height requirements, parking requirements. Basic structural engineering, fire safety, etc. requirements of course would stay but if local code is more stringent than national you might take a look at it (e.g. things like a local code requiring copper pipes when PVC is acceptable and much cheaper).
(Straight) PVC is not acceptable for hot water supply lines.
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Quite a lot of regulations have nothing to do with safety. Minimum set-backs, minimum parking requirements, maximum building heights, etc. All of these add cost and reduce density. Single-family zoning is another local government policy that is absolutely intended to constrain development, not improve safety.
Well as someone who lives in a fairly regulated housing market (Berlin) I'm happy about all the regulations you've mentioned as they prevent negative externalities which would benefit real-estate developers at the cost of everyone else. Imo targeting a specific population density is within the mandate of local government, as too-high density causes all sorts of issues from traffic to health and everything in between.…
> it's not as if building regulations have been developed for fun, it's largely in response to safety issues and so on.
But they're not. As you (now) say, they're for reducing development. The original statement about safety was substantially incorrect.
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Quite a lot of regulations have nothing to do with safety. Minimum set-backs, minimum parking requirements, maximum building heights, etc. All of these add cost and reduce density. Single-family zoning is another local government policy that is absolutely intended to constrain development, not improve safety.
It's not about safety, it's also about amenity and suitability and sustainability. In some areas, density is important given the population, in others its not. Parking requirements are about local traffic management as well. Set backs are about ensuring natural light. Some local regulation is about NIMBYism or HOAism, that sort of thing is where reform might be better addressed.
Mandating these things is some of that "local regulation tied into NIMBYism" you mention.
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Or a house full of cats. I had a 'cat lady' friend who struggled to sell her home because she had 13 cats. 13 'indoor' cats. Even at a great price the house would not sell. Enter the wonderful folks at Zillow that bought her house based purely on the numbers. Last I heard they still hadn't been able to move that house at any price.
Toxoplasmosis is a scary thing.