Zillow lost money because they weren't willing to lose money • Hacker News Board

Re: Zillow lost money because they weren't willing to lose money

#261

Post by asdff » Sat, Nov 27, 2021, 9:03 PM UTC

rossdavidh wrote: post #131

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…

It's land, there is no top. It's a finite resource. Buy any property in the U.S. and hold for 15 years and I would be shocked if you didn't make out even if you had 2008 in between.

Re: Zillow lost money because they weren't willing to lose money

#262

Post by rufus_foreman » Sat, Nov 27, 2021, 9:04 PM UTC

rswail wrote: post #78

pontifier wrote: post #15

Earlier quoted context omitted.

The answer is to reduce regulation. The process of building new structures is filled with so much regulatory friction that it is impossible for the average person to even consider building their own home.

Because there's a societal need to ensure that the housing stock is safe and effective. We invest (or should) a lot of our taxes into local amenities to ensure that housing is provided the best environment. Transport, schooling, roads, etc. That housing should also be up to a similar standard in terms of its externalities like pollution and energy efficiency etc. We have regulations for air travel, for car emissions…

We have regulations for air travel, and that raises the price for air travel, which means some people can't afford air travel.

We have regulations for car emissions, and that raises the price for cars, which means some people can't afford cars.

We have regulations for housing, and that raises the price for housing, which means some people can't afford housing.

How many people should not be able to afford housing? Is the number of people who currently can't afford housing too low, or too high? Should we increase regulations for housing, or decrease them? Are we making the right trade-offs?

Re: Zillow lost money because they weren't willing to lose money

#263

Post by intuitionist » Sat, Nov 27, 2021, 9:07 PM UTC

perl4ever wrote: post #223

opportune wrote: post #158

Earlier quoted context omitted.

I don’t think it’s just that they had a poor model, but the combination of that and adverse selection. If you pledge to purchase at the Zestimate then people who reasonably think they can get more than the Zestimate on the open market don’t have an incentive to sell their house to Zillow (besides convenience). But people who think the Zestimate is an over estimate will of course sell to Zillow. So instead of a normal…

>adverse selection According to Matt Levine's recent column, while you might think that, it wasn't what sunk them in practice. Bidding low in fact worked; it just was inherently limited in scale, which is why they switched to bidding higher. Unfortunately, being wrong in the other direction is very bad. "I know, I know, the traders are saying: “No, this is stupid, your algorithms will not be 100% precise, some of you…

I think the question of fungibility comes into play here, too. If I’m a HFT and I accidentally post a too-high bid for Anacott Steel then there are well-capitalized players in a position to sell me a whole lot of Anacott until I lower the bid. (They may even be other HFTs who can naked short it to me.) But if I’m an iBuyer and post a too-high bid for 742 Evergreen Terrace, only the Simpson family can hit that bid, and only the one time. If I’m systematically overbidding, then that’s bad, but not every counterparty is informed enough to take advantage (or willing to stomach the considerable transaction costs), and there’s not a well-capitalized player to step in and arbitrage away the difference.

Re: Zillow lost money because they weren't willing to lose money

#264

Post by Ekaros » Sat, Nov 27, 2021, 9:08 PM UTC

skinnymuch wrote: post #214

JanisL wrote: post #20

Earlier quoted context omitted.

Basically the COMEX changed the rules explicitly to disadvantage the Hunt Brothers. The changes made to margin requirements is what made the difference here. I don't think anyone could claim that the silver market is an entirely free market, I remember last year a press release where the COMEX said they weren't sure how much they actually had in their vaults in eligible and registered, with a plus/minus 50% figure be…

Would some cryptocurrency stuff count? We have no idea how much a handful of whales control Bitcoin or Eth. The tether thing seems really shaky too with how much they actually have in reserves. Same with a number of exchanges or major market players. Cryptocurrency is also a bit wonky because of always including forever lost access to a solid percentage of the currency. Bitcoin is the most notable.

Bitcoin is best example. Somehow currency we aren't sure how much is reachable anymore should come some sort of gold standard... Like at any moment significant fraction of it could be dumped on market. Probably won't, but it is not entirely certain...

Re: Zillow lost money because they weren't willing to lose money

#265

Post by seanmcdirmid » Sat, Nov 27, 2021, 9:14 PM UTC

kevin_thibedeau wrote: post #252

WarOnPrivacy wrote: post #182

Earlier quoted context omitted.

> So Texas funds education at the state level via property taxes? That sounds surprisingly progressive of them. It sounds like that funding decision predates the current crop of state leadership

Everyone forgets it used to be a Democratic state when Republicans were the reviled coastal elites.

That was when "Southern Conservative Democrat" was still a thing. Republicans were reviled in the South because they were literally the party of Lincoln, the most unpopular politician among southern whites for a long time (suffice it to say, black southerners had no problem voting for Republicans when they were allowed to vote at all). The turning point didn't really start until Nixon's southern strategy, and took a three decades to finish.

I'm still surprised that Texas would distribute property taxes equally like that for education. Even if they were run by Democrats, they were never run by the liberal kind.

Re: Zillow lost money because they weren't willing to lose money

#266

Post by 01100011 » Sat, Nov 27, 2021, 9:16 PM UTC

conductr wrote: post #110

jason-phillips wrote: post #101

Earlier quoted context omitted.

> I think the housing market is so fucked no one really grasps the scale of the problem. I don't think I agree with this assessment. I live in a very rural area two hours northwest of Austin, literally in the middle of nowhere. I've studied the local economy and understand how things work here. I think the characteristics you've identified in the rural housing supply are not unusual and also not as serious in a pract…

My observations passing through rural Texas matches this. You frequently see houses that probably only served 1 maybe 2 generations and then they are in a poor condition uninhabitable by even those folks used to roughing it. Housing stock in rural areas just doesn’t last long.

FWIW I lived in San Diego and saw this too. Houses bought by parents for $50k in 1973 ended up being unmaintainable for some of the families even with Prop 13 keeping their taxes low. Then you'd have houses passes to kids, sometimes with drug problems, but in any case, no resources or knowledge sufficient to maintain a house.

Re: Zillow lost money because they weren't willing to lose money

#267

Post by rrrrrrrrrrrryan » Sat, Nov 27, 2021, 9:16 PM UTC

spywaregorilla wrote: post #60

johnebgd wrote: post #32

Earlier quoted context omitted.

People forget that tech is able to automate workflows. You don’t often yield success when you attempt to automate and invent the workflows in parallel.

I would say the opposite is true. Dying companies are stuck in their own routines because they're trying to automate their poorly designed processes that require humans at multiple steps. Smart companies are designing newer, better processes that are enabled by tech. Starting from scratch can be a huge advantage.

Ideally, you want to understand the whole process from beginning to end, including all the complex edge cases, before trying to automate it, then automate the whole shebang in one giant undertaking. You need a tremendous amount of high-level buy-in to pull this off, as people will have to wait and suffer with the old process until you're completely done building the new one.

What often ends up happening is a large manual processes is automated bit by bit, and you end up with the situation you describe: a poorly designed manual process painstakingly replicated in code. Full automation is often never actually achieved here.

The absolute worst thing to do, though, is to begin automating the thing without fully understanding it. It's putting rocket boosters on your self-driving car without first understanding the rules of the road.

Re: Zillow lost money because they weren't willing to lose money

#268

Post by Dowwie » Sat, Nov 27, 2021, 9:21 PM UTC

Feels analogous to the history of the collateralized debt obligation debacle where the models used to value CDOs were trained on data that no longer resembled reality. At least Zillow can live to fight another day, where as Stan O'Neal put all of Merrill Lynch's chips in with one of the biggest make-or-break gambles in the history of finance and the market turned against it, rendering Merrill to a fatally wounded company bailed out by Bank of America.

Re: Zillow lost money because they weren't willing to lose money

#269

Post by initplus » Sat, Nov 27, 2021, 9:23 PM UTC

rossdavidh wrote: post #131

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…

Zillow wasn’t aiming to build a business making bets on the housing market. They wanted to become a market maker for housing, profiting off the spread and not caring about the underlying price movements. Being a (good) market maker is still profitable in a falling market.

The issue is that the housing market is just unsuitable for this strategy. Houses aren’t fungible, and they are very slow to trade. So Zillow ended up in a position where rather than clipping the ticket on spread, they were actually quite exposed to house price movements.

Re: Zillow lost money because they weren't willing to lose money

#270

Post by spamizbad » Sat, Nov 27, 2021, 9:24 PM UTC

SilasX wrote: post #133

SteveGerencser wrote: post #117

Earlier quoted context omitted.

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.

Okay even accepting that Zillow made big unforced errors, that doesn't sound believable. Like, they don't make the offer conditional on someone looking at it in person for red flags?

Walking through a house with a high quality N95 mask in a hurry you might not notice the cat pee smell - or chalk it up to there being 13 cats and once they're gone the smell will go away.