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

stevenbuccini.com

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

#341

Post by helsinkiandrew »

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…

Came here to say the same thing, Matt Levine's article is at https://www.bloomberg.com/opinion/articles/2021-11-18/zillow...

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

#342

Post by spoonjim »

hamburglar wrote: post #313
spoonjim wrote: post #238

Earlier quoted context omitted.

Totally. There’s a surly creep who lives on our street and the houses next to his are worth less because of that. But Zillow would never know that.

This “annoying neighbor” problem keeps getting cited as an example of something that affects housing prices that the automatic algorithms don’t know about, but does it really exist? What is the mechanism by which the potential buyers find out about the annoying neighbor? I’m highly skeptical. I’ve had annoying neighbors before and there is zero chance that any potential buyers knew about them when I sold. Are people…

Two covered cars in the driveway, bushes growing out halfway into the sidewalk, house in disrepair, taller than allowed fencing with Beware of Dog signs, it’s sometimes not hard to spot someone you don’t want to live next to.

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

#343

Post by spoonjim »

ahepp wrote: post #339
spoonjim wrote: post #238

Earlier quoted context omitted.

Totally. There’s a surly creep who lives on our street and the houses next to his are worth less because of that. But Zillow would never know that.

Where I am all the houses sell for above asking, often before an open house. It seems hard to imagine a buyer would even have a chance to get scared off by the neighbors.

This neighbor has external signals of the kind of person he is.

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

#344

Post by nebula8804 »

ipaddr wrote: post #310
nebula8804 wrote: post #298

Earlier quoted context omitted.

How is the diversity? Is there integration or do different ethnic groups just keep to themselves. Is there upward mobility for some groups but not others? What about issues like Joe Arpaio and his policies affecting the community. I can't speak for your experience but I wonder are you really seeing the whole picture? How do you feel Arizona will cope with the coming climate change? At the rate its going Arizona may b…

I remember hearing that 15 years ago. I remember hearing about how we are due for an earthquake that will break California into two. That was in the 80/90s. We had great fears of a new ice age in 60/70s. I don't know what the future holds but thinking Arizona will become unsafe in 10-15 due to climate change is a little foolish.

Sounds like you have "heard" a lot of different things over the years.

Have you look at any actual data? Have you seen the trends in the data that have been going in the wrong direction? At the end of the day, unless the direction changes, it does not matter if it happens in 10 or 15 years or may take longer. It will happen.

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

#345

Post by kgwgk »

JumpCrisscross wrote: post #333
hhmc wrote: post #321

Earlier quoted context omitted.

I think you maybe have some misunderstandings around the practicalities limit orders and market microstructure (not withstand some theoretical model of risk free market-making, which has broadly been superseded, if you care about the theory at all).

> you maybe have some misunderstandings around the practicalities limit orders and market microstructure Perhaps. I haven’t been on a market-making desk for close to a decade now. But to correct one misconception in your comment, market makers don’t commonly use limit orders. (You’d submit a quote and try to hit rebates.)

How are quotes different from limit orders? [Edit: apart from the originator, I mean.]

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

#346

Post by hamburglar »

spoonjim wrote: post #342
hamburglar wrote: post #313

Earlier quoted context omitted.

This “annoying neighbor” problem keeps getting cited as an example of something that affects housing prices that the automatic algorithms don’t know about, but does it really exist? What is the mechanism by which the potential buyers find out about the annoying neighbor? I’m highly skeptical. I’ve had annoying neighbors before and there is zero chance that any potential buyers knew about them when I sold. Are people…

Two covered cars in the driveway, bushes growing out halfway into the sidewalk, house in disrepair, taller than allowed fencing with Beware of Dog signs, it’s sometimes not hard to spot someone you don’t want to live next to.

Huh. Some variation of this house exists on any given block in my city except maybe the neighborhoods where the prices are well over $2 million. No HOAs. I guess my threshold for “annoying neighbor” is a bit different from yours.

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

#347

Post by jasonwatkinspdx »

bee_rider wrote: post #235
perl4ever wrote: post #223

Earlier quoted context omitted.

>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 wonder -- does it really matter if the previous homeowner is more informed than Zillow? For things like "annoying neighbor" or other hard to quantify/quickly detect annoyances, the buyer doesn't know about those things either, so I guess the information asymmetry is almost 100% in Zillow's favor, right?

This is one of the things that's still useful about agents. They want to keep doing deals with each other, so the selling agent is motivated to pass on information like this.

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

#348

Post by sokoloff »

loeg wrote: post #177
sokoloff wrote: post #72

Earlier quoted context omitted.

(Straight) PVC is not acceptable for hot water supply lines.

GP obviously meant PEX, which is another plastic. (For people not familiar with modern plumbing: PEX is used for supply; PVC is used for drainage to the sewer.)

Maybe that’s what they meant, but PVC is also used for water distribution, cold water supply, and sprinkler piping (obviously all cold water but still pressurized supply applications), so it’s not at all clear that when they said PVC they meant PEX. CPVC is rated for domestic hot water supply, so they could have meant that as well. I’d say PEX was an underdog rather than the obvious alternative meaning.

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

#349

Post by emodendroket »

civilized wrote: post #309
perl4ever wrote: post #223

Earlier quoted context omitted.

>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 don't think Levine successfully disputes the importance of adverse selection here. Sure, if you make a million low-ball offers, a handful will be accepted for God knows what reason. That doesn't mean that adverse selection isn't a serious danger when you attempt to scale up, as Zillow did. I mean, why did Zillow go straight from making profitable purchases of few houses to losing money on tons? If there's some swee…

> I think it's obvious that homeowners know much more about the houses and neighborhoods they live in than Zillow, and this creates a big risk for Zillow.

I really question the idea that most people have any idea what their home is worth without relying on... Services like Zillow. Especially if they've lived there a while.

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

#350

Post by emodendroket »

jasonwatkinspdx wrote: post #347
bee_rider wrote: post #235

Earlier quoted context omitted.

I wonder -- does it really matter if the previous homeowner is more informed than Zillow? For things like "annoying neighbor" or other hard to quantify/quickly detect annoyances, the buyer doesn't know about those things either, so I guess the information asymmetry is almost 100% in Zillow's favor, right?

This is one of the things that's still useful about agents. They want to keep doing deals with each other, so the selling agent is motivated to pass on information like this.

Maybe that's been your experience. Mine has been that they're eager to cover up issues and explain away those they can't. I mean no hate, that's their job.
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