As a current residential real estate appraiser, and coming from being a developer for a large corporation that is very active in this space, this has been eye opening yet unsurprising to watch from where I sit with access to all the transactions in my area (I service the Phoenix-Metro and outlying areas).
In appraisal after appraisal after appraisal within the last 6-7 months, I have watched Zillow, Opendoor, and OfferUp getting cleaned out to the tune of losing $30,000 - $60,000 on home after home in some neighborhoods. And in AZ, Zillow and Opendoor have been buying and selling in this market pretty healthily the past few years, and we’re it not for themselves and the buying frenzy of last Spring and Summer, they probably would not have gotten as hurt here in the Valley. They got suckered into paying top dollar in a market that was at its peak, and their algos were not trained to deal with the human factors causing this.
When I was working as a developer for a real estate tech company, it was made very clear that this company, along with any other iBuyer are able to show homes and come up with estimates is because they have local access just like realtors, appraisers, and developers to a Multiple Listing Service (MLS). In fact, the company I worked for had access to every MLS in the US; They would use the data from any of these MLSs to populate their front end product, which would then be influenced by their data science team to give the “estimate” based on whatever factors they deemed appropriate.
As someone whose job is predicated on objectively using primarily historical (for the past year) MLS/County data to asses what the market will allow a home to be valued at, it pains me to see people being taken advantage of by companies like Zillow who want to be “market makers” while not thinking through the implications of their strategies past making money on “easy” flips.
All this at the cost of local communities home values losing touch with the realities of the people who are living in an area to live, not invest. And here in Phoenix, it’s only gotten worse for anyone who doesn’t already have generational or attained wealth to find affordable housing.
The median price as of the past few months has cooled down to $350,000 - $400,000 for what would be considered normal for a less-than 2,000 square foot home. But, in some areas of the valley, it’s gotten so ridiculous that a sub 2,000 sf house is able to sell for $610,000.
On the one hand, I can appreciate these types of companies and business practices because they will keep me in a job making sense of the messes they make in the micro. On the other hand in a macro view, I hope this shakes some sense into the C-suite and product teams of these platforms that they need to approach this less as a “move fast, break things” type enterprise, for themselves and the communities they impact with their choices.