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How Zillow's homebuying scheme lost $881M

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Re: How Zillow's homebuying scheme lost $881M

#651

Post by HWR_14 »

IAmGraydon wrote: post #414
thr0wawayf00 wrote: post #9

The scary thing is that it's easy to see how something how like this could drive a market boom and bust cycle. I'm imagining a scenario where two iBuyer companies try to outbid each other algorithmically, driving the prices further and further out of reach of people who are looking for a primary home. Tangentially related, I talked to a friend who works on geospatial data for one of the big vacation rental companies,…

You honestly think 2 iBuyer companies would have the liquidity to move the entire housing market? I don’t think you understand the size of the US housing market. If you’re in the top 2% of earners and can’t buy a home, you either live in a ridiculously expensive city (outlier) or have a money management issue.

iBuyers often move into a specific area. A huge percentage of Zillow's purchases was in one city in Arizona (or New Mexico, I forgot where). And two iBuyers in a city can totally move the market.

Re: How Zillow's homebuying scheme lost $881M

#652

Post by qeternity »

ohgodplsno wrote: post #603
qeternity wrote: post #566

Earlier quoted context omitted.

You replied without understanding my comment. Let me pose the question back to you: if everyone can comfortably afford food, housing and basic necessities, what is going to cause population growth to level off? Your characterization of bad things happening is exactly my point - you’re just failing to understand that I’m saying that’s the healthy part.

As the other response to you shows, you're the one missing the point. Population growth massively slows down the more your basic needs are met. Countries that have high children counts are countries where the solution to actually reaching wealth is multiplying until few of them die, or one of them ends up making a lot of money (relative to the country they live in).

> Population growth massively slows down the more your basic needs are met.

No, this is the point you’re missing: your presumption is predicated on being able to meet everyone’s basic needs cheaply. What I’m saying is that this is not possible, and that high prices are the feedback mechanism.

Re: How Zillow's homebuying scheme lost $881M

#653

Post by qeternity »

orangecat wrote: post #594
qeternity wrote: post #566

Earlier quoted context omitted.

You replied without understanding my comment. Let me pose the question back to you: if everyone can comfortably afford food, housing and basic necessities, what is going to cause population growth to level off? Your characterization of bad things happening is exactly my point - you’re just failing to understand that I’m saying that’s the healthy part.

if everyone can comfortably afford food, housing and basic necessities, what is going to cause population growth to level off? This is exactly backwards; both across and within countries, richer people have fewer children.

The world cannot support 10 billion rich people (by current standards). High prices are one of a number of expected natural feedback mechanisms.

You’re pointing to a correlation which has no bearing on the future.

Re: How Zillow's homebuying scheme lost $881M

#654

Post by HWR_14 »

moonchrome wrote: post #563
bastawhiz wrote: post #517

Earlier quoted context omitted.

The house I bought was listed for two weeks. They had one day of showings. The following day they stopped accepting offers. Maybe it's different in the Bay, but here in Raleigh houses are available to tour for essentially eight hours.

The alternative being to ask above market the house so it sits on the market for longer ? I don't understand what Zillow changes in this story ? (I'm genuinely curious - not from US)

Most investors seem to overask and let it sit on the market. The carrying cost of an extra month is more than offset by the higher final sale price.

Re: How Zillow's homebuying scheme lost $881M

#655

Post by HWR_14 »

mwt wrote: post #15
mistrial9 wrote: post #8

I am especially annoyed at Zillow SF holding "Data Science" meetups in San Francisco at the penthouse place, while advertising for TWO data science positions.. meanwhile, frat guys are at the golf course by the dozens, across three states. The people that they hired at that time, probably built this setup exactly as required by the frat guys. Happy banking Zillow!

There's some poetry in older banks claiming they're pivoting to being tech companies (i.e. Capital One) while some tech companies are heading straight towards being banks.

There was the line about Netflix seeing the writing in the wall about needing to produce their own content because everyone was going to make their own steaming service. "We need to become HBO before HBO becomes us."

If the right answer is a blend of two business models, then both companies becoming more like the other make sense.

Re: How Zillow's homebuying scheme lost $881M

#656

Post by xenadu02 »

karpierz wrote: post #179
lubesGordi wrote: post #157

Earlier quoted context omitted.

I'm under the impression that 'cash offer' just means that whoever is buying has already secured their financing. That means there's almost no risk of the deal falling through and the sale can go from contingent to pending immediately. This is better for the buyer because they sell faster. Senior software eng at microsoft can pull this off no problem (no one is buying a house with cash in their bank, not even rich pe…

It means that they aren't using a mortgage to buy it. If there's a mortgage involved, then the offer becomes contingent on the bank's due diligence which can cause the deal to fall through in a variety of ways. For example: the bank will only loan you money up to the appraised value of the home, which is done after the deal is signed (banks won't send an appraiser to every house you make an offer on). If the appraise…

At least in the SF market what matters is a financing contingency, not all cash vs mortgage. As long as you go through underwriting first and get full approval (not pre-approval) an offer with a mortgage and no financing contingency is 99% as good as an all-cash offer. Sellers are not impressed by cash offers anymore unless they're the high bidder... in which case it is the high offer not the cash nature that matters.

And lenders that work in SF understand how this works and indeed can go through full underwriting without a property having been selected. Appraisal is the only thing that might matter which is why it is a good idea to hold back some cash.

Re: How Zillow's homebuying scheme lost $881M

#657

Post by xenadu02 »

jjav wrote: post #368
lubesGordi wrote: post #157

Earlier quoted context omitted.

I'm under the impression that 'cash offer' just means that whoever is buying has already secured their financing. That means there's almost no risk of the deal falling through and the sale can go from contingent to pending immediately. This is better for the buyer because they sell faster. Senior software eng at microsoft can pull this off no problem (no one is buying a house with cash in their bank, not even rich pe…

No, cash offer means actually pay it cash. If there's any kind of financing involved, the bank will need to approve the purchase, slowing down the process, which is what a cash offer bypasses. > no one is buying a house with cash in their bank, not even rich people They most certainly are. Tons of real estate sales here (Silicon Valley) are all-cash because the other people making offers are also all-cash, so the onl…

As I noted above this is not really true anymore. My agent told me flat out that sellers (read: seller's agents) are not impressed with all-cash offers anymore. As long as you make a no-contingencies offer that's plenty good enough. They might ask if you have a 5-10% reserve just in case the appraisal comes in a bit low but in the three offers we made that never came up, even against other buyers offering all cash.

Getting a mortgage approved was also easier than I expected; when you move into Jumbo territory and have more than 20% cash to put down the bank seems to assume if you were industrious enough, lucky enough, or connected enough to come up with $500k, $1m, or whatever cash then you're probably good for the loan.

They also counted unvested RSUs as assets at a slight discount to the average stock price (I think it was the previous 90 day average?).

Re: How Zillow's homebuying scheme lost $881M

#658

Post by epistasis »

nitrogen wrote: post #542
epistasis wrote: post #493

Earlier quoted context omitted.

If they are renting them out, the homes are not being hoarded, they are being lived in. The real problem isn't a problem of vacant units, it's a problem of unbuilt units.

This results in a transient population and concentration of wealth, and reduced overall housing security. A mortgage doesn't go up by 10% every year, but my rent sure does.

Why do landlords have the power to raise rents 10% per year? Because there's not enough housing being built. Every unbuilt unit leads to displacement and rising prices.

When you say "This results in a transient population," I'm not sure exactly what you mean by "this" but perhaps it's renting at all? If so, the only reason renting leads to "transient" population is the rising rents and displacement caused by lack of building.

Re: How Zillow's homebuying scheme lost $881M

#659

Post by flir »

jjav wrote: post #615
flir wrote: post #597

Earlier quoted context omitted.

Honestly, that sounds great. The risk of being a rentier should be higher than the risk of an index tracker. A lot of our problems can be traced to the fact that bricks and mortar are seen as a better RoI than stocks and shares, and one way to fix that is to change the risk profile of being a landlord by increasing tenants' rights.

> Honestly, that sounds great. You're saying that it's totally fine for a renter to pay like one month out of every six months and keep doing that forever, just enough to defer evictions each time? > The risk of being a rentier should be higher than the risk of an index tracker. Risk and return should roughly correlate, or people will not do it. There is already very little return in renting out a house, so the risk…

> If the risk is too high to compared to the return, these rental units are simply removed from the market. Are you convinced that less available units make renters better off?

Yes. We'll need an LVT too. Adjust the market so selling is the rational choice, not hoarding.

Markets are just tools, and right now the market for property isn't serving the needs of society. So we stick our collective thumb on the scales until it does.

Re: How Zillow's homebuying scheme lost $881M

#660

Post by rdtwo »

Dylan16807 wrote: post #363
rdtwo wrote: post #304

Earlier quoted context omitted.

Liberals can break laws just like conservatives can. Free country

Sure they can! But ongoing intent to break certain categories of law will also mean that certain political labels are incorrect.

Nah labels are based on how you want others to behave not how you behave yourself
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