Zillow Is Manipulating the Housing Market • Hacker News Board

Re: Zillow Is Manipulating the Housing Market

#11

Post by randomhodler84 » Thu, Jul 08, 2021, 4:19 AM UTC

reducesuffering wrote: post #9

ashtonkem wrote: post #7

Earlier quoted context omitted.

1) It’s not clear that market making is all that necessary or desirable with homes. Homes are not stock shares. 2) Zillow does more than just make a market, they’re also supposed to be facilitating transactions between buyers and sellers. The fact that they’re also a party to these same transactions is an obvious conflict of interest.

> 1) It’s not clear that market making is all that necessary or desirable with homes. Homes are not stock shares. I think it's pretty well established in economics that market making improves liquidity. As a parallel, in the used car market, having used car salesmen allows people to quickly liquidate a car to cash without needing to go through the work of finding buyers. Similar on the sell side. And the housing mark…

How is buying up all the housing stock and selling it for 20% more than you paid adding liquidity?? I think a more accurate term is “scalping”. Houses and 3000 series nvidia cards are in demand. We don’t want big players scalping the product back to us. Nothing is gained except inefficiency and grift.

Re: Zillow Is Manipulating the Housing Market

#12

Post by ashtonkem » Thu, Jul 08, 2021, 5:09 AM UTC

reducesuffering wrote: post #9

ashtonkem wrote: post #7

Earlier quoted context omitted.

1) It’s not clear that market making is all that necessary or desirable with homes. Homes are not stock shares. 2) Zillow does more than just make a market, they’re also supposed to be facilitating transactions between buyers and sellers. The fact that they’re also a party to these same transactions is an obvious conflict of interest.

> 1) It’s not clear that market making is all that necessary or desirable with homes. Homes are not stock shares. I think it's pretty well established in economics that market making improves liquidity. As a parallel, in the used car market, having used car salesmen allows people to quickly liquidate a car to cash without needing to go through the work of finding buyers. Similar on the sell side. And the housing mark…

To be clear, I said that it’s not clear whether or not we need market makers, not liquidity. Market makers can improve liquidity, but they are not one and the same, contrary to the protestations of the market makers themselves.

The housing market needs liquidity, but:

1) It’s far from clear that market making can fix this.

2) Market making has tradeoffs, especially in non-fungible items.

On the first, the housing market is illiquid for a variety of reasons, a desperate lack of housing stock and the high cost of switching being among them. No market maker is going to produce more housing, nor are they going to fix the fact that moving is slow and expensive and banks are not quick.

On the second, market makers extract value from each transaction. The more unique the transaction, the more market makers tend to make. Used car sales people charge a hefty premium to the buyer and seller, about $2k average each, for the convenience of them “making” a market. Given how expensive the American housing stock is, this is a convenience that Americans cannot afford.

And that’s being extremely generous in assuming that what Zillow is doing is trying to just provide liquidity, rather than speculating in the real estate market using their customers data.

Re: Zillow Is Manipulating the Housing Market

#13

Post by ashtonkem » Thu, Jul 08, 2021, 5:23 AM UTC

jb775 wrote: post #8

He says Zillow "overpays" for properties, then quickly flips them for a 20% profit. I'd say they're underpaying if that's actually the situation. Zillow is taking on a decent amount of risk by purchasing a property, so I don't have a problem with them making money off the process...especially if it's making the selling/buying process easier for all parties. I don't understand how commission based realtors exist nowad…

I’d say the issue isn’t that Zillow is speculating in the market, well not any more than any other real estate speculator, but that they’re now effectively trading against their customers.

Re: Zillow Is Manipulating the Housing Market

#14

Post by reducesuffering » Thu, Jul 08, 2021, 4:24 PM UTC

randomhodler84 wrote: post #11

reducesuffering wrote: post #9

Earlier quoted context omitted.

> 1) It’s not clear that market making is all that necessary or desirable with homes. Homes are not stock shares. I think it's pretty well established in economics that market making improves liquidity. As a parallel, in the used car market, having used car salesmen allows people to quickly liquidate a car to cash without needing to go through the work of finding buyers. Similar on the sell side. And the housing mark…

How is buying up all the housing stock and selling it for 20% more than you paid adding liquidity?? I think a more accurate term is “scalping”. Houses and 3000 series nvidia cards are in demand. We don’t want big players scalping the product back to us. Nothing is gained except inefficiency and grift.

> buying up all the housing stock

Because this is hyperbole. Checking Zillow yourself, you’ll find that they have maybe 0.5% of listed homes across all markets.

Re: Zillow Is Manipulating the Housing Market

#15

Post by ashtonkem » Thu, Jul 08, 2021, 7:32 PM UTC

reducesuffering wrote: post #14

randomhodler84 wrote: post #11

Earlier quoted context omitted.

How is buying up all the housing stock and selling it for 20% more than you paid adding liquidity?? I think a more accurate term is “scalping”. Houses and 3000 series nvidia cards are in demand. We don’t want big players scalping the product back to us. Nothing is gained except inefficiency and grift.

> buying up all the housing stock Because this is hyperbole. Checking Zillow yourself, you’ll find that they have maybe 0.5% of listed homes across all markets.

Buying up half a percent of the housing stock is a lot, especially when there’s a shortage of housing.