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How Zillow's homebuying scheme lost $881M

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

#121

Post by mywittyname »

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,…

> The scary thing is that it's easy to see how something how like this could drive a market boom and bust cycle.

It would take a lot more than a billion dollars to make a dent in the national housing market. Total housing sales in Feb22 amounted to $161 billion.

That's enough to make a temporary splash in a rural market, but Zillow would need to spend 100x more than what they lost to even move the needle. And spend 10000x as much to really drive a boom/bust cycle nationally.

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

#122

Post by vincentmarle »

cellis wrote: post #97
mentalpiracy wrote: post #79

Earlier quoted context omitted.

Why should we use this as an example? You’re talking about people who are throwing away money by leaving assets idle - and implying that they obviously don’t know how to operate in this market.

As a potential landlord who is doing this very thing right now, it isn't really "throwing money away", because of asset appreciation. If you get stuck with a bad tenant it's way more hassle than if you had just let it sit and AirBnB'd it every once in a while. Especially for properties where the rent is less than the appreciation per month.

You are neglecting opportunity costs: if you could earn double (appreciation + rent) instead of just appreciation, you're leaving money on the table.

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

#123

Post by ryandrake »

a1pulley wrote: post #62
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,…

> It's honestly quite scary how I'm in the top 2% of income earners in my generation and yet I could barely afford to buy a small place in a semi-desirable area. I can easily see myself not being able to compete in algorithmically dominated markets flush with venture cash in the future and I earn more than just about everybody I know today. A thought exercise: suppose that no new houses are ever built and that housin…

> > It's honestly quite scary how I'm in the top 2% of income earners in my generation and yet I could barely afford to buy a small place

> I live in Los Angeles, where a "small place in semi-desirable area" gets listed for 1.5M and goes for nearly 2M. I'm somewhere in the top 5% of earners in California, but that $2M 1950s tract housing would be >50% of my post-tax income.

I think the obvious answer here is that people in the top 2% or top 5% are not buying houses... It's the people in the top 0.1%. Last time I was home shopping, we were regularly outbid by all-cash offers of 50%-100% over asking price, no contingencies. These competing bidders are not teachers and nurses. They're not even high-paid tech employees. Do you really think a Senior Software Engineer at Microsoft has $2.5M in cash sitting in his checking account to buy a home? No way. These are all businesses, investors, serial landlords buying their 60th house, hedge funds, 0.1% wealthy people--that's who's buying all these houses. Not us.

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

#124

Post by el_benhameen »

harikb wrote: post #35
dpierce9 wrote: post #13

Anecdote on the estimates. We bought a house for X and renovated it. The day before we listed it both Zillow and Redfin estimate had an estimate around the purchase price X. When we listed it for 2X, both companies changed their estimate to be close to the listing. However, Redfin changed the entire price history as well showing a gentle slope. Zillow preserved their previous history and showed a spike.

+1 I have always been annoyed by Redfin's rewrite of history. At least have the decency to show two lines (original prediction for last year and how it turned out to be).

At least in my area, they've completely given up on providing a "historical" estimate of the house in question and just have a trend graph for the general area. I assume this data is also heavily massaged, too, though.

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

#125

Post by TimPC »

Teknoman117 wrote: post #71
paxys wrote: post #57

Earlier quoted context omitted.

Agreed. Heck I know several people who prefer to keep their condos/houses empty rather than rent them out at market rate because of 100% tenant friendly city and state laws. Someone can move in and refuse to pay rent, refuse to leave, use your house as a drug den, destroy your property and lots more, and you can do nothing about it. At that point the city is just incentivizing homeowners to contribute to the housing…

> Someone can move in and refuse to pay rent, refuse to leave, use your house as a drug den, destroy your property and lots more, and you can do nothing about it. This is one of those things that really just confuses me. It's like no one could agree on happy medium between "landlord can eject you whenever they want for whatever reason" and "no one can make you leave, ever, for any reason". And to whoever downvoted yo…

These laws are hard to get actually correct. The major problem is court delays. There is a very high bar for kicking someone out before they get their day in court about whether it is fair to do so. This seems eminently reasonable but there is also a severe shortage of judicial services that result in court dates over a year out to resolve such issues. In that year of time, it's quite possible for a tenant with maybe $5K to their name to accumulate $500K in damages and debts. For many such tenants it is a cost they could never repay in their lifetimes which means even if the landlord gets the desired verdict they'll never see the capital they wanted.

I agree there are places in the world that are so biased against landlords that they don't even try to get this problem correct but I think for many cases the problem isn't bad laws but rather the delays to being able to execute reasonable actions to limit damages. I'm not sure what a good solution is for many cases because I think it would take fairly extreme evidence to kick someone out without their day in court if they decided to fight it. I do agree with landlords it should be easier to kick someone out if they stop paying rent and that fact is adequately documented. I mean stop paying rent in the sense of an appropriate pattern not a single late payment.

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

#126

Post by flir »

paxys wrote: post #57
jliptzin wrote: post #51

Earlier quoted context omitted.

There's even lower hanging fruit than that. I have a 6 bedroom house, but local regulations state that I am not allowed to live with more than 2 people unrelated to me. Plenty of parking, tons of people looking for housing, but legally I am forced to keep 3 bedrooms empty.

Agreed. Heck I know several people who prefer to keep their condos/houses empty rather than rent them out at market rate because of 100% tenant friendly city and state laws. Someone can move in and refuse to pay rent, refuse to leave, use your house as a drug den, destroy your property and lots more, and you can do nothing about it. At that point the city is just incentivizing homeowners to contribute to the housing…

Sounds like those places need a land value tax, too.

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

#127

Post by newaccount74 »

lordnacho wrote: post #49
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,…

This has perplexed me as well. Here in the UK, the top 1% of incomes is £175K. Assuming the bank lets you borrow 5x, and you're married to someone with a more middling income, you can borrow ~£1M. Yet there's a ring around London where it's hard to see any family homes that are under £1M. I mean sure maybe they're sitting on equity or mom and dad are contributing, but by my estimation there are a huge number of peopl…

> there are a huge number of people who have thrown absolutely everything into owning a home

I don't know what the situation is like in the UK, but here in Austria banks are really really eager to give people as much money as they'll take.

Getting a mortage that runs 30 years? Sure thing! Why not make it 35 years? 60% of your paycheck goes into mortage? Why not? You have less than 10% of the required amount in cash? Who cares!

The people who are buying homes right now are getting into massive debt, with variable interest rates. If interest rates rise, a lot of home owners won't be able to pay their mortages anymore, and they won't be able to sell because the only reason people can afford these crazy mortages is because the interest rates are so low. It looks like a bubble to me, and the only thing that's redeeming to me is that everyone has an interest in keeping the bubble going.

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

#128

Post by el-salvador »

kevin_thibedeau wrote: post #87
thebean11 wrote: post #66

Earlier quoted context omitted.

> suppose that no new houses are ever built Why would you suppose that? I don't really see what you're getting at, that's a very unintuitive assumption; it shouldn't happen if market forces are allowed to run their course.

New afordable housing isn't built. Everything is "luxury" so that developers can maximize profit. When someone tries to build affordable duplexes the NIMBYs say not in my town.

One trick they use in my country is adding a pool to apartment buildings.

The pools are unused most of the time, but having a pool in the building increases the value estimated by property appraisals' checklists.

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

#129

Post by tristor »

paxys wrote: post #57
jliptzin wrote: post #51

Earlier quoted context omitted.

There's even lower hanging fruit than that. I have a 6 bedroom house, but local regulations state that I am not allowed to live with more than 2 people unrelated to me. Plenty of parking, tons of people looking for housing, but legally I am forced to keep 3 bedrooms empty.

Agreed. Heck I know several people who prefer to keep their condos/houses empty rather than rent them out at market rate because of 100% tenant friendly city and state laws. Someone can move in and refuse to pay rent, refuse to leave, use your house as a drug den, destroy your property and lots more, and you can do nothing about it. At that point the city is just incentivizing homeowners to contribute to the housing…

> prefer to keep their condos/houses empty rather than rent them out at market rate because of 100% tenant friendly city and state laws. Someone can move in and refuse to pay rent, refuse to leave, use your house as a drug den, destroy your property and lots more, and you can do nothing about it.

I'm in this situation right now. The only way I'll rent it out is if I personally know the tenant and their personal character. Otherwise, I'd rather leave the property empty. I didn't buy it as a rental, rather I paid off my primary residence and then had to move, so just kept it. I don't want to go outside the law, but that would be my only option as a landlord if someone tried to abuse me/my property, since the law offers me no meaningful protection. To avoid that liability, I simply don't rent.

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

#130

Post by javert »

colinmhayes wrote: post #116
javert wrote: post #104

Earlier quoted context omitted.

My comment explains in detail the specific mechanism I'm concerned about in a way that everyone can understand it. Your comment regurgitates something from a textbook that people have on reason to actually trust. I don't have a problem that you disagree with me. I have a problem that it's an argument from authority. Also, I wonder if you're conceding that the Fed steals from the economy in general and gives to the su…

Bitcoin is not a viable currency. It's value is not anywhere near stable enough. It's honestly incredible that you haven't even thought of the very first problem with using bitcoin as a currency. Yes, the rich abuse the current system. They will do the same with any system. Saying "we shouldn't ensure that our currency has predictable value because that would make the rich even richer" is insane when the rich will be…

> Bitcoin is not a viable currency. It's value is not anywhere near stable enough.

It can't go from zero to stable overnight. It has to start somewhere and gain stability over a long period of time.

> It's honestly incredible that you haven't even thought of the very first problem with using bitcoin as a currency.

You're behaving like a troll. There is an absolutely obvious objection to your prior sentence, but rather than see that, you pretend like it isn't the case, and attack me personally. You don't know me and you don't know my thinking.

You're also behaving as a troll because you've totally changed the topic instead of answering my direct objections to your prior comments.

I'm done talking to you. I assume your next comment will also be trollish, and I hope people see through it. But please just don't answer.

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