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Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

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Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#151

Post by analyst74 »

_fat_santa wrote: post #80
pezzana wrote: post #34

> ‘We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility,’ CEO tells investors. That's quite a statement. The head of a company with a privileged view of the US residential real estate sector says that the market is "unpredictable." Not the good kind of unpredictable where yo…

Other commenters on this and the previous thread pointed out, sometimes with first-hand experience, that Zillow would vastly overpay them for their home. I think this is less to do with the housing market in general and more to do with their tech. Zillow's iBuyer program hit the scene like a bull in a china shop. The real story is that they rushed into this space, had underdeveloped algorithms, overpaid for homes, an…

Overpaying for a house is not a problem in an appreciating housing market. If you overpaid for a house, just wait for its actual market value to catch up and voila, no loss.

The reason you fire-sale that house at loss, is because you believe market value is unlikely to catch up.

Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#152

Post by [deleted] »

acchow wrote: post #147
enlyth wrote: post #113

Good riddance, I hope this company burns to the ground The software developers working for this company knowingly tried to make algorithms to flip and profit off of something that should be a human right Replacing carpets and painting walls, trying to flip for a 20% profit, the people running Z must be geniuses As a millennial looking at 2 bedroom flats selling for £575k (780k usd, not far from a million dollars) in…

Zillow basically bought homes, repainted them, then sold them. Why is this so villainous?

[deleted]

Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#153

Post by siruncledrew »

_fat_santa wrote: post #88
silisili wrote: post #49

I don't get Zillow's play here. They were for a long time the de facto neutral party everyone used to look at houses. Great. Then they got into doing contracts apparently, still OK. Then they started competing against people and overbidding everyone, at the height of what appears to be the biggest housing boom of my lifetime. This was not only apparently financially dangerous, but an act that puts them in a bad light…

I think Zillow saw the numbers going up in the housing market and got FOMO. It's crazy to think an institution like this would get FOMO, but I think what happened is in 2020 they saw housing prices go through the roof, thought to themselves "hey we have all of this data, we can make a quick buck here" and piled in only to now get burned.

It makes sense there could have been internal shareholder/executive pressure to continue expanding into other aspects of housing markets to further entrench their positions against competitors, but hedging their bets backfired in some areas, and now is the retrospective time to cut their losses and refocus on their strengths.

Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#154

Post by gravypod »

AussieWog93 wrote: post #138
gravypod wrote: post #47

Earlier quoted context omitted.

I am not an analyst but this is my armchair understanding of the market: 1. The construction of new homes was limited in late 2019 early 2020. This was due to covid and labor shortages and supply lines being blocked. 2. Demand for homes rose to an all time high. The people in big cities said: "Why quarantine with nothing to do in my Manhattan apartment when I can buy a house and sell it when the pandemic is over. Hou…

>I've been seeing homes steadily creep back to what inflation would account for in price delta. Do you have any data or more info about this? I think many of us young 'uns would just like some hope right about now.

Nothing scientific, just observing ~20 listings by my apartment (that I would love to live in some day).

I would however offer that if anyone can give me unfettered access the data of multiple MLSs I could generate some visualizations. I really really really want this data.

Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#155

Post by trident5000 »

copenja wrote: post #148
trident5000 wrote: post #121

Earlier quoted context omitted.

Because the real estate sector is like 30-40 trillion. 2007 was the result of a massive infusion of debt by unsophisticated retail "investors" who bid prices up far higher than even their rental value. Lending standards dont allow this today. If big institutional money is going to cause a frenzy it would need to be irrational money managers that somehow clear their purchases through a panel and none of them say anyth…

According to this article[1], large investment companies accounted to 16.1% of all single family home sales in the US in Q2. I'm not an analyst. But, I would think that would be plenty of extra demand to influence the price?

Investment companies are far less likely to lead a speculative bubble than retail buyers. They are professional investors who go through a valuation process. They have also always been part of the market.

Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#156

Post by selimthegrim »

topspin wrote: post #40
tppiotrowski wrote: post #14

"The surprising exit, announced with pedestrian quarterly profits, thrashed shares in another rough trading session Tuesday, a day after an analyst said two-thirds of the homes it bought are underwater." https://fred.stlouisfed.org/series/MSPUS The fed chart shows almost hockey stick growth in housing prices this year. How can the Zillow properties be underwater, did they just massively overpay up-front?

> did they just massively overpay up-front? That's the only possibility available as far as I can see. I recall seeing the housing stock they favored were all in the hottest US markets, so they're exposed to small fluctuations at the extreme end of the histogram. Otherwise the US median home price curve still looks like a boost phase ballistic missile track as of Q3 2021. Zillow only got into this flipping game in 20…

Well with only dos commas at least we know which way the doors will open on the super cars.

Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#157

Post by Factorium »

missedthecue wrote: post #142
calltrak wrote: post #111

Don't worry black rock ( look them up on yahoo finance) with 20 trillion dollars stolen from the american people via the privately owned federal reserve will buy up all the houses in America.

BlackRock manages the assets of pensions and 401ks. They are literally in the business of making returns for the middle class.

The Fed hired Blackrock to manage the QE program.

They are basically in charge of printing US dollars and buying their own assets.

And we think crypto is bad...

We should just end the Fed and replace it with a giant algorithm, with crowdsourced and transparent consumer price data. Maybe a few humans to keep the lights on, and to figure out how a 4K TV is better 'value' than a 1080p TV, etc.

Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#158

Post by iskander »

lokar wrote: post #141
AussieWog93 wrote: post #136

Earlier quoted context omitted.

In defense of Zillow, they weren't looking to buy a "portfolio" of houses - they bought as many as they sold, and didn't have any net negative effect on housing supply. Yes, they're profiting off of a bad situation, but they're not the cause of it. Bev from the local council's planning department, as well as Michael Caton's horrific propaganda piece, has done more damage than every flipper combined.

They were trying to act as a market maker, providing liquidity for a price. Nothing wrong with that.

It's more complicated than that since they also have a huge influence on prices through Zestimates. They undoubtably kept housing prices rising for the past few years, which was very profitable to them as large scale flippers.

Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#159

Post by iskander »

acchow wrote: post #147
enlyth wrote: post #113

Good riddance, I hope this company burns to the ground The software developers working for this company knowingly tried to make algorithms to flip and profit off of something that should be a human right Replacing carpets and painting walls, trying to flip for a 20% profit, the people running Z must be geniuses As a millennial looking at 2 bedroom flats selling for £575k (780k usd, not far from a million dollars) in…

Zillow basically bought homes, repainted them, then sold them. Why is this so villainous?

Because they would outbid people who actually want to live in those homes, essentially front-running the middle class to earn a massive profit.

Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#160

Post by ChuckMcM »

iab wrote: post #131
ChuckMcM wrote: post #102

Earlier quoted context omitted.

Very much like the $5000 books on Amazon where the algorithms are anticipating flipping an existing listing. Congrats on winning this round! The next step might be interesting which would be to go back and re-purchase the Condo once the price corrects to the 'real' price and bank the difference. I have read this article and the one before it and it sounds very much like some folks who fell in love with their own idea…

Traffic fascinated me - please post a link to that paper

I will see if I can find it, not all papers published in the 80's are online. (and I just looked the professor is emeritus at USC now but still around so I'll send him the question too)
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