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

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

#181

Post by chii » Wed, Nov 03, 2021, 1:01 AM UTC

not2b wrote: post #125

gibsonf1 wrote: post #119

Earlier quoted context omitted.

That doesn't sound like an algorithm mistake, just like a policy to match sales nearby at the same price because of the assumption that prices will just keep going up coupled with the stupidity of not tracking what you've bought so far - yikes! Oh, on second thought, I guess it could be algo as that previously bought nearby condo could have been priced using some crazy algorithm.

"Prices will keep going up" was a key belief that triggered the 2008 real estate crash. They keep going up until they don't, and then the house-flippers who weren't careful enough and the lenders that approved "liar loans" get burned badly.

> the lenders that approved "liar loans" get burned badly.

the lenders "knew" of the bad loans, but because these lenders are going to on-sell the loan to some other investor, they didn't care as they profit off the sale, rather than the loan repayments. It's a moral hazard.

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

#182

Post by mikeryan » Wed, Nov 03, 2021, 1:02 AM UTC

missinfo wrote: post #55

woeirua wrote: post #7

This is kind of a big deal in the real estate sector. The only reason that Zillow would sell everything right now is if they believed that the carrying costs of the properties until they (eventually) sell would eat all of their profits. They must be seeing flashing red signs across the board that there's a slowdown in the market and that scenario is exactly what will play out if they don't exit quickly. There's no wa…

Maybe Opendoor will follow, but there's also this perspective: Selling or shorting Opendoor due to Zillow’s flaws is akin to shorting Google due to Yahoo’s inability to monetize search well or return long tail queries properly. https://twitter.com/rabois/status/1455564619494436870

Rabois is a founder of Opendoor.

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

#183

Post by yanderekko » Wed, Nov 03, 2021, 1:04 AM UTC

iskander wrote: post #159

acchow wrote: post #147

Earlier quoted context omitted.

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.

So if the previous owners moved out and then repainted the house and sold it for 20% additional value, would they be villains too? Or is it okay because they're "middle class" and Zillow's shareholders presumably are just yacht-owning billionaires?

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

#184

Post by lokar » Wed, Nov 03, 2021, 1:04 AM UTC

engineer_22 wrote: post #169

lokar wrote: post #141

Earlier quoted context omitted.

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

The market doesn't need any more liquidity. Banks will lend to anyone with a pulse.

That is not the kind of liquidity I'm talking about. Look up what companies like citadel securities do in equities markets.

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

#185

Post by mym1990 » Wed, Nov 03, 2021, 1:05 AM UTC

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.

More so than providing liquidity they are providing increased velocity. I would love to know if there are properties that Z has bought and sold more than once...

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

#186

Post by penneyd » Wed, Nov 03, 2021, 1:08 AM UTC

notjesse wrote: post #116

_fat_santa wrote: post #88

Earlier quoted context omitted.

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.

They started ZO back in 2018. I think the bigger concern was the amount of growth and threat Opendoor presented them. There was a vision that they will fundamentally change the sector and make Zillow an equivalent of what the White Pages is to Google. So yes it was FOMO, but not based on quickly appreciating real estate.

This is 100% it.

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

#187

Post by vba » Wed, Nov 03, 2021, 1:08 AM UTC

ChuckMcM wrote: post #160

iab wrote: post #131

Earlier quoted context omitted.

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)

Appreciate the effort

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

#188

Post by TheCoelacanth » Wed, Nov 03, 2021, 1:09 AM UTC

iab wrote: post #134

tomcam wrote: post #103

Earlier quoted context omitted.

I feel pretty smart because I immediately found that same book on eBay for only $8 million

Textbook arbitrage - congrats on the fortune

Unfortunately, I have a feeling that the bid-ask spread on that book is approximately $23 million.

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

#189

Post by ahmadss » Wed, Nov 03, 2021, 1:09 AM UTC

ChuckMcM wrote: post #160

iab wrote: post #131

Earlier quoted context omitted.

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)

yes please do find that paper (or the name of the professor)!

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

#190

Post by maxsilver » Wed, Nov 03, 2021, 1:10 AM UTC

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.

> Nothing wrong with that.

Zillow was literally scalping housing, a basic human need that all people must buy. That's generally considered very immoral by most reasonable people. And they didn't just do it once or twice, they did it at ridiculous scale (tens of thousands of homes sold last quarter, was a sale to a scalper to artificially drive up all housing prices).

Most reasonable people would consider this behaviour to be evil (like, comic-book-villain level evil). Even scalping a optional-only luxury item like concert tickets or whatever is already considered unethical by most folks.