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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

#231

Post by lsh123 »

roland35 wrote: post #41
onlyrealcuzzo wrote: post #26

Earlier quoted context omitted.

TBF - wasn't the Phoenix metro up almost 40% in one year? After a 14% cut, that would still be an absurd YoY increase (I think still the largest single year increase in a major metro in the US on record?). I get that Zillow is losing 14% - but the market is not yet even back to normal appreciation - let alone "crashing".

Here is the case shiller index for Phoenix - it is absolutely wild since 2020! https://fred.stlouisfed.org/series/PHXRNSA/

One thing I don’t understand is that many people who buy houses in Phoenix believe in Global Warming getting worse in the short term (source: lived in Phoenix for a year, considered buying a house there, and spoke with many folks who just moved or were about to move).

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

#232

Post by kwertyoowiyop »

datavirtue wrote: post #71
beamatronic wrote: post #8

Earlier quoted context omitted.

Agree 100%... I'm astonished that a large corporation trying to get into this business, would "bite off more than they could chew". Don't they have MBAs and financial models to assess this sort of thing?

Yeah, throw your model at: "contractors took six months longer than expected to finish the kitchen" Extrapolate that out a hundred thousand times and you get a sense of what they were trying to manage. How did they predict remodel costs? Pre-pandemic material costs and back-of-the-napkin labor estimates?

LOL. It’s kinda like estimating software!

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

#233

Post by chii »

datavirtue wrote: post #66
darthvoldemort wrote: post #43

Earlier quoted context omitted.

It's a huge pivot to go from flipping houses to becoming a landlord. It would essentially be a disaster for them. That's a high-touch business and probably the costs associated with it, and the legalities around it are too complex. That's basically turning into an Avalon or something. The interesting question is around their bonds. They were basically convertible bonds which likely triggered, but now they have to pay…

Flipping is extremely high touch.

not as high touch as finding a tenant, maintenance, etc.

Flipping is low touch compared to that. To flip, all you need is a buyer willing to pay money, and it's a single transaction.

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

#234

Post by EastOfTruth »

emails4vg wrote: post #217

Wondering if this is a tipping point? One thing is for sure, zillow’s competitors will get super careful. And this should bring some sanity go the market

They are about 1/10th of a percent of the US market... hope that is enough

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

#235

Post by Erik816 »

justinpombrio wrote: post #230
anchpop wrote: post #203

Earlier quoted context omitted.

> Because they would outbid people who actually want to live in those homes If they outbid everyone who actually wanted to live there, who were they planning to sell to? :P Buying things you think are underpriced and reselling them is not frontrunning. (Ever since GME, a lot of people learned the word frontrunning and started using it in every possible situation.) Zillow's plan was to act as a market maker. Market ma…

> Despite maybe seeming like a useless middleman, the reason market makers can exist is because they provide a valuable service to the buyer and the seller. Well, and also because it's illegal in some states to buy directly from a car manufacturer, so you're forced to go to a dealership whether they provide value or not. Would eBay and Amazon be considered market makers, as they pair up buyers and sellers?

The example was used car dealerships. You can always buy/sell your vehicle in a private sale without requiring a used car dealership.

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

#236

Post by Erik816 »

__float wrote: post #204
pcwalton wrote: post #200

Earlier quoted context omitted.

The first part of this is correct; the second part isn't. Rather than earning a profit, Zillow's current situation is the result of the invisible hand of the market correcting its economically-irrational behavior.

Unfortunately those in charge at Zillow didn't feel the real pain -- that went to families trying to find homes, being outpriced by Zillow.

Real pain would be buying an overpriced house that was bid up by Zillow or other similar companies and then needing to move. Missing out on that overpriced sale would actually be great!

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

#237

Post by _vertigo »

yanderekko wrote: post #183
iskander wrote: post #159

Earlier quoted context omitted.

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?

I think there’s a difference between a company with enormous amounts of capital buying a bunch of houses to flip, intentionally trying to drive a trend of increasing home prices to profit, and a single homeowner improving a single house and profiting primarily because of the improvements and not because he’s driving the market up massively..

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

#238

Post by esyir »

93po wrote: post #223
pcwalton wrote: post #202

Earlier quoted context omitted.

I don't consider it evil. When you buy a house, fix it up, and resell it, you're essentially providing a renovation service to whoever will buy it next. There's no meaningful difference between you renovating a house and selling it and an owner-occupant buying the house and renovating it themselves. In this case, Zillow bought houses too high and sold them too low. As a result, the market punished that irrational beh…

If there's no difference then there'd be no profit for Zillow and they wouldn't be doing this to begin with. Clearly there's a difference and it's morally bankrupt

His argument is that Zillow was providing a valuable service in the renovation process. Value-add allows them to charge for it.

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

#240

Post by erik_seaberg »

chii wrote: post #181
not2b wrote: post #125

Earlier quoted context omitted.

"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.

The loans were also bundled into opaque securities and the “low-risk” tranches were rated and priced for a typical rate of uncorrelated defaults, not a widespread crash.
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