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

So this has some obvious issues: * Areas without a ton of very similar houses that have also sold recently will basically have no 'comps' to use. * It's really easy to keep identifying differences (pros/cons) until the adjusted prices equal each other but it's hard to know if all of the meaningful differences have actually been identified. * It gives average homes and average buyers a huge advantage. This model assumes that the housing market is hot but not hot enough that someone will pay 10-15% more for some specific feature. Anything unique to a home/property is only going to be worth a fraction of the time & money it would cost to add. Anything super common (kitchen remodel, finished basement, etc.) can actually add 100% or more of it's cost to the houses value because the buyer is paying with 5x or more leverage so paying a bit extra to have it included. This is also why it's often better to fix a few things as the seller than give a discount on the sale price - the buyer will often pay a premium to get things move-in ready since it doesn't impact their monthly costs significantly.

The same set of people who would move their price points up after a few months and get larger mortgages. This worked for all of 2020 and most of 2021 and only the past quarter did it fail as a strategy.

>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.)

You're missing that this is Zillow, not a neutral market actor. They have unique information about demand for houses and even get to influence prices upward through Zestimates.

FYI, the reason this is happening is that interest rates are so low that people are desperate for yield, and rental yield fits the bill.

There are a lot of benefits:

- professionally managed properties. Most small time landlords are incompetent -- the horror stories you see about landlords being petty or vindictive is from the small time landlord, not the professional manager.

- lower rental prices for properties people want to own. Institutional investors can move funds more quickly to increase rental stock where it is most in demand. Here, too, the yield will fall, which is another way of saying lower rents.

Moreover despite the moral panic by journalists that ordinary households are being priced out, this doesn't actually happen because most institutional investors operate in unconstrained areas, where home prices track construction costs, at most with a small delay. In these areas, an increase in renter demand will result in more property built much more quickly if the institutional investors participate. This actually drives down prices over the long term by increasing supply.

However in constrained areas, this would drive up prices for SFHs. But I thought people weren't supposed to buy SFHs in constrained areas - and institutional investors have been in the multi-unit market for over a century.

Getting paid for a service is not rent seeking in the way people are using it here.

[1] https://www.investopedia.com/terms/r/rentseeking.asp