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Zillow lost money because they weren't willing to lose money

stevenbuccini.com

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Re: Zillow lost money because they weren't willing to lose money

#311

Post by shitloadofbooks »

axg11 wrote: post #139
rossdavidh wrote: post #131

While no doubt Zillow made many of these mistakes, I think the reality is more sobering that the author of the article realizes. The more grim possibility, is that Zillow got out of the house buying business, not because they weren't good enough at it, but because they _were_ good enough at it to realize that it was at the top. If buyers want more now for their house, than it can be sold for in a few months time (whi…

While this sounds plausible, I think there are a couple of factors that work against this theory: 1) Why layoff your data science division if they are predicting with accuracy? 2a) If you have enough conviction to call the top of the market, why sell off so much housing at a huge loss? Zillow are the only participant in the residential real estate market losing money right now. 2b) If you see signals of a forthcoming…

What mechanism can you use to short the housing market? I thought most of the stuff used in 2008 don't exist anymore/will never be offered again?

Re: Zillow lost money because they weren't willing to lose money

#312

Post by perl4ever »

civilized wrote: post #309
perl4ever wrote: post #223

Earlier quoted context omitted.

>adverse selection According to Matt Levine's recent column, while you might think that, it wasn't what sunk them in practice. Bidding low in fact worked; it just was inherently limited in scale, which is why they switched to bidding higher. Unfortunately, being wrong in the other direction is very bad. "I know, I know, the traders are saying: “No, this is stupid, your algorithms will not be 100% precise, some of you…

I don't think Levine successfully disputes the importance of adverse selection here. Sure, if you make a million low-ball offers, a handful will be accepted for God knows what reason. That doesn't mean that adverse selection isn't a serious danger when you attempt to scale up, as Zillow did. I mean, why did Zillow go straight from making profitable purchases of few houses to losing money on tons? If there's some swee…

I think he was saying that while no doubt it occurs on a case by case basis, it appears to be relatively insignificant either way.

When they were paying less than market price, they still made a lot per deal, and when they were paying more than market price, adverse selection hardly pushed them over the edge.

If you make "a million high ball offers" then the fact that some of them are particularly bad deals isn't the core problem.

I'm not 100% confident of this but it seems like the picture that is being painted.

And also, that it is particularly hard to hit the spot in between - I don't know if he's correct about that.

Re: Zillow lost money because they weren't willing to lose money

#313

Post by hamburglar »

spoonjim wrote: post #238
lordnacho wrote: post #122

Earlier quoted context omitted.

Yes, you might discover that your average price is accurate, which is just fine for a reporting site. But beneath that there could be some structure, for instance there might be blobs of houses that your model makes too cheap vs reality, and blobs that are too expensive. If those are identifiable, eg via some sort of local knowledge, you might find that people will sell you houses that you've marked too high, but you…

Totally. There’s a surly creep who lives on our street and the houses next to his are worth less because of that. But Zillow would never know that.

This “annoying neighbor” problem keeps getting cited as an example of something that affects housing prices that the automatic algorithms don’t know about, but does it really exist? What is the mechanism by which the potential buyers find out about the annoying neighbor? I’m highly skeptical. I’ve had annoying neighbors before and there is zero chance that any potential buyers knew about them when I sold.

Are people interviewing all the neighbors before making a house purchase? Are those neighbors not incentivized to withhold any negative information about the neighborhood because it affects their own property values?

Re: Zillow lost money because they weren't willing to lose money

#314

Post by civilized »

perl4ever wrote: post #312
civilized wrote: post #309

Earlier quoted context omitted.

I don't think Levine successfully disputes the importance of adverse selection here. Sure, if you make a million low-ball offers, a handful will be accepted for God knows what reason. That doesn't mean that adverse selection isn't a serious danger when you attempt to scale up, as Zillow did. I mean, why did Zillow go straight from making profitable purchases of few houses to losing money on tons? If there's some swee…

I think he was saying that while no doubt it occurs on a case by case basis, it appears to be relatively insignificant either way. When they were paying less than market price, they still made a lot per deal, and when they were paying more than market price, adverse selection hardly pushed them over the edge. If you make "a million high ball offers" then the fact that some of them are particularly bad deals isn't the…

I won't say he's definitely wrong but it seems odd to argue that Zillow has so much market knowledge and money as to render adverse selection irrelevant, and yet they just couldn't resist making tons of unprofitable offers out of sheer impatience to scale up. What happened to all that market knowledge? There's got to be more to it than this.

Re: Zillow lost money because they weren't willing to lose money

#315

Post by selimthegrim »

JanisL wrote: post #20
JKCalhoun wrote: post #10

Earlier quoted context omitted.

I'm reminded always of the Hunt brothers that tried (and failed) to corner the silver market in the 70's/80's: https://en.wikipedia.org/wiki/Silver_Thursday

Basically the COMEX changed the rules explicitly to disadvantage the Hunt Brothers. The changes made to margin requirements is what made the difference here. I don't think anyone could claim that the silver market is an entirely free market, I remember last year a press release where the COMEX said they weren't sure how much they actually had in their vaults in eligible and registered, with a plus/minus 50% figure be…

Saudi oil reserves for one

Re: Zillow lost money because they weren't willing to lose money

#317

Post by goldenkey »

erikpukinskis wrote: post #277
goldenkey wrote: post #180

Earlier quoted context omitted.

Indoor cats don't magically get diseases. Just like an indoor pet bat isn't going to magically contract rabies. They might if you are letting them out to go roam the terrain. I'm really tired of these silly perpetuated mythologies.

How can an indoor cat ever clean themselves though? It doesn’t seem like most indoor cat owners bathe the cats, do they?

Bathing cats can give them infections if the water gets in their ears. Generally, they clean themselves in a freshly cleaned litter box, what's called a "sand bath" by rolling around. They also clean themselves by licking themselves. They do a very good job, I've been around cats my whole life and none of them smell except perchance the fat ones that cannot lick their butts and sometimes have a bit of a dirty butt.

I'm not sure if you asked the question in regard to disease -- but even indoor cat poop will not carry diseases. Perhaps E. coli or other bacteria already in the cat's gut (and our guts too), but toxoplasmosis is not going to pop up unless it's in the cat food (uncooked pork, etc.) or the cat already has it. It is another common mythology that somehow poop has "disease" in it. It has no more disease than we already possess...

Re: Zillow lost money because they weren't willing to lose money

#318

Post by JumpCrisscross »

wpietri wrote: post #250
bee_rider wrote: post #247

Earlier quoted context omitted.

If we look at archetypal on Wikipedia, we get: > 1) a statement, pattern of behavior, prototype, "first" form, or a main model that other statements, patterns of behavior, and objects copy, emulate, or "merge" into. Informal synonyms frequently used for this definition include "standard example," "basic example," and the longer-form "archetypal example;" mathematical archetypes often appear as "canonical examples." >…

That could be it. Except that if market-makers were ideal in that sense, they wouldn't need to exist. If a buyer and a seller simultaneously exist at a given price, they can just trade with one another. Market-makers are valuable to markets only when they provide liquidity through non-simultaneous buy/sell pairs. I think it also leaves out that not every market maker wants to be flat instantly. The one I worked for,…

> one I worked for, and at least some of our peers were sometimes happy to hold inventory for a bit

May I ask if this was before or after GLB (1999, for the kids following at home)? (My experience as a derivative market maker was post GLB and post crisis.)

Managing a flat book is less exciting than placing directional bets. It’s also less profitable, at least when the bets go well. Add to that the complexity of market making, particularly when derivatives enter the equation, and you get the two decades–following the advent of ECNs, turbocharged by GLB and ending in the financial crisis—in which market making desks were proprietary traders first and liquidity providers second.

Also, if you buy a swap and I simultaneously sell stock, there is both a simultaneous trade and liquidity being provisioned in a value-adding way.

Re: Zillow lost money because they weren't willing to lose money

#319

Post by JumpCrisscross »

hhmc wrote: post #204
JumpCrisscross wrote: post #173

Earlier quoted context omitted.

> Saying they simultaneously buy/sell is wrong/confusing That wasn’t claimed. What was said is the archetype is simultaneity. That is 100% accurate for how the term “market maker” has been used, globally, since at least 1999. (Pre-GLB/LTCM and post-ECN, the term was used more broadly.) Drift from simultaneity incurs cost and risk. Those costs and risks must be managed. If you aren’t thinking in those terms, you aren’…

You can't garauntee your (bid/ask) resting orders are executed against in the same epsilonic time window, nor would you want to. No market making practioners would think in these terms.

> You can't garauntee your (bid/ask) resting orders are executed against in the same epsilonic time window, nor would you want to

Of course you can. This is the entire thesis with which HFT beat out old-school market makers in securities.

Re: Zillow lost money because they weren't willing to lose money

#320

Post by bscphil »

elliekelly wrote: post #236
andi999 wrote: post #210

Earlier quoted context omitted.

Apart from that of course you can sue anybody for anything (with more or less success); why would that be the case here? I mean isnt if neighbours are annoying a subjective thing? Do you know of any court ruling which implies one has to disclose the state of the neighbours?

There is a famous (among first year law students) case[1] that seems relevant given the nature of the issue is one a buyer would not reasonably be able to ascertain on their own. One possible point of differentiation: ghosts are a permanent defect on the value of the property while loud children living next door would probably only torment the homeowner for a decade or so at most. The opinion is famous not just for i…

Despite quoting the ruling at length multiple times in the article, there's not a single link to the actual ruling on that page, so far as I can find. Never change, Wikipedia.

This seems to be the opinion: https://scholar.google.com/scholar_case?case=329068483649083...

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