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How Zillow's homebuying scheme lost $881M

fullstackeconomics.com

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Re: How Zillow's homebuying scheme lost $881M

#351

Post by nunez »

ryandrake wrote: post #123
a1pulley wrote: post #62

Earlier quoted context omitted.

> It's honestly quite scary how I'm in the top 2% of income earners in my generation and yet I could barely afford to buy a small place in a semi-desirable area. I can easily see myself not being able to compete in algorithmically dominated markets flush with venture cash in the future and I earn more than just about everybody I know today. A thought exercise: suppose that no new houses are ever built and that housin…

> > It's honestly quite scary how I'm in the top 2% of income earners in my generation and yet I could barely afford to buy a small place > I live in Los Angeles, where a "small place in semi-desirable area" gets listed for 1.5M and goes for nearly 2M. I'm somewhere in the top 5% of earners in California, but that $2M 1950s tract housing would be >50% of my post-tax income. I think the obvious answer here is that peo…

but what about all-cash mortgage lending services and margin loans?

Re: How Zillow's homebuying scheme lost $881M

#352

Post by endisneigh »

giraffe_lady wrote: post #346
endisneigh wrote: post #297

Earlier quoted context omitted.

How exactly is it inherently adversarial? Isn’t what you’re saying also true to literally any for profit transaction?

Only things that are absolute needs. You can walk away from a profitable transaction, you can't walk away from one you'll die without. People are willing to take much more extreme action around housing (and food, medicine, ) than they are most other goods. They're also less likely to agree there is moral justification in profiting from these things. So even when entering these transactions (they must, after all), the…

Should doctors work for free? Should farmers?

Re: How Zillow's homebuying scheme lost $881M

#353

Post by jjav »

paxys wrote: post #90
mentalpiracy wrote: post #79

Earlier quoted context omitted.

Why should we use this as an example? You’re talking about people who are throwing away money by leaving assets idle - and implying that they obviously don’t know how to operate in this market.

> You’re talking about people who are throwing away money by leaving assets idle No, they are watching their assets shoot up in value every day without any operational burden. > and implying that they obviously don’t know how to operate in this market When did I say that? In fact what they are doing the most logical thing.

> > You’re talking about people who are throwing away money by leaving assets idle

> No, they are watching their assets shoot up in value every day without any operational burden.

It's not either/or. They might be watching the property value go up every year, but they are simultaneously throwing money away by leaving it empty. They could have been profiting from both sources but chose to profit only from one.

(Often rationally, since a bad tenant can destroy the property and never pay, but still.)

Re: How Zillow's homebuying scheme lost $881M

#354

Post by scatters »

MiroF wrote: post #153
programmarchy wrote: post #120

Earlier quoted context omitted.

If you have a family home, you probably don’t want 8 college students moving into the house next door to you. This was a restriction in my college town. As a student, I didn’t like it, but as a homeowner with a family, I completely understand.

If you want to control who lives next to you, feel free to buy the neighboring properties.

Elsewhere on the thread you pointed out that fair housing laws mean that you don't get to control who lives next to you even if you're renting out those properties. So your only option would be to leave them empty.

Re: How Zillow's homebuying scheme lost $881M

#355

Post by buzzdenver »

TimPC wrote: post #337
buzzdenver wrote: post #10

The author has a valid point in that the information asymmetry will attract sellers whose property is overvalued to sell to Zillow. I suspect though that something different happened in reality. I live in a 70 unit condo building, so there are a lot of very good comparables. Zillow bought one of the units about 10% over market value, which makes me think that they're doing some sort of market manipulation, like charg…

It’s very hard to do good real estate pricing models from raw data. You can get all sorts of metrics on the property statistics but one important factor in the cost of the home is the state of renovation. Since most listings don’t have a historical listing of work done in the home your best hope of accurately assessing this comes from something like computer vision on the listing pictures. Assessing the quality of wo…

What was stopping Zillow from having a human look at the property and adjust the price based on factors that their algorithm didn't consider?

Re: How Zillow's homebuying scheme lost $881M

#356

Post by jjav »

programmarchy wrote: post #120
KptMarchewa wrote: post #70

Earlier quoted context omitted.

>local regulations state that I am not allowed to live with more than 2 people unrelated to me What? Where is that? It sounds insane and extreme overreach. How can somebody regulate with whom consenting adults choose to live?

If you have a family home, you probably don’t want 8 college students moving into the house next door to you. This was a restriction in my college town. As a student, I didn’t like it, but as a homeowner with a family, I completely understand.

> but as a homeowner with a family, I completely understand.

Why do you understand? Why would you care how many people live next door?

There are potential negatives, sure. Like noise or making a mess outside. But those are already covered by other ordinances, so just enforce those.

As a homeowner with a family, I wouldn't care if there are 50 people stuffed living in the house next door. As long as they're quiet and don't make a mess, it's none of my business.

Re: How Zillow's homebuying scheme lost $881M

#357

Post by somewhereoutth »

paxys wrote: post #40
thr0wawayf00 wrote: post #9

The scary thing is that it's easy to see how something how like this could drive a market boom and bust cycle. I'm imagining a scenario where two iBuyer companies try to outbid each other algorithmically, driving the prices further and further out of reach of people who are looking for a primary home. Tangentially related, I talked to a friend who works on geospatial data for one of the big vacation rental companies,…

One can blame Airbnb, Zillow or whoever else, but the truth is that speculation in real estate and vacation towns have both been a thing for a very long time. If the population rises and we refuse to build more houses, the existing ones will get more expensive no matter what. The solution is out there in front of us but everyone prefers to dance around it.

The problem is that interest rates are too low. 5% interest rates would fix house prices (and other capital mis-allocation).

The reason why lots of boomers are sitting on large amounts of housing equity is that they bought before the transition to low rates. The reverse will also hold - anyone buying now before the transition to higher rates will get clobbered (in terms of loan to equity - probably they'll be ok repayment wise so long as they have a fixed mortgage)

Re: How Zillow's homebuying scheme lost $881M

#358

Post by tempnow987 »

Teknoman117 wrote: post #71
paxys wrote: post #57

Earlier quoted context omitted.

Agreed. Heck I know several people who prefer to keep their condos/houses empty rather than rent them out at market rate because of 100% tenant friendly city and state laws. Someone can move in and refuse to pay rent, refuse to leave, use your house as a drug den, destroy your property and lots more, and you can do nothing about it. At that point the city is just incentivizing homeowners to contribute to the housing…

> Someone can move in and refuse to pay rent, refuse to leave, use your house as a drug den, destroy your property and lots more, and you can do nothing about it. This is one of those things that really just confuses me. It's like no one could agree on happy medium between "landlord can eject you whenever they want for whatever reason" and "no one can make you leave, ever, for any reason". And to whoever downvoted yo…

I had a friend who let someone move in as part of an apartment share. Person NEVER paid them a nickel, never paid landlord anything, claimed they felt unsafe and got a restraining order. It was actually genius.

My (female) friend HAD TO MOVE OUT of the house she was renting, the landlord required she still pay rent on the lease. "self-help" (changing locks) was totally out.

All this would have been fine I think if she could have gone to court in a week or two (the person literally hadn't paid anyone anything).

Instead it was 18 months to the FIRST court date, plenty of drama between A and B, and at that court date it was clear it was going to take a LONG time longer (in fairness COVID came into picture but still).

It turned out of course this person had done this repeatedly. In my friends case the landlord just demanded she keep on paying rent and so was no help on eviction. So she was paying rent on a new place, paying rent on the old place AND paying legal bills vs a tenant getting free community legal help and who was an absolute expert in the rules.

Luckily for her for some reason tenant DID want to move eventually, and they basically arranged a settlement. She paid landlord for some damages, she paid tenant a cash for keys amount (substantial) and was allowed to go on with her life.

You could only afford this on a bay area tech level salary. For normal landlords and people this is insane.

When someone says the eviction has to be "for" a reason, and a court has to review that reason and approve it, in the bay area that easily 1-2 years if someone wants to stretch it out.

Re: How Zillow's homebuying scheme lost $881M

#359

Post by MiroF »

scatters wrote: post #354
MiroF wrote: post #153

Earlier quoted context omitted.

If you want to control who lives next to you, feel free to buy the neighboring properties.

Elsewhere on the thread you pointed out that fair housing laws mean that you don't get to control who lives next to you even if you're renting out those properties. So your only option would be to leave them empty.

Yes, you're correct.

Re: How Zillow's homebuying scheme lost $881M

#360

Post by rrrrrrrrrrrryan »

paxys wrote: post #40
thr0wawayf00 wrote: post #9

The scary thing is that it's easy to see how something how like this could drive a market boom and bust cycle. I'm imagining a scenario where two iBuyer companies try to outbid each other algorithmically, driving the prices further and further out of reach of people who are looking for a primary home. Tangentially related, I talked to a friend who works on geospatial data for one of the big vacation rental companies,…

One can blame Airbnb, Zillow or whoever else, but the truth is that speculation in real estate and vacation towns have both been a thing for a very long time. If the population rises and we refuse to build more houses, the existing ones will get more expensive no matter what. The solution is out there in front of us but everyone prefers to dance around it.

> One can blame Airbnb, but > speculation in ... vacation towns [has] been a thing for a very long time. > the existing [houses] will get more expensive no matter what.

In vacation towns, the issue is that tourists are flooding out of hotels, and into livable dwellings.

Our hotel vacancy rates are rising just as fast as our home prices.

Perhaps the solution is tearing down hotels and building high-rise apartments in their stead, but it seems a bit wasteful compared to the alternative (regulating and taxing Airbnbs to nudge tourists back into the hotels designed for them).

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