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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

#361

Post by grayhatter »

aeturnum wrote: post #310
grayhatter wrote: post #298

Earlier quoted context omitted.

So am I allowed to 'rent seek' if I also contribute? Or is 'rent seeking' so bad, merely contributing isn't enough? Is there an amount of rent seeking that's ok? Or is any amount of rent seeking egregious enough to get you on the shit list?

I think you're confusing the common meaning of rent for "rent seeking"[1] which, in economics, means specifically getting more resources in return for nothing. It's a pejorative definition. 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

I actually didn't know about the pejorative nature of 'rent seeking', so genuine thanks for the link! IMO I didn't need to either, knowing the commonalty doesn't change the intent I was going for. Even if you're seeking rent above the break even point. I'd still say that's amoral at it it's worse ethically speaking. I mean to expose the hyperbole of the assertion that wanting to wake profit in of itself doesn't make you a leach. Manipulating the market, coercing a negative sum game (accepting a loss to force out competition because you can expend the resources). These are the immoral things people do. Pretending that, just owning property and having them gall to dare to not rent it at or below cost is what's immoral or unethical is harmful to persuading anyone currently undecided, that there are real harms with allowing malicious parties to abuse their capital to prevent others from even playing the game. Which is where the majority of the harms originate from. You dont win hearts and minds by lying about how the game is unfair, and anyone who dares to play is immoral. That's obviously untrue. The people that are cheating, or abusing the rules are what's unfair. And without the majority consensus we'll never be able to fix the defects in the rules.

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

#362

Post by grayhatter »

LordDragonfang wrote: post #335
seanmcdirmid wrote: post #325

Earlier quoted context omitted.

Being a landlord actually involves a lot of work and risk. If it were free money, everyone would do it and it wouldn’t be free money anymore. I don’t have the nerve or free to be a landlord myself, but I’m sure I own some small parts property management companies via the index funds I own shares in.

As someone who previously worked for, and is also the child of, landlords, I can attest to the fact that, yes, there is some work and some risk, but you're wildly overselling it. The reason "everybody" doesn't do it is that in order to do it, you have to already have money (even if you can do it on a loan, the terms won't be favorable unless you have significant starter capital). At that point, it's basically free mo…

Why is that, specifically, wrong? I'm going to reply to your other comment as well, but I'd like to drive this point/idea to a conclusion as well.

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

#363

Post by tehnub »

AgentOrange1234 wrote: post #329
anchpop wrote: post #316

Earlier quoted context omitted.

Scalpers don't provide liquidity, market makers do

Why don’t scalpers provide liquidity? If Alice has season tickets to a basketball team, and Bob buys some of them to scalp later, isn’t he adding liquidity? I know nothing.

I don't know how to frame this in economic terms, but here's an observation. It's no easier buying a GPU from a scalper on eBay than it is buying that GPU from Bestbuy. In fact, it's probably harder. So, they seem to be making it harder to obtain the item.

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

#364

Post by lordnacho »

muttantt wrote: post #11

Crazy. I recently sold a condo to Opendoor for significantly more than I would have even thought to list it for. When I negotiated with Opendoor after their initial offer, I pointed out a recently sold condo (days before, in similar condition, layout and finishes) in the same complex that sold for much higher than Opendoor offered. Within hours Opendoor came back matching that same selling price. The kicker? It was a…

I spent a lot of time doing quant models for financial products. Two lessons:

- It's easy to get wrong. If you see a lot of opportunity all the time, it's your model that's wrong, not the market. Very trivial things can mess up your model, like not understanding what the input data means.

- Good trades are hard to get, common rule of thumb that your boss will tell you. Someone selling a house too cheaply? Either there's lots of other buyers or there's something about the house that you didn't think of.

I remember seeing an FX volatility model that almost never traded. It always said "the market is right, plus minus costs". Now and again it would ding and we'd carefully try to get it done in the market, you wouldn't do like Zillow and surprise all the sellers with a massive payday.

I also wrote an arbitrage bot from Bitstamp to MtGox once. I looked at it, didn't turn it on. Percentage wise it was a massive arb, but you couldn't see this in the raw numbers: credit risk on one of the legs. It just shows you that you still need to understand how things actually work. The model is only a calculator for quantifying opportunities that you understand.

This is perhaps the oddest thing about this story. Zillow must have run into several situations where they were paying more than what's sensible, and their staff must have reported this? Surely at the start of an algo buying program, you are vigilant to evidence that the program is wrong?

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

#365

Post by ojosilva »

sangnoir wrote: post #349
fspeech wrote: post #339

Earlier quoted context omitted.

"by letting a gap grow in front of me that would absorb the wave" would cause the freeway to carry fewer cars if everyone does it. My oldest one used to argue with me on this point when I asked him to keep a bigger gap from the car in the front for safety reasons.

But it could arguably increase the throughput (easier to on and off). Which is better: more vehicles on the freeway at lower average speeds - or fewer, faster ones?

According to analysis from engineers, or Esther from a guy I used to work with who studied break waves for the state transportation board, less cars with larger gaps is better. That's why you see semaphores on highway entering ramps sometimes, ie 101 around SV or certain European big city inner highways.

This is a problem that can probably be solved someday with self driving cars collaborating to make highways huge coordinated conveyor belts.

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

#366

Post by rsj_hn »

satellite2 wrote: post #345
rsj_hn wrote: post #308

Earlier quoted context omitted.

Nevertheless they are not buying houses for emotional reasons, but for the income stream. 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 s…

> home prices track construction costs But construction costs track home price so this doesn't prevent an unbounded faster than inflation growth.

Yes, the correlation is not necessarily causation, but we can add some other data points -- for example the size of new construction has been steadily growing at roughly 2%, which does not suggest any kind of odd explosion in house size as a result of the price going up. Of course ultimately, ability to pay determines the price of housing and also house size.

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

#367

Post by grayhatter »

dumbfoundded wrote: post #341
pbourke wrote: post #321

Earlier quoted context omitted.

Car rentals? Tool rentals? Camera equipment rentals? Leeches, all of them?

It's actually pretty simple to break it down if you try to think about it. Rent seeking is evil when the renters absolutely need the service and cannot afford ownership. Otherwise, it's a service that some find useful. Home rentals would be awesome if it was only for vacations or because someone didn't feel like dealing with maintenance. In reality, everyone needs a place to sleep at night and many cannot afford it.…

> It's actually pretty simple to break it down if you try to think about it. Rent seeking is evil when the renters absolutely need the service and cannot afford ownership.

Do they absolutely need the service? I assume you're going to give an example where someone buys out the market so they can control the price like a monopoly. If so, I'd like to point out controlling the market like a monopoly isn't the same description as "rent seeking is evil if you're selling a service people need". People need many things that can only be provided by an expert. Are they evil if they don't provide their service at cost too? If not what's the difference? Or was my assumption of your example wrong from the start?

> Otherwise, it's a service that some find useful. Home rentals would be awesome if it was only for vacations or because someone didn't feel like dealing with maintenance. In reality, everyone needs a place to sleep at night and many cannot afford it. The people who make it unaffordable to own a home by buying up all inventory and then renting it back are absolutely leaches. Comparing camera equipment rentals to home ownership likewise lacks morality.

I'm in agreement with you, but this nuance is *very* important, and you're the first to actually explain in detail exactly what's wrong.

> In the San Francisco for example, the minimum wage is $16.32/hr or ~$33K/year. The median price per square foot is $1000/sqft. A person earning minimum wage will never be able to buy property in San Francisco. Instead they're forced to spend most of their income on rent creating a cycle of poverty by preventing property ownership & wealth accumulation.

True, but a gross oversimplification of all the factors that go into something like this. The hyperbole becomes disingenuous with the reasonable expectation that not all parties are aware of the full content. Saying rent seeking makes you a leach, doesn't look like hyperbole. It looks like an assertion that owning property is immoral. This argument is going to drive people away from the realization that people are abusing the rules of the game at the expense of people who now can't even begin to play.

> The property owning class of the Bay Area desperately depends the poverty class yet burns the ladder up. We complain about the homelessness and crime yet trap people into poverty by blowing up every bill that would create affordable housing.

I suspect the intersection of the people opposing anything affordable aren't the same who actually complain about the problem. Here I'm trying to not equate the people complaining about the problem, or the injustice, from the people complaining because they're angry and need to complain. Or those complaining about the inconvenience of having to see someone poorer than they are.

> I will absolutely cheer for the failure of any company looking to profit from exacerbating the problem. I hope you can now understand the difference between renting a camera and being permanently unable to afford a place to sleep.

Me too, but it seems a bit unfair to state it like this. You're the first person to actually explain these real problems in enough detail to convey the idea and how unfair it really is. I say this because you didn't offer to explain deeper, or invite additional participation. The only thing I was able to parse out of this was a final mic drop because we both know you're right about it.

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

#368

Post by lordnacho »

KingMachiavelli wrote: post #312
azth wrote: post #306

Earlier quoted context omitted.

So you can say the same about money lenders, right?

Lending money endures risk. Landlords do have some risk but in the current supply side limited housing market the risk is drastically lower than the typical returns. e.g the bond market is probably a lot closer to the market equilibrium than the housing market. There are no NIMBYs in the bond market.

So you're saying if it was just a properly free market, it would be fine?

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

#369

Post by grayhatter »

LordDragonfang wrote: post #340
pbourke wrote: post #321

Earlier quoted context omitted.

Car rentals? Tool rentals? Camera equipment rentals? Leeches, all of them?

You're being disingenuous. All of those things you listed fulfill a temporary or geographically localized need, and are very short term. On the other hand, people often spend an entire generation in one apartment. Those categories are wholly unalike each other, and it's clear because the category of actually short term housing also exists, hotels. Likewise, long term car rentals exist, they're called leases.

The point I was trying to make, so I assume the person you replied to see it the same. Is that no one else really attempts to explain the context around the assertion. Everyone previous is happy to blame people who are winning the game, labeling anyone who's not losing as a cheater. No one else is willing to explain why or how they're cheating. Which, if you don't know all the rules, and exploits looks like complaining not about the exploitation, but about even playing. So a fair interpretation is that every game must be cheating. It's not disingenuous to not already know the ways people try to control others to make some money. It's disingenuous to pretend like you've already made a point you haven't.

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

#370

Post by LordDragonfang »

grayhatter wrote: post #369
LordDragonfang wrote: post #340

Earlier quoted context omitted.

You're being disingenuous. All of those things you listed fulfill a temporary or geographically localized need, and are very short term. On the other hand, people often spend an entire generation in one apartment. Those categories are wholly unalike each other, and it's clear because the category of actually short term housing also exists, hotels. Likewise, long term car rentals exist, they're called leases.

The point I was trying to make, so I assume the person you replied to see it the same. Is that no one else really attempts to explain the context around the assertion. Everyone previous is happy to blame people who are winning the game, labeling anyone who's not losing as a cheater. No one else is willing to explain why or how they're cheating. Which, if you don't know all the rules, and exploits looks like complaini…

The assertion is that rent seekers are "leeches", providing no value, while extracting value for themselves. It's very hard to prove the existence of a negative. That's the context. Note that no one said "cheating", that's context you read in yourself.

It's interesting that you haven't made a single attempt to provide an actual counterpoint of your own, of what value rent seekers actually provide, especially since you're complaining that no one else is explaining their position. "No one" attempts to explain, including yourself?

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