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How Zillow's homebuying scheme lost $881M

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

#41

Post by LimaBearz »

chrisbrandow wrote: post #11

How many homes did they buy? wow. Oh, ~5,000/month.

What gets me is even if the number was significantly smaller the fallout effect is massive. A common argument I've heard defending the practice is "well they didn't buy that many homes, it was just a small portion of total sales" ...implying that its not a big deal.

Lets no argue the truthiness of that statement but look at it as stated. They buy one house within a 10-20 mile radius away from you and they do so aggressively paying 20-30%+ over the pre-bubble price (think early pandemic times when prices were more realistic then they are now)

Well now thats the anchor price on comps for the next guy just looking to sell his house. Rinse and repeat a few times with anchored expectations on an inflated value and we have runaway prices.

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

#42

Post by rank0 »

janj wrote: post #34
rank0 wrote: post #18

Earlier quoted context omitted.

I think people should expand what "desirable" means to them. There's a ton of suitable houses all over the country. Everyone seems to need to own a SFH in a trendy part of a trendy city.

I don't understand this comment, maybe you can expand. It makes sense to me that what is desirable for a primary residence would significantly overlap with what is desirable for rental, comfortable space, walkable to a city center, etc. Is your point that people should be more accommodating to the rental market? IMHO I think all cities should strongly regulate what can be a rental and add tax to homes when it is not…

I'm arguing that people should lower their standards. It should be easy to understand that not everyone can afford own property walking distance to the city center.

I fully agree with you on prioritizing primary residence.

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

#44

Post by pixl97 »

haroldp wrote: post #24
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,…

> 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. But iBuyers are always low-balling. They are bidding under the asking price with an all-cash offer that they hope will make up in speed and ease what it lacks in price. > It's not that uncommon to see nearly entire neighborhoo…

>But iBuyers are always low-balling. They are bidding under the asking price with an all-cash offer that they hope will make up in speed and ease what it lacks in price.

But is asking price "market" price. As in does the seller price a 10-20% premium calculating this. Always easier to negotiate down than up.

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

#45

Post by alistairSH »

rank0 wrote: post #18
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,…

I think people should expand what "desirable" means to them. There's a ton of suitable houses all over the country. Everyone seems to need to own a SFH in a trendy part of a trendy city.

“All over the country” doesn’t have good jobs, good schools, access to entertainment, etc.

But, I agree on the SFH part. The expectation that a 3000sqft house on 1/4 acre is the norm is completely unsustainable. Yet that seems to be what many people want. Even in high COL areas where demand and cost should be driving density.

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

#46

Post by ct0 »

harikb wrote: post #35
dpierce9 wrote: post #13

Anecdote on the estimates. We bought a house for X and renovated it. The day before we listed it both Zillow and Redfin estimate had an estimate around the purchase price X. When we listed it for 2X, both companies changed their estimate to be close to the listing. However, Redfin changed the entire price history as well showing a gentle slope. Zillow preserved their previous history and showed a spike.

+1 I have always been annoyed by Redfin's rewrite of history. At least have the decency to show two lines (original prediction for last year and how it turned out to be).

This happens all the time with most data providers.

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

#47

Post by cheriot »

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,…

> The scary thing is that it's easy to see how something how like this could drive a market boom and bust cycle.

iBuyers don't buy from each other or hold the house for long. As soon as they sell then everyone sees what a market price looks like without them.

> automation creating adverse market incentives

You seem interested in how markets drive outcomes so I'd suggest looking into the effects of residential zoning and other barriers to construction. The US has spent the last 50 years coming up with creative excuses to prohibit new housing and it gets more expensive every year. Probably related!

Not the best example, but one I have handy: https://twitter.com/DurhamFella/status/1441808710066577410?s...

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

#48

Post by sokoloff »

Invictus0 wrote: post #36

I wonder how this would have ended up if they just dealt in options instead of taking on the inventory. For those that don't know, a real estate option gives the holder the right to buy the property at a fixed price within a certain timeframe, in exchange for a premium. This would have been a much better way to learn the market than diving straight into home purchases.

Most people who are selling their house are doing so in order to buy another one. That is to say they need the money from the sale to close on their other house. Selling an option on a house you live in is a pretty terrible idea since if the market takes off, your option gets called, you're out of a house and into a market that's skyrocketing.

I don't think there's enough benefit to sellers to make buying options feasible.

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

#49

Post by lordnacho »

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,…

This has perplexed me as well. Here in the UK, the top 1% of incomes is £175K. Assuming the bank lets you borrow 5x, and you're married to someone with a more middling income, you can borrow ~£1M.

Yet there's a ring around London where it's hard to see any family homes that are under £1M.

I mean sure maybe they're sitting on equity or mom and dad are contributing, but by my estimation there are a huge number of people who have thrown absolutely everything into owning a home. We'll see how they fare if rates rise.

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

#50

Post by rank0 »

t-writescode wrote: post #30
rank0 wrote: post #18

Earlier quoted context omitted.

I think people should expand what "desirable" means to them. There's a ton of suitable houses all over the country. Everyone seems to need to own a SFH in a trendy part of a trendy city.

Not me. I just want mixed residential housing. Yeah, it’s not happening because America made that effectively illegal. We’re finally rolling some of that back, but it’s going to take decades to undo and by that time the shortage will continue.

Sorry man that sucks. I own a property that's effectively a duplex in Atlanta. My buddy owns a duplex in Denver. It's not everywhere that mixed residential homes are banned!

Are you in CA?

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