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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

#451

Post by RNCTX »

iudqnolq wrote: post #375
sollewitt wrote: post #354

Earlier quoted context omitted.

What is this green card prioritization mechanism you allude to?

EB-5 investor visas > Under regulations ... an EB-5 investor would need to invest ... a minimum of $1 million normally or $500,000 in economically disadvantaged areas... > You'll need to plan on having your money tied up in the business for several years. When you first get your green card, your permanent resident status will be conditional for two years. During the 90-day period before the end of the two-year condit…

That's the one.

So practically it's pretty cheap to get yourself to the top of the list for permanent residency. All you have to do is buy a couple of $500k houses, rent them for whatever rent you can get for them, claim you created 10 jobs by hiring maintenance guys and landscapers and whatever else to maintain them, and then when you've got your paper from the US government you can turn around and sell them for what you paid for them (or even a little less, who cares, you bought your American residency).

The rules were changed from the original law to not only allow properties in economically disadvantaged areas but near them.

As I said, that's why there's a trailer park which resembles some "third world" country slums right on the freeway in the wealthier north Dallas suburbs where I live. All of those realtors selling rental houses to Chinese factory bosses, Russian mobsters' children, South American cartel finance guys, etc need them to be near the trailer park to qualify for the program. Similarly, via a ridiculous string of foot paths and bike lanes, Hudson Yards in NYC was determined to be economically disadvantage due to its proximity to Harlem, so they could also sell apartments that no one else wanted to Chinese factory bosses, children of Russian mobsters, South American cartel finance guys, etc.

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

#452

Post by chii »

aaronwall wrote: post #445
erik_seaberg wrote: post #240

Earlier quoted context omitted.

The loans were also bundled into opaque securities and the “low-risk” tranches were rated and priced for a typical rate of uncorrelated defaults, not a widespread crash.

The rating agencies would rate just about everything https://www.cnbc.com/id/27321998 Official #1: Btw (by the way) that deal is ridiculous. Official #2: I know right...model def (definitely) does not capture half the risk. Official #1: We should not be rating it. Official #2: We rate every deal. It could be structured by cows and we would rate it. And the parts that were so junky they couldn't be rated got remixed i…

It stems from the idea that multiple junk bonds can be combined together to form a higher quality bond than otherwise. This is actually not true, but was the unquestioned underlying assumption.

Its definitely wrong to make this assumption, but the people who got paid are all incentivized to turn a blind eye.

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

#453

Post by rsj_hn »

chii wrote: post #452
aaronwall wrote: post #445

Earlier quoted context omitted.

The rating agencies would rate just about everything https://www.cnbc.com/id/27321998 Official #1: Btw (by the way) that deal is ridiculous. Official #2: I know right...model def (definitely) does not capture half the risk. Official #1: We should not be rating it. Official #2: We rate every deal. It could be structured by cows and we would rate it. And the parts that were so junky they couldn't be rated got remixed i…

It stems from the idea that multiple junk bonds can be combined together to form a higher quality bond than otherwise. This is actually not true, but was the unquestioned underlying assumption. Its definitely wrong to make this assumption, but the people who got paid are all incentivized to turn a blind eye.

> multiple junk bonds can be combined together to form a higher quality bond than otherwise.

Well it's obviously true. Take your good bond to get paid first from 1000 junk bonds. Then your 999 worse bonds get paid last. Even during the mortgage crisis, not all of the junk bonds returned zero. So there is some number of junk bonds that can be combined into a good bond and worse bonds.

The problem is that people estimated that number to be lower than it actually was. It was a quantitative failure.

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

#454

Post by prawn »

whimsicalism wrote: post #423
anchpop wrote: post #251

Earlier quoted context omitted.

So they basically gave $550 million to UMC homeowners by overpaying for houses, while making it slightly harder for other UMC wanna-be homeowners to buy homes for a couple months. Not the worst outcome I can imagine

Is the threshold for being "UMC" owning a home now? Most of these homes were not uber pricey.

I think it was more shorthand for "someone at least able to be in the housing market".

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

#455

Post by grayhatter »

aaronwall wrote: post #450
grayhatter wrote: post #383

Earlier quoted context omitted.

Oh boy, this jumps around a lot and very little is very deep so my answers will have to jump around a bit to make sure I didn't miss anything. > Are you asking why, in a system that its supporters claim is a meritocracy, who's made these assertions, and where? Not anywhere in the thread's I've read... > it wrong for it to be easier for the rich to get richer than for the poor to achieve parity, given equal merit? Is…

One time I had a client who thought it was "unfair" to pay me just because I knew how algorithms worked. He was quickly fired, but he did not find inheriting his family owned business unfair. He did not find his ranking boost which gave him outsized profits unfair. There is no way to go back in time to make everything fair from some arbitrary starting point. All you can do is your best to do your best. Pricing can le…

I'm confused what you're responding to. I never thought everything should be fair.

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

#456

Post by [deleted] »

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.…

[deleted]

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

#457

Post by xapata »

laminarflow wrote: post #424
xapata wrote: post #332

Earlier quoted context omitted.

Zillow Offers team was isolated from the Zestimate team. They didn't share algorithms.

AFAIK this is false; Offers began transacting at the Zestimate price in several markets earlier this year

Could be stale information. I talked to them a while back. Still, transacting at the Zestimate price doesn't mean they're privy to the Zestimate algorithms.

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

#458

Post by ColonelPhantom »

Apofis wrote: post #351
enlyth wrote: post #113

Good riddance, I hope this company burns to the ground The software developers working for this company knowingly tried to make algorithms to flip and profit off of something that should be a human right Replacing carpets and painting walls, trying to flip for a 20% profit, the people running Z must be geniuses As a millennial looking at 2 bedroom flats selling for £575k (780k usd, not far from a million dollars) in…

So? Flip yourself then. Buy a 2 family unit, renovate it while you live in one of the units, and then flip when you're done. Repeat a second time. Now you're set. All of this is folded into your mortgage. If you're not a capitalist, you're not going to have a good time since no one is going to break your doors down to save you.

And where do you suggest an average person gets the money to do this? A lot of people cannot even afford to buy a home for themselves, let alone a 2 family unit.

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

#459

Post by papito »

gitfan86 wrote: post #132
_fat_santa wrote: post #80

Earlier quoted context omitted.

Other commenters on this and the previous thread pointed out, sometimes with first-hand experience, that Zillow would vastly overpay them for their home. I think this is less to do with the housing market in general and more to do with their tech. Zillow's iBuyer program hit the scene like a bull in a china shop. The real story is that they rushed into this space, had underdeveloped algorithms, overpaid for homes, an…

The housing market may or may not take a turn. But this Zillow story is about incompetency. It smells of some non tech person pitching an AI solution. No need to inspect these homes and neighborhoods, the AI will figure it out.

I say we give up on thriving for a better economic balance and just leave it to the faulty AI redistribute the dumb money sloshing around.

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

#460

Post by mym1990 »

captnObvious wrote: post #274
mym1990 wrote: post #193

Earlier quoted context omitted.

Nitpick but the reason you fire-sale that house at loss is because you don't believe the market will catch up in your beneficial timeline. The housing market historically has a pretty slow appreciation rate, but one that is fairly predictable. Maybe Z sees the incoming rate hikes as a high volatility event?

Holding onto inventory is death. In auto and housing sales if you’re a dealership you’re leveraged in order to hold that inventory (paying interest on it, less friendly interest than you get as a government backed mortgage borrower) and you’re paying insurance and maintenance on that inventory. Vacant houses depreciate very quickly.

Yes, you validated my observation with that assessment. But my point was more towards the private consumer. I think we see a lot of speculation in the housing market now and historically it has been a long term hold investment.
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