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How Zillow's homebuying scheme lost $881M

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

#531

Post by diamondlovesyou »

imilk wrote: post #271
brk wrote: post #4

Earlier quoted context omitted.

Mine is pretty accurate ($2.5M), based on recent sales and a couple of solicitations from realtor friends. FWIW, we have had a high frequency of home sales in the past year, so that might help. I just looked up my previous house (sold 5 years ago), and Zillow is saying $740K, which I am pretty sure is massively overvalued, however the street it is on, and general area, have a fairly low turnover, so less recent data.

Mine is pretty accurate as well ($44.8M), based on recent mentions in Architectural Digest and a couple of solicitations from fellow G650 owners.

There isn't exactly a large market for homes at that price point. Plus at that price, a thorough DD is an order. So not unexpected that your home's value would be accurate.

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

#532

Post by chii »

pfisherman wrote: post #309
cuteboy19 wrote: post #177

Earlier quoted context omitted.

> That would have fixed much of this, it's point blank illegal to run a bed and breakfast out of your home. Why? It's your home, you can do anything in it. Why should you need a license to rent out your own home for a few days? Does it physically destroy neighborhoods or just your perception of it? If so, why should anyone care?

How would you feel if I paid your next door neighbor to store radioactive waste in their yard? What if I paid them to demolish their home and put up a giant flashing billboard facing your bedroom window? Do you think it would impact the value of you property? Do you think that would be fair? People care because it is a matter of justice, which is one of the fundamental precepts of society.

So what if a NIMBY pays to stop rezoning to high density in their suburb? Isn't it the same then?

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

#533

Post by chii »

mym1990 wrote: post #332
cuteboy19 wrote: post #268

Earlier quoted context omitted.

So we should criminalize perfectly harmless things because it ruins your experience? It doesn't seem logical

It can't be perfectly harmless if it is ruining someone's experience. Its kind of like urinating in public...maybe it doesn't hurt anyone but it sure does ruin a lot of people's experience...and thus it is criminalized.

If there were more public toilets, there'd be fewer public urination. The law is there to catch the few that do it.

But if there's tonnes of public urination because there are no public toilets, then even tho the law says no, people are still going to do it. There's a demand to pee that cannot be stopped.

The idea that airbnb should be outlawed is irrelevant - the fact is that there's demand for it. This means there's a lack of short term rentals in the area. The demand must be satisfied, and so the price of it grows.

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

#534

Post by chii »

soggybutter wrote: post #490
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,…

Top 2% puts you fairly deep into the six figures, no? I've not even surpassed top 10% and haven't had too much issue getting into 2 homes in the last 3 years. Both in areas I would consider "semi-desirable", which leaves me wondering what exactly do other folks consider "semi-desirable"? Unless of course you mean buying a home outright, in which case this makes total sense

top % income earners aren't the top wealth owners. One should examine the rate of wealth growth (not just via income, but via other forms of gains, such as capital gains and business income). I bet you will find that the top 2% income earners are barely even the top 50% wealth gainers that year.

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

#535

Post by chii »

mwt wrote: post #27
ddoolin wrote: post #16

Earlier quoted context omitted.

The problem here is that they were buying the homes at prices above what they would actually sell for to real buyers and Zillow ended up racking up losses in that way. In your scenario in which two iBuyers outbid each other -- fine, but wouldn't the same situation as Zillow's happen? They'd just end up with overpaid inventory.

Whether or not the market works itself out later, it puts everything into a weird state while the bidding war is going on. If iBuyer1 and iBuyer2 together buy up the inventory of a zip code for 120% of asking, then what are people who are willing to go to 105% to do? Maybe it just resets the market to whatever the drunken algorithm decided it to be.

> who are willing to go to 105% to do?

i too, want to only pay less money than the highest bidder for the mona lisa.

There's no such thing as 105%. By definition, iBuyer paying "120%" is the true 100%. If they overpay, they lose when there's no buyer after them to sell to, and their debt will not be serviceable. At that time, the "105%" buyer could buy at a lower price.

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

#536

Post by chii »

mdavis6890 wrote: post #377
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.” The opposite really. Speculators do their best to buy low which pushes the price back up toward the mean in the aggregate, and sell high, which pushes it back down toward the mean. Speculation is a stabilizing force overall. The boom and bust cycle in real estate is very real, but driven by other things.

> Speculation is a stabilizing force overall.

a sophisticated speculator is.

an unsophisticated speculator is actually destabilizing, because they might incorrectly speculate capital (that they cannot really afford), causing a loss in market efficiency in allocating capital to where it's needed.

The 2008 GFC is in part caused by unsophisticated speculators (home buyers) to speculate on property. Initially they saw some good profits, which lead to even more unsophisticated people to try get in on the game (and the banks happily obliged).

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

#537

Post by bryananderson »

Ma8ee wrote: post #523
kortilla wrote: post #516

Earlier quoted context omitted.

In the US we are nowhere near land being a concern. That’s a cop-out.

The relevant metric is land within a reasonable commute to an attractive city centre .

This is not in short supply either. In California, the capital of the American housing crisis, the overwhelming majority of new residential development in the last 50+ years is low-density single-family on greenfield land. This is certainly true within the high-demand metro areas like the Bay and Greater LA. We could multiply the housing supply of these metro areas by many times without ever building on greenfield land ever again. The land is unbelievably not scarce. It is just illegal to put a sane number of people on it.

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

#538

Post by chii »

BirdieNZ wrote: post #240
civilized wrote: post #67

Earlier quoted context omitted.

Yes. The problem is: 1. A lot of high earners want to cram into a small space 2. The existing high earners living in that space don't want to allow more built in that space because they like the neighborhood how it is So all these high earners compete against each other, and houses become as expensive the winning high-earning bidders can afford. For this to stop happening, #1 or #2 needs to stop. So, either the high…

Per-unit rent will go down if you increase supply of housing, but the value of the land underneath will go up if you increase the amount of houses allowed to be built on said land. There's one part of "standard economics" that a lot of people forget with property, which is that land in desirable locations is of limited supply and you cannot increase its supply. Land at the boundaries of a city is not equivalent with…

> but the value of the land underneath will go up if you increase the amount of houses allowed to be built on said land.

which is what would incentivize the owner of that land (ostensibly a single family home land owner) to sell and let high density to be built. If the land doesn't increase in value this way, the owner would not have any incentive to sell.

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

#539

Post by pj_mukh »

tmp_anon_22 wrote: post #439
pj_mukh wrote: post #427

Earlier quoted context omitted.

Land is a finite resource but housing units are not. Once America gets over it’s love affair with single family homes, we could undercut most speculators by just building up.

Single Family homes have the benefit of more autonomy where as building up means you're living on-top of your neighbor, its not binary but we should acknowledge the clear QoL tradeoffs of condensed living. Maybe its inevitable and necessary to force more people into condensed housing, maybe the societal benefits really outweigh the tradeoffs.

This is a massive failure of imagination. I moved into a new 5 by 1. Don’t even know who lives above me (never heard em). Sound Insulation has come a long way.

There’s a lot that can be done to add autonomy and privacy to the condo living. And then more to make it cheaper and accessible. It’s mostly a technical problem.

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

#540

Post by lelanthran »

chii wrote: post #528
pyuser583 wrote: post #458

Earlier quoted context omitted.

Thank you! This comes up a lot when people argue in favor reforming how real estate is taxed. When real estate isn’t for sale, it’s “value” is synthetic. I wouldn’t actually sell my house for less than 400% what similar homes are worth. For some people that means the value is 400% that of similar homes. Thankfully the real estate tax folks don’t see it that way.

I actually want tax valuation to work like an offer - the tax man can choose to purchase your home for the valuation you use for taxation (you don't pay the tax in that case), or accept the tax payment. if you value your house too high, you'd pay more tax than you'd need of course, but guarantee that it isn't going to be immediately bought up by the tax man. If you value it too low, you're risking a sale. So the idea…

> I actually want tax valuation to work like an offer - the tax man can choose to purchase your home for the valuation you use for taxation (you don't pay the tax in that case), or accept the tax payment.

>

> if you value your house too high, you'd pay more tax than you'd need of course, but guarantee that it isn't going to be immediately bought up by the tax man. If you value it too low, you're risking a sale. So the ideal is to value it at market price - where the tax man will have no incentive to actually buy it out.

I use to think this too, but it looks too easily gamed, and over many iterations the taxman would be left selling a bunch of properties lower than the price they paid for it.

In effect, this would be passed off onto the taxpayers, so the net effect is going to be that the taxpayers are paying for the profits of private speculators who purchase from the taxman and sell or rent the property for a profit.

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