Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

marketwatch.com

Post reply on HN
Print view View original

61–70 of 476 posts

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

#61

Post by yellow_postit »

jklein11 wrote: post #56

I'm a little bit confused about what their strategy was. As I understand it, house flippers usually buy houses, do some renovations to add value and then sell in under a year at a higher price. It sounds like Zillow tried to buy homes and hold them until they appreciated? Was there any data that supported that this would be successful?

They were also trying to make upgrades and expecting they could lower the costs through scale eg give painters steady work at lower rates because they were a single party with lots of inventory.

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

#62

Post by missedthecue »

dreyfan wrote: post #57
missedthecue wrote: post #38

Big ups to hedge fund short seller Jim Chanos for calling this one way back in 2019. https://twitter.com/WallStCynic/status/1192663938720292864 Steve Eisman, the short seller who was Mark Baum in 'The Big Short' also predicted this in 2019. https://www.cnbc.com/2019/08/08/big-short-investor-steve-eis...

With the complete rout today of -11.5% and the additional -11.0% aftermarket on Zillow's stock, it's still up +95% from when Chanos made that comment. Calling bullshit simply isn't worth the hassle these days (e.g. see Tesla and cryptocurrency fans). Better to figure out how to identify the top and keep opinions to yourself.

Short selling is one of those things in life where being right can make you worse off.

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

#63

Post by datavirtue »

pezzana wrote: post #34

> ‘We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility,’ CEO tells investors. That's quite a statement. The head of a company with a privileged view of the US residential real estate sector says that the market is "unpredictable." Not the good kind of unpredictable where yo…

I question the wisdom of corporations house flipping. How can they evaluate an individual property and make the series of educated guesses about the co ability in various regions? How do they find and predict all the remodelling issues before they happen? How do they know that a particular house is worth messing with? I only know a few counties in Ohio where I would even attempt it because I know the areas very well.

If you could statistically trade houses people would have been doing it before we were born.

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

#64

Post by andromeda-brain »

pezzana wrote: post #34

> ‘We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility,’ CEO tells investors. That's quite a statement. The head of a company with a privileged view of the US residential real estate sector says that the market is "unpredictable." Not the good kind of unpredictable where yo…

I’d be more inclined to believe this if it wasn’t painfully obvious how much Z was overpaying for homes in the last half year, especially when all the other iBuyers saw the market slow down and reduced their offers accordingly. Seems much more likely that we can take them at face value and Zillow’s forecasts were just bad.

Zillow hasn’t ever bought and sold homes (until now). That’s not their business.

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

#65

Post by holografix »

When will governments step in to stop historic low interest rates from preventing anyone not bathing in cash from buying a home?

It’s a grotesque situation in Australia with property appreciating by exorbitant amounts every month to keep up with the rate of cash printing.

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

#66

Post by datavirtue »

darthvoldemort wrote: post #43
woeirua wrote: post #7

This is kind of a big deal in the real estate sector. The only reason that Zillow would sell everything right now is if they believed that the carrying costs of the properties until they (eventually) sell would eat all of their profits. They must be seeing flashing red signs across the board that there's a slowdown in the market and that scenario is exactly what will play out if they don't exit quickly. There's no wa…

It's a huge pivot to go from flipping houses to becoming a landlord. It would essentially be a disaster for them. That's a high-touch business and probably the costs associated with it, and the legalities around it are too complex. That's basically turning into an Avalon or something. The interesting question is around their bonds. They were basically convertible bonds which likely triggered, but now they have to pay…

Flipping is extremely high touch.

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

#67

Post by datavirtue »

toomuchtodo wrote: post #31
onlyrealcuzzo wrote: post #27

Earlier quoted context omitted.

Well - if the Fed stops buying MBSes and interest rates go up - flippers in highly speculative markets (almost everywhere ATM) are likely to have a bad time.

Right. This is Zillow getting out before the Fed tapers, interest rates go up, and real estate sales and values go down.

Zillow paid too much. Tapering isn't going to have a material effect on new mortgages or home sales.

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

#68

Post by quickthrowman »

woeirua wrote: post #7

This is kind of a big deal in the real estate sector. The only reason that Zillow would sell everything right now is if they believed that the carrying costs of the properties until they (eventually) sell would eat all of their profits. They must be seeing flashing red signs across the board that there's a slowdown in the market and that scenario is exactly what will play out if they don't exit quickly. There's no wa…

> They must be seeing flashing red signs across the board that there's a slowdown in the market and that scenario is exactly what will play out if they don't exit quickly.

The Fed is (likely) going to announce bond purchase tapering this week, they’re currently buying $80B of US Treasuries and $40B of MBS every month. I believe the plan is to taper buying completely before raising rates.

The lack of QE could see the long end of the yield curve start to rise, which would push home prices down. If and when they start hiking the FF rate, look out!

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

#69

Post by m0zg »

I think they might know something we don't. Such as, for example, that loan rates are about to go up a lot, which if inflation is not "transitory" (which it isn't) they will.

They already did go up some. Most people can't count to save their lives, but $1M at 2.5% APR is about $4K monthly (borderline doable for quite a few folks on 2 incomes), whereas at 16% (historical peak) it's something like $13.5K (not really doable beyond the top 1%).

In spite of their large loss, this could prove to be a wise divestment under that scenario. If loans get a lot more expensive (which happened during Carter and then Reagan years, see "stagflation"), the housing market will tank right away and people will be desperate to lock in at least some of the gains they thought they had, creating excess supply. Not a good environment for flipping, especially at the mid- to low end of the market. The game of musical chairs seems to be coming to an end, and Zillow has just grabbed a chair. Three legged and busted chair, but a chair nevertheless.

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

#70

Post by onlyrealcuzzo »

datavirtue wrote: post #67
toomuchtodo wrote: post #31

Earlier quoted context omitted.

Right. This is Zillow getting out before the Fed tapers, interest rates go up, and real estate sales and values go down.

Zillow paid too much. Tapering isn't going to have a material effect on new mortgages or home sales.

Do you think lower interest rates had no effect on prices? Or do you think it did - but that raising rates for some reason won't have an effect?
Post reply on HN