Capitalism at it's finest - Zillow (iBuyer)

[afm199]

I’m waiting on Berto to comment.

They have $1.5B in Cash on Hand. I’m sure they took loans but not full boat. The recent quarter they expected over $1B in revenues from the homes division

Just checked the balance sheet.

$5 billion in liabilities, $4.54 billion in debt. Total equity $5.7 billion

Right now the average Zillow home sale is $400k and they are losing an average of 5% on each sale.

 

[Yakoo752]

Good catch

 

[mrzuzzo]

Why do people hate this? They fixed the houses and didn't even sell them for any profit. Much better than flippers and individual slumlords, of which there are plenty.

They also didn't operate in the Bay Area AFAIK.

 

[afm199]

Why do people hate this? They fixed the houses and didn't even sell them for any profit. Much better than flippers and individual slumlords, of which there are plenty.

They also didn't operate in the Bay Area AFAIK.

I don't hate them. I do hate the current monetization of the real estate market. It's now becoming a corporate play ground for speculation.

 

[Yakoo752]

Why do people hate this? They fixed the houses and didn't even sell them for any profit. Much better than flippers and individual slumlords, of which there are plenty.

They also didn't operate in the Bay Area AFAIK.

They own about 30-50 homes in Roseville /Rocklin

Your basic flipper doesn’t have the (access to) capital to influence market prices, Zillow does. That the problem here, everyone’s looking at them as a basic bitch (flipper) but their design was to impact pricing.

 

[littlebeast]

They own about 30-50 homes in Roseville /Rocklin

Your basic flipper doesn’t have the (access to) capital to influence market prices, Zillow does. That the problem here, everyone’s looking at them as a basic bitch (flipper) but their design was to impact pricing.

quick search on one site (realtor.com) shows 2,412 homes sold in roseville in the last 6 months, and 412 currently available. hard to imagine they are influencing the market that much.

and if their goal was flipping - trades people in that area (and the surrounding area) are super jammed up. most we have contacted over the past 6 months are quoting 3 month lead times minimum before they have openings in their schedules. and even that seems to be a ‘rolling 3 months’. we’re on on our 3rd ‘3 month’ estimate with one of our contractors.

even basic stuff. i called a plumber a few days ago for a job (instant hot water for the kitchen sink). he answered from the road (so busy, the head of the company is out working alongside his team doing basic plumbing), and he laughed and said his phone rings literally every 5 minutes. he told me to call him back in 2 weeks, and he might be able to tell when he could get to it. don’t think he was shitting me as he had to break off the call when another one came in while we were talking. he apologized profusely and jumped off the call.

the whole zillow thing seems like a bright idea someone had that wasn’t too bright after all. they may have super sophisticated models for certain things, but they screwed the pooch on this one. it’s impacted not only their financials, but also their brand. corporations do what all corporations do - look for ROI like a heat seeking missile. but age old lesson - stick to what you know. or at least hire talent you clearly don’t have to begin with lol.

 

[Eldritch]

Let's get to the base line. They are using non public information and connections to make purchases and sales in the stock of homes in various markets where they think it will be advantageous, based on that insider knowledge.

If this were the stock market, that would be called insider trading, which is a crime. Given that homes are not just places to live but also investments, why should we treat this any different.

It blew up in their face because they did not predict having to compete to get home improvement/remodeling contractors, and now that the housing market is cooling a bit they are holding a lot of property they are going to take a loss on.

What? How the fuck is this insider trading? Homes are complete products, not shared investments. The trends they are using to take advantage of changing markets are not driven by trends they have invented. They are observing sales other people do and using their proprietary intelligence gathering tool to attempt to take advantage of changing markets. To suggest that is insider trading is like suggesting using proprietary AI to manage investment portfolios is somehow insider trading.

Market manipulation and price fixing

We see this all the time in the pharmaceutical business. It’s been made illegal there. Example: I have access to tons of prescribing data. As a business, by monitoring demand (I think we handle the data of more prescriptions then anyone in the US), we could short supply by buying up large volumes then reselling to the market for a premium.

How is this market manipulation or price fixing? There is no anything anywhere that suggests they are colluding with their competition to fix prices, and they are just one of many other iBuyers out there as is even indicated in the base article, so there doesn't seem to be any evidence of Market Manipulation.

I don't hate them. I do hate the current monetization of the real estate market. It's now becoming a corporate play ground for speculation.

Yeah, the abandonment of Capitalism in the real estate market has really fucked it off in many urban and suburban environments in the U.S. It is a problem.

 

[Yakoo752]

You should look into it more El dirty. This wasn’t a speculation play of their part.

I will write up their strategy when I sit down at a machine in the morn. It’s complex. But the core, is identifying markets where the primary buyer is not local and using the average income of the buyer as a method to determine opportunity spend and then purchasing in those interested markets to remove supply to artificially increase prices

It goes back to my statement of pharmaceuticals. I can determine when a run on medication is about to occur in a region. If I then use that knowledge to buy up supply so I can return it to market at an inflated price, that’s illegal. What’s even worse, if I can identify the entities that need the medication the most, I can charge them even higher prices. This is exactly what they were doing. Their only “defense” is their ability to say that housing, or a set level of housing ($$$), is not necessary or required (sad that this is an actual defensive statement) whereas medication is.

 

[Eldritch]

You should look into it more El dirty. This wasn’t a speculation play of their part.

I will write up their strategy when I sit down at a machine in the morn. It’s complex. But the core, is identifying markets where the primary buyer is not local and using the average income of the buyer as a method to determine opportunity spend and then purchasing in those interested markets to remove supply to artificially increase prices

It goes back to my statement of pharmaceuticals. I can determine when a run on medication is about to occur in a region. If I then use that knowledge to buy up supply so I can return it to market at an inflated price, that’s illegal. What’s even worse, if I can identify the entities that need the medication the most, I can charge them even higher prices. This is exactly what they were doing. Their only “defense” is their ability to say that housing, or a set level of housing ($$$), is not necessary or required (sad that this is an actual defensive statement) whereas medication is.

I mean, it sounds like you have some kind of insight into their strategy, what what you are saying certainly wasn't in the OP article.

However if that were the case, I don't really see any great problem with it. As you say, access to an affordable home in a given region is not a thing and more well funded entities levering their superior cash assets against a local market to maximize profits isn't a problem. It isn't like there is not an overwhelming abundance of affordable real estate available.

What's more, they are aren't exploiting markets to their advantage. Over the course of a few short years, they tried a strategy, invested in it heavy, and are losing their fucking asses over it. So what?

 

[Yakoo752]

I agree with your so what. They weren’t outright successful BUT their involvement has increased home prices unnecessarily in select markets.

Long term effects

I’m glad it didn’t work out.

I also don’t believe residential RE should be used as investable opportunities especially by corporations.

 

[ScarySpikes]

What? How the fuck is this insider trading? Homes are complete products, not shared investments. The trends they are using to take advantage of changing markets are not driven by trends they have invented. They are observing sales other people do and using their proprietary intelligence gathering tool to attempt to take advantage of changing markets. To suggest that is insider trading is like suggesting using proprietary AI to manage investment portfolios is somehow insider trading.




How is this market manipulation or price fixing? There is no anything anywhere that suggests they are colluding with their competition to fix prices, and they are just one of many other iBuyers out there as is even indicated in the base article, so there doesn't seem to be any evidence of Market Manipulation.




Yeah, the abandonment of Capitalism in the real estate market has really fucked it off in many urban and suburban environments in the U.S. It is a problem.

This Flamboyant real estate agent on tik tok will walk you through it. (It was linked before, but not the specific video, though looking through the rest of his recent ones, kind of interesting.

Zillow has access to information not available to the public on what zip codes are getting searched a lot, what price range people are searching, where they are searching from. They use this information to buy up properties in specific areas with a lot of traffic, constraining the supply and driving up the price to the top of what people can afford. That is both making investment decisions on nonpublic information, and manipulating housing markets.

Also, want to point out, Zillow is getting shit for this because it blew up in their face. All of those real estate companies do it.

 

[gnahc79]

https://www.cnbc.com/2021/11/04/ope...sm-of-gains-in-ibuying-after-zillow-exit.html

Eric Jackson, president of EMJ Capital and an Opendoor investor, equated Zillow’s departure from instant buying to the decision by a host of internet companies to give up on search two decades ago, eliminating Google’s biggest competitive threats.

“Z ceding the market to OPEN is like the equivalent of Yahoo/Ask Jeeves/Lycos/Excite giving up on search in 2001,” Jackson tweeted on Thursday. In a direct message to CNBC, he said Opendoor’s advantage is all about “data data data.”

Opendoor’s stock increase wiped out almost all its losses suffered earlier in the week, when it sank alongside Zillow. Investors are betting that the market is viable, but that Zillow, which grew up as an internet marketplace for home sales, was ineffective at operating in a much different business. Opendoor, on the other hand, was created specifically to buy and sell homes.

Opendoor is now up for the year and valued at close to $15 billion, while Zillow’s market cap has plummeted from a high of about $50 billion in February to just over $17 billion.

It seems Zillow's assumptions on its own data (search) ended in disaster. I don't think this is insider trading. Opendoor didn't have access to Zillow's info and is still #1.

As for manipulation, not really
https://www.bankrate.com/real-estate/zillow-ends-ibuying/

For all the headlines and hype surrounding iBuying, the concept remains small. iBuyers never have accounted for more than 1 percent of all U.S. home sales, according to Redfin. In some markets, such as Raleigh-Durham, North Carolina, Charlotte and San Antonio, iBuyers were responsible for more than 2.5 percent of all home sales in the first quarter of 2021.

 

[Yakoo752]

You contradict yourself the: market position.

Opendoor is up to $15B whereas Zillows is down to $17B

At no point is/was Zillow not the market leader.

 

[Yakoo752]

But I agree with the ascertain that Zillow doesn’t necessarily impact overall mark plays. At $1B in revenue a quarter that suggest about 4K home sales in an overall market of 6.5M sales. Their play is very localized.

 

[gnahc79]

Sorry didn’t mean #1 based on market position. For ibuying only it’s opendoor as the stronger company with better data and tech imo.

 

[ScarySpikes]

But I agree with the ascertain that Zillow doesn’t necessarily impact overall mark plays. At $1B in revenue a quarter that suggest about 4K home sales in an overall market of 6.5M sales. Their play is very localized.

That's kind of the point though. They would not really *need* the information they have to just broadly buy homes anywhere. It's not about buying a fuck ton of homes, it's about buying, say, 30 homes in a single neighborhood that their data tells them will be popular, in the price range their data says most buyers are in, then driving up prices on all the ones they just bought and are planning to flip by going over market price with later purchases in that neighborhood.

 

[cheez]

But I agree with the ascertain that Zillow doesn’t necessarily impact overall mark plays. At $1B in revenue a quarter that suggest about 4K home sales in an overall market of 6.5M sales. Their play is very localized.

*Hadn't yet impacted significantly.

 

[Killroy1999]

This Flamboyant real estate agent on tik tok will walk you through it. (It was linked before, but not the specific video, though looking through the rest of his recent ones, kind of interesting.

That sounds like market manipulation. Seems like it would be easily countered with better appraisals. I do think appraisals are lame. So, the appraisal if for the lender, but the lender does not decide what to buy the house for.

One flipper was suggesting that Zillow failed because they are a bunch of new hires in an office out of state and they are competing with local agents and flippers with a huge network of local contractors.

 

[Yakoo752]

That's kind of the point though. They would not really *need* the information they have to just broadly buy homes anywhere. It's not about buying a fuck ton of homes, it's about buying, say, 30 homes in a single neighborhood that their data tells them will be popular, in the price range their data says most buyers are in, then driving up prices on all the ones they just bought and are planning to flip by going over market price with later purchases in that neighborhood.

yep. raise prices on the micro region scale.

*Hadn't yet impacted significantly.

correct

That sounds like market manipulation. Seems like it would be easily countered with better appraisals. I do think appraisals are lame. So, the appraisal if for the lender, but the lender does not decide what to buy the house for.

One flipper was suggesting that Zillow failed because they are a bunch of new hires in an office out of state and they are competing with local agents and flippers with a huge network of local contractors.

I am shocked they had 2,000 employees in this division and none of them were tradespeople. If I was doing this, I would have a crew in each state that knows their states code and requirements.

I don't even know what 2,000 people would do on this project if they weren't tradesmen.

 

[littlebeast]

I am shocked they had 2,000 employees in this division and none of them were tradespeople. If I was doing this, I would have a crew in each state that knows their states code and requirements.

I don't even know what 2,000 people would do on this project if they weren't tradesmen.

yeah - i had the same reaction. but a) they didn’t make their offers on every available property, so it was probably more labor intensive to investigate on a case by case basis (less ability to automate the process), and b) as with all ‘staff reductions’, companies announce a reason, but there’s always a portion of staff that get swept up in it for reasons that aren’t announced. sort-of-a ‘look over there’, but ‘don’t look here’ strategy.

and i don’t know how relevant it is, but as i said previously, we have been having a beast of a time getting on the schedule for work at our new place. couldn’t even get places to return our calls. we only started making headway when we asked our local mom and pop flooring supplier if they knew any good electricians. they referred us to a great local guy, who referred us to a great local stone guy, who referred us to a great local cabinet guy - and so on. each time they said ‘tell them i gave you their name’. that was like the magic ticket.