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All the ibuyer companies won't make it. Nationwide downturn in house prices and all the inventory these companies are holding are underwater. Zillow and Redf
by adrr 7y ago
All the ibuyer companies won't make it. Nationwide downturn in house prices and all the inventory these companies are holding are underwater. Zillow and Redfin are more than likely done. Zillow maybe holding 60,000 homes.
We never learn our lesson. GE was taken out by their financial division and high risk bets.
- ashtonkem 7y agoWait, Zillow owns homes?
- mackey 7y agohttps://www.zillow.com/marketing/zillow-owned-homes/ https://www.zillow.com/marketing/zillow-owned-homes/
- ashtonkem 7y agoThat’s a crazy bad idea. Someone who makes money on transactions shouldn’t be taking long or short positions.
- Guest42 7y agoYes, but only to flip, a more recent strategy
- ashtonkem 7y agoTurns out the inventory you hold to flip can be enough to get you killed during a crash. Ask Lehman Brothers.
- Guest42 7y agoAgreed, I like their website a lot but don’t like them trying to sell houses
- ashtonkem 7y agoSeems like a pretty serious conflict of interest, being both broker and seller. I’d think twice about counting on them for price discovery now.
- throwing838383 7y agonot only that but in highly competitive markets like the bay area, they may even hold out for buyers that use one of their own agents (and try not to sell to others). That way, they can make 3% commission on both the buying and selling side. It's a huge conflict of interest to their own client which technically isn't legal ~ they're supposed to consider all offers.
- rel2thr 7y agoI don’t think Zillow holds close to 60k homes... In their last quarter they ended the quarter with 2,700 , they are buying and selling < 2k per quarter. They are still in the testing / ramp phase of this business, I don’t think it will hurt them that much
- rubidium 7y ago“ Nationwide downturn in house prices” there’s nothing certain about that happening. Look at 2001. It may.. but all the free money being thrown will prop up prices some. Plus supply in the tank because people aren’t moving. https://www.calculatedriskblog.com/2018/06/real-house-prices-and-price-to-rent.html?m=1 https://www.calculatedriskblog.com/2018/06/real-house-prices...
- ghaff 7y ago>Plus supply in the tank because people aren’t moving. One of the complicated things about housing prices is that people do (mostly) need to live somewhere. Yes, there are homeless and yes people move back in with family etc. But, for the most part, the people getting laid off from, say, Bay Area tech jobs aren't immediately picking up and moving to some cheap city in the Midwest. Especially if they already own a house.
- adrr 7y agoLenders have already tightened up loan requirements which will decrease the demand part of the equation. It is the same thing that happened during the great recession. People may want to buy, but have no ability to do so. There's also the high unemployment rate and foreign investors liquidating inventory for capital because their country is also going through a downturn. All the ibuyers have stopped purchasing. If the stock market drops, 10% of buyers who use their 401k or IRA for their downpayment will probably dry up. I don't see any situation where the housing market doesn't drop.
- pixl97 7y agoThat said I believe the drop after 2008 should have been more significant. The massive amount of cash the government pumps into markets, it allows massive amounts of dark/shadow inventory that would cause further price drops if the market was transparent.
- wil421 7y agoZillow just sold a house in my neighborhood they had for almost a year at a $40k loss. It sold for about $75k less than when Zillow first tried to sell it. The house itself is very odd and the outside materials don't match the rest of our neighborhood. It was renovated poorly and looks weird but Zillow bought it anyway.
- 0x8BADF00D 7y agoThat’s mainly due to irresponsible monetary policy by the Fed. Imagine if the benchmark rate was 10%. A lot of the indebted would default/go bankrupt, but it would also incentivize companies to save and behave fiscally responsible.
- outside1234 7y agoIn short order, when inflation takes off, it will be 10%, so we'll get to test that theory.
- hef19898 7y agoIf the benchmark was 10% a lot more money would go to more traditional investments. And VC funding would be much lower.
- atlantacrackers 7y agoStated another way, the equity premium over a 10% treasury rate would make VC investment for LPs much much less attractive as an asset class.
- deleted 7y ago[deleted]
- throwing838383 7y agoAs a consumer of Zillow and Redfin, I like their website. But, as a house buyer, I really dislike the fact that they always try to push their buyers Agents on you.