15 ms·

This is a good example of the fallacy of youth: buying too far into hype and being all "the sky is falling" with negative news. It wasn't long ago that we were

by cletus 5y ago

This is a good example of the fallacy of youth: buying too far into hype and being all "the sky is falling" with negative news. It wasn't long ago that we were reading how Zillow et al were going to buy up all the housing stock and keep millenials and Zoomers homeless forever. The people saying this have obviously never gone through a "bust" cycle. This is unsurprising as we've now been in the longest bull market in modern history. It's not always like this. It won't always be like this. History is littered with the corpses of those who tried and failed to corner a market. Real estate is no different. That's not to say we can't make the system better. We can and we need to. But serfdom isn't imminent either. Zillow shouldn't be taking real estate positions as it's going to end badly and will likely hurt their core business (ie transactions). I'd love to know who signed off on this idea. They need to be fired.

valeness 5y ago
But didn't they sell the houses to investors and/or established landlords? I'm not sure how this helps the youth or those otherwise disillusioned with the current housing market as that housing is still unavailable to them.
- r3trohack3r 5y ago
  I think the ops point is that it will end, not that it has ended.
  - valeness 5y ago
    Yes, but this is not evidence of "it will end" to me.
    - r3trohack3r 5y ago
      I think the evidence presented was "history" > The people saying this have obviously never gone through a "bust" cycle. This is unsurprising as we've now been in the longest bull market in modern history. It's not always like this. It won't always be like this. I once heard someone who ran an investment floor say, paraphrased: During a bull market, I want my floor staffed with people too young to have lived the last bull market. They didn't want the risk aversion - drilled into people by the last bust cycle - on their trading floor. The cycle will repeat itself, folks will go from being unbelievably wealthy to bankrupt overnight (overnight as a figure of speech speaking, the crash will come but might drag out). Folks who bet it all will have their lives ruined. We will have another generation of market participants who are risk averse from hard earned lessons. The flip side of this is that _everything will go on sale_ for those who had stable investments and those who are income rich. If everything doesn't go on sale soon (soon might mean many years) it'll be the first time in history we broke out of the boom/bust cycle. For me, personally, I track my net worth and check in monthly. For the past year I've excluded my home's valuation from my net worth, it's monopoly money; by the time I'm willing to liquidate my house we will be on the other side of a bust cycle. I'm mentally prepared for my home to lose 50% of its value "overnight."
whimsicalism 5y ago
Sorry, youth here. The housing market remains screwed regardless of the actions of Zillow or Blackstone or whomever.
- harryh 5y ago
  Decades of under-building due to restrictive zoning laws will do that.
  - whimsicalism 5y ago
    Yes, that - plus the rapid reversal of white flight to the suburbs among young people in the last 10-15 years (more of an east coast phenomena). It is both a demand and supply problem, but short of creating a Hukou system I don't see any solution but building.
    - WarOnPrivacy 5y ago
      > the rapid reversal of white flight to the suburbs among young people in the last 10-15 years The massive buy-ups in West & Central FL have led to an unprecedented shortage in housing. Rentals get 400 applicants each day and people with money in the bank are facing homelessness. People without have little hope.
      - deleted 5y ago
        [deleted]
    - nradov 5y ago
      Another solution would be encouraging economic development in other areas instead of cramming increasing numbers of people into a small number of geographically constrained cities.
      - whimsicalism 5y ago
        I think these returns to scale/density are somewhat intrinsic.
ineedasername 5y ago
being all "the sky is falling" with negative news I don't read it that way. My guess is that they 1) didn't believe that prices would level off a bit, as they have in the last couple of months 2) didn't factor in significant delays & increased costs for even minor refurbs and 3) as a result realized that any profits would be eaten by carrying costs (property taxes, maintenance, opportunity cost of having capital stagnate).
altacc 5y ago
I wouldn't be too quick to claim that the myth of institutional house buying has been dispelled. Zillow isn't the only company out there buying real estate, and they are planning to sell most of the properties to other institutions and landlords, not the open market of owner occupiers. It appears they made some errors in their calculations and temporarily bought too many houses at too high a price but the article says they are only pausing purchasing for the rest of the year and there's no mention of if they are revising their plan to purchase up to 5,000 homes a month by 2024. So, looks like without evidence of a market wide cessation or significant long term reduction, significant institutional real estate actors remain a factor in the market.
- shane_b 5y ago
  I would guess supply chain costs and delays reduced their speed of renovation unexpectedly and they can’t carry the cost of sitting on the property during that wait time. So to your point, it’s likely temporary based on unexpected renovation constraints.
- gregman 5y ago
  Agreed. One thing this article doesn't point out that was a bigger topic a couple of weeks prior is that Zillow had to halt purchases due to lack of workers to help flip the homes [1]. The iBuying revenue model depends on the ability to flip a home quickly so that market fluctuations do not have enough time to pose as a risk, which Zillow was willing to take. 1 - https://archive.md/tNaDt https://archive.md/tNaDt
- andrewmutz 5y ago
  I've never seen any good data that supported the myth of institutional house buying being a big enough phenomenon to affect homeowners. It was never apparent in the homeownership rate (https://fred.stlouisfed.org/series/RHORUSQ156N https://fred.stlouisfed.org/series/RHORUSQ156N) which has been broadly stable for decades, and the jumps over the last few years are, if anything, towards increased homeownership, not less.
  - treeman79 5y ago
ISL 5y ago
As I understand things, Zillow's approach wasn't a corner, but rather an attempt at arbitrage/value-creation. They were pretty sure they had an edge at price-estimation and had enough capital to be able to simultaneously offer sellers execution speed and offer buyers a price they would accept. It is a market-making play. My impression here is that Zillow has re-evaluated some part of that calculus and decided to pull back. I hope that they'll be able to retool and revisit the approach after learning expensive lessons, as it is my impression that there should be real value here for all concerned.
- short12 5y ago
  >They were pretty sure they had an edge at price-estimation If they actually thought that they must have been high af Their tool is absolutely terrible
  - ISL 5y ago
    I'm pretty sure that their internal dataset is far more rich/detailed than the public-facing "Zestimate". Traffic-data alone, segmenting the buyers clicking on each listing and their expressions of intent, would give them an incredibly-actionable trading/training signal. Zillow might see, nationally, the nationwide (and regional) direction of buyer and seller sentiment 2-4 weeks ahead of all but the largest regional brokerages.
    - ItsMonkk 5y ago
      That's all everything ever is anymore. You don't need to be a good stock picker if you know that someone sent a buy out, and you can get there first, buy it and then sell it to them. You don't need to find good domain names, just wait for someone to search if one is available and then buy it. Or when you Google for Verizon and the first thing you see is an ad for verizon.com. Most people will click the ad instead of the first listing.
drnonsense42 5y ago
I disagree strongly with this sentiment. Clearly Zillow is not going to buy all the houses in America and turn us into serfs overnight - that is an absurd strawman. What? Zillow is far from the only actor here trying to enter this space. It's quite ridiculous to claim, as you are, that industrial-scale home speculation is doomed to fail since there are boom and bust cycles and therefore we don't need to worry. That's ridiculous. We really don't have any direct, past precedent for this type of situation. It is rational to be concerned here. The fact that Zillow failed on their initial attempt does not imply that this can't work - it just means they're one of the first making a serious attempt and, unsurprisingly, they got overzealous and it didn't work on the first try! Quant firms for the stock market in the early 90s did not work overnight even though the market was much more inefficient than it is now. It takes time for groups of highly qualified and very smart people to figure this stuff out - but, they will.
- secondaryacct 5y ago
  Let them buy overpriced useless houses, if they buy too many we'll vote them out or we'll take the homes back by force. Everything is a balance and the only way to make money long term is to be undeniably useful to a majority of people. Anything below that bar will die down in shame, infamy or violence.
  - sokoloff 5y ago
    What does “vote them out” mean in this context?
    - tablespoon 5y ago
      > What does “vote them out” mean in this context? I suppose it could mean voting in people to write a law that makes it exceedingly unattractive for institutional investors to buy single family homes. You could probably even do such a thing "neutrally" since people really only need one home and if you own more than two you're almost certainly investing in some way. Apply some onerous tax on each unit owned above 100, and all these investors will flee the market. Edit: IIRC, the companies that buy up all these single family homes are large corporations. I'm pretty sure you could write a law like I described that they wouldn't try to use some cheeky corporate shell game to try to bypass (e.g. in their tax filings require them to declare how many single family homes they're the beneficiary owner of, regardless of any intermediary shell companies/special purpose entities, and tax them for that). Require the auditors to sign off of on the number. If they lie, everyone's subject to even more onerous civil and criminal penalties (e.g. blow them up like Enron). Large corporations will stretch the law as far as they can, but it's rare for them to deliberately venture into fraud and other kinds of illegality (for the pedants out there, note I said rare not never). The systemic issues can be solved if they're made to comply, even if some relatively small fish still don't
adam_arthur 5y ago
You're right, but the difference these days is the Fed putting the pedal to the metal even when fiscal spending and economic data at all time records. We haven't seen this phenomena since the 70s when inflation was running hot and the Fed did nothing for many years. Back then, prices continued to rise nominally for many years. I suspect the Fed will tighten somewhat (taper should be announced tomorrow), but they keep stating that inflation is transitory. So clearly their intention is to kick the can as far down the road as possible. If inflation does start to inflect downward, they have the perfect excuse to do nothing until it levels off at an elevated level many months later. Rents alone will drive elevated inflation for years to come. However, used car prices will certainly tank at some point which will mask the effect. By moving so slowly, they seem to be facilitating the development of a new epic bubble, except it's a bubble in most asset classes. Stocks generally aren't too over valued, but hypergrowth is for sure. E.g. NET at 100x sales. Compare to Cisco in the dotcom bubble, which peaked at something like 200 PE and much smaller sales multiple. The PEs back then are now the PSs. Kind of insane, even accounting for the greater legitimacy of the businesses today. In the past the Fed used to preempt excesses and inflation. Anytime they haven't, has been a disaster in the long run, historically. Unfortunately I think a lot of their action is motivated by Powell trying to retain his seat. They really need to either renominate him or put somebody else up for vote so he stops optimizing for the job. His term ends in Feb 22.
- SilasX 5y ago
  >I suspect the Fed will tighten somewhat (taper should be announced tomorrow), but they keep stating that inflation is transitory. I hope so, but keep in mind, the Fed has lacked the will to tighten even in the most favorable conditions -- strong market, no covid -- merely because banks screamed bloody murder about having to pay slivers of a basis point more on overnight loans or (heaven forbid) stay more liquid so they don't need to get as many loans. HN stories about "liquidity injections": https://news.ycombinator.com/item?id=22559175 https://news.ycombinator.com/item?id=22559175 https://news.ycombinator.com/item?id=21731848 https://news.ycombinator.com/item?id=21731848 https://news.ycombinator.com/item?id=21477855 https://news.ycombinator.com/item?id=21477855
  - 5y ago
edw519 5y ago
I'd love to know who signed off on this idea. They need to be fired. True for everywhere I've ever worked. Imagine how much better everything would be if we prioritized this problem before all the tech orgasms.
short12 5y ago
Correction, Zillow core business is crappy advertising
- nradov 5y ago
  Zillow also gets a lot of revenue from referrals to mortgage lenders.
HWR_14 5y ago
> History is littered with the corpses of those who tried and failed to corner a market. History is also filled with the bloated corpses of those who did successfully corner a market. Or, in modern times, those who participated in a synergistic duopoly to skirt anti-trust laws.
cs702 5y ago
> The people saying this have obviously never gone through a "bust" cycle. Yes, indeed. What's more, those people have a large, receptive audience: An entire generation that has never gone through a "bust" cycle. We're talking about nearly everyone in their early 20's to their mid-30's who joined the workforce after the global financial crisis. They have zero personal experience as to what it's like to be an asset owner in a prolonged bust or bear market.
- jurassic 5y ago
  It's ridiculous to suggest young people don't know anything about downturns. People who are now in their early-mid-30's were some of the biggest victims of the 2008 GFC because they bore the brunt of unemployment and delayed entry into careers (and other life milestones) as a result. If you're an employer, why would you hire a new grad when you could fill all your hiring needs with experienced hands? You wouldn't, and that was the reality in many industries back then. New grad unemployment reached nearly 15% in the period from 2008-2012, significantly higher than the overall unemployment rate. Then there was something like 20+% underemployment, with college grads working as baristas just to have some money coming in while they waited for the economy to thaw so they could start their lives. Many young people had no opportunity to pursue a real career after taking on four years of educational debt through no fault of their own. "Go to college and get a good job" was revealed to be a complete farce. A few years later as things picked up, there was a fresh crop of new grads behind them without any awkward employment gap or strange jobs to explain. Even those who managed to make their way into solid careers missed out on the stock market and housing asset boom of the last decade because they did not have the deposits and credit history needed to contemplate buying a home until fairly recently when prices went vertical.
infecto 5y ago
I don't know about your assessment, Zillow in my opinion is just a third party here. Sure we can agree Zillow bought too much for probably too high of a price but I think there is a larger discussion about the significant move of institutional money into real estate. I have not seen that slow down and I have been amazed with how entire new developments are being bought up by institutions to be rental home communities. That I think is a new change that we have not seen at this volume before.
tablespoon 5y ago
> It wasn't long ago that we were reading how Zillow et al were going to buy up all the housing stock and keep millenials and Zoomers homeless forever. I think you're making a significant error there: the narrative you're criticizing wasn't focused exclusively on Zillow, but rather "big investors" buying up single family homes and pushing actual single families out of that market. This news does nothing to repudiate that narrative, from the OP: > The company is seeking roughly $2.8 billion for the houses, which are being pitched to institutional investors, according to people familiar with the matter. Zillow will likely sell the properties to a multitude of buyers rather than packaging them in a single transaction, said the people, who asked not to be named because the matter is private.
refurb 5y ago
Yup. As someone who was in the real estate market in 2007 it’s pretty amazing how quickly we went from “be careful with housing” to “housing only goes up, it’s now or never”. I’d say it took about 5 years. Human recency bias is very strong. Whatever trend has happened in the last 6-12 months is assumed to continue ad infinitum. And that’s true on both sides. When the market crashed everyone assumed it was forever.
varelse 5y ago
They just need to hold all that inventory long enough for it to go black. But of course the market can remain irrational longer than they can remain solvent so that's not how it will play out. Also good luck convincing the sociopaths of VC to get rich slow here: they want their capital back so they can throw it at more promising get-rich-quick schemes.
- hinkley 5y ago
  > the market can remain irrational longer than [you] can remain solvent This deserves to be stated on its own.
FFRefresh 5y ago
Responding here given that you are calling out the 'fallacy' of others. You seem to be making quite declarative statements here that are false: -Buying real estate does not always end badly -Zillow's core business is not transactions Zillow's issue was not that they attempted to buy houses, it was that they didn't operate with enough fiscal discipline in doing so. They got too far out over their skis, as the saying goes. Given your suggestion that someone who signed off on the idea should be fired, is there any record of you stating publicly that the person should be fired for the idea when they first started this endeavor (or at least when you first heard of it)? If not, it seems like you are operating with the fallacy of hindsight bias.
ericmcer 5y ago
New monetary policy is designed to prevent any kind of bust from happening. It is only boom from here on out. 2009 was the last chance to get on the train.
- throwawayyy181 5y ago
  This comment feels a lot like Rockefeller’s shoe shine
decebalus1 5y ago
> History is littered with the corpses of those who tried and failed to corner a market. Real estate is no different. That's not to say we can't make the system better. We can and we need to. But serfdom isn't imminent either. Zillow is just a piece of the puzzle. I don't want to go down the 'collapse-porn' hole but with Zillow (and many others) doing this and pushing/pricing out family buyers + my city's new buildings being 99% rentals owned by financial corporations, I don't see a bright home ownership future. I'm driving around and all I see are 'vibrant' cities that look like https://archive.curbed.com/2018/12/4/18125536/real-estate-modern-apartment-architecture https://archive.curbed.com/2018/12/4/18125536/real-estate-mo.... I find that super depressing. Whenever I see cranes going up I get excited there's going to be a new condo building. NOPE. It's yet another 6 story matchbox owned by some no name shell in Delaware which ends up in 2 years under Berkshire Hathaway.
jdavis703 5y ago
Look at how short the last recession was in the US. It was 2 quarters, meeting the bare minimum definition of a recession. Since 2008 policy makers have shown a broad willingness to stimulate the economy at all costs. Barring a USA debt crisis or a change in the political climate, I’m skeptical the US will see a major recession any time soon.
scotuswroteus 5y ago
I think I agree with your ultimate conclusion, but that's not a fallacy it's an ageist trope, and also you're mistaking whoever generates oversimplified clickbait for the youth. I want to emphasize this: the youth do not control what the real estate media is urging various news outlets to say.
vb6sp6 5y ago
zillow isn't going to release these houses to you and me. they are going to blackrock and other such firms
vmception 5y ago
This is the weirdest take on so many levels. Like, in my filter bubble, I never saw any of that hype/doom. I saw Zillow and a few others making home buying and selling attractive and more efficient because it made the assets much more liquid. One of the most unattractive things to me about real estate was how long it takes to convert it back to cash, compared to other kinds of assets. The second is that Zillow's $2.8bn position isn't a problem even for Zillow or for the real estate market. There is simply not enough information to suggest its a bust or about the folly of trying to corner a market and there is more information to say that its just reached their corporate risk tolerance. For example, the article doesn't mention anything about the delta between buying price and price they are trying to sell at. Is it 2% off, 5%, 20%? And secondly does it matter? Zillow issued $4bn in corporate bonds at like 2% interest rate to do whatever they want. They've spent half of it on houses and still make revenue. That's nooooooothing like someone overleveraged on a mortgage 20:1. This isn't even 1:1 leverage, its way less. This is a complete nothingburger and that's before we even know the difference in value of their purchase price and new listing price. $2.8bn or 7,000 homes, is barely a dent in this several dozen trillion market. "The youth" is still not going to be able to afford anything, no matter if some institutional investors buy this bit, or if there was a fire sale.
jiveturkey 5y ago
Fired? Zillow has explored the market and is making an operating profit on these "losses". They charge exorbitant fees to sellers, effectively buying properties at a decent market discount, while publicly showing a sale price above market so as to inflate the price. Even though the first go at it may have failed due to whatever reason (stated or otherwise), whoever signed off on this should be promoted.

by cletus 5y ago

valeness 5y ago

But didn't they sell the houses to investors and/or established landlords? I'm not sure how this helps the youth or those otherwise disillusioned with the current housing market as that housing is still unavailable to them.

r3trohack3r 5y ago
I think the ops point is that it will end, not that it has ended.
- valeness 5y ago
  Yes, but this is not evidence of "it will end" to me.
  - r3trohack3r 5y ago
    I think the evidence presented was "history" > The people saying this have obviously never gone through a "bust" cycle. This is unsurprising as we've now been in the longest bull market in modern history. It's not always like this. It won't always be like this. I once heard someone who ran an investment floor say, paraphrased: During a bull market, I want my floor staffed with people too young to have lived the last bull market. They didn't want the risk aversion - drilled into people by the last bust cycle - on their trading floor. The cycle will repeat itself, folks will go from being unbelievably wealthy to bankrupt overnight (overnight as a figure of speech speaking, the crash will come but might drag out). Folks who bet it all will have their lives ruined. We will have another generation of market participants who are risk averse from hard earned lessons. The flip side of this is that _everything will go on sale_ for those who had stable investments and those who are income rich. If everything doesn't go on sale soon (soon might mean many years) it'll be the first time in history we broke out of the boom/bust cycle. For me, personally, I track my net worth and check in monthly. For the past year I've excluded my home's valuation from my net worth, it's monopoly money; by the time I'm willing to liquidate my house we will be on the other side of a bust cycle. I'm mentally prepared for my home to lose 50% of its value "overnight."

whimsicalism 5y ago

Sorry, youth here. The housing market remains screwed regardless of the actions of Zillow or Blackstone or whomever.

harryh 5y ago
Decades of under-building due to restrictive zoning laws will do that.
- whimsicalism 5y ago
  Yes, that - plus the rapid reversal of white flight to the suburbs among young people in the last 10-15 years (more of an east coast phenomena). It is both a demand and supply problem, but short of creating a Hukou system I don't see any solution but building.
  - WarOnPrivacy 5y ago
    > the rapid reversal of white flight to the suburbs among young people in the last 10-15 years The massive buy-ups in West & Central FL have led to an unprecedented shortage in housing. Rentals get 400 applicants each day and people with money in the bank are facing homelessness. People without have little hope.
    - deleted 5y ago
      [deleted]
  - nradov 5y ago
    Another solution would be encouraging economic development in other areas instead of cramming increasing numbers of people into a small number of geographically constrained cities.
    - whimsicalism 5y ago
      I think these returns to scale/density are somewhat intrinsic.

ineedasername 5y ago

being all "the sky is falling" with negative news I don't read it that way. My guess is that they 1) didn't believe that prices would level off a bit, as they have in the last couple of months 2) didn't factor in significant delays & increased costs for even minor refurbs and 3) as a result realized that any profits would be eaten by carrying costs (property taxes, maintenance, opportunity cost of having capital stagnate).

altacc 5y ago

I wouldn't be too quick to claim that the myth of institutional house buying has been dispelled. Zillow isn't the only company out there buying real estate, and they are planning to sell most of the properties to other institutions and landlords, not the open market of owner occupiers. It appears they made some errors in their calculations and temporarily bought too many houses at too high a price but the article says they are only pausing purchasing for the rest of the year and there's no mention of if they are revising their plan to purchase up to 5,000 homes a month by 2024. So, looks like without evidence of a market wide cessation or significant long term reduction, significant institutional real estate actors remain a factor in the market.

shane_b 5y ago
I would guess supply chain costs and delays reduced their speed of renovation unexpectedly and they can’t carry the cost of sitting on the property during that wait time. So to your point, it’s likely temporary based on unexpected renovation constraints.
gregman 5y ago
Agreed. One thing this article doesn't point out that was a bigger topic a couple of weeks prior is that Zillow had to halt purchases due to lack of workers to help flip the homes [1]. The iBuying revenue model depends on the ability to flip a home quickly so that market fluctuations do not have enough time to pose as a risk, which Zillow was willing to take. 1 - https://archive.md/tNaDt https://archive.md/tNaDt
andrewmutz 5y ago
I've never seen any good data that supported the myth of institutional house buying being a big enough phenomenon to affect homeowners. It was never apparent in the homeownership rate (https://fred.stlouisfed.org/series/RHORUSQ156N https://fred.stlouisfed.org/series/RHORUSQ156N) which has been broadly stable for decades, and the jumps over the last few years are, if anything, towards increased homeownership, not less.
- treeman79 5y ago

ISL 5y ago

As I understand things, Zillow's approach wasn't a corner, but rather an attempt at arbitrage/value-creation. They were pretty sure they had an edge at price-estimation and had enough capital to be able to simultaneously offer sellers execution speed and offer buyers a price they would accept. It is a market-making play. My impression here is that Zillow has re-evaluated some part of that calculus and decided to pull back. I hope that they'll be able to retool and revisit the approach after learning expensive lessons, as it is my impression that there should be real value here for all concerned.

short12 5y ago
>They were pretty sure they had an edge at price-estimation If they actually thought that they must have been high af Their tool is absolutely terrible
- ISL 5y ago
  I'm pretty sure that their internal dataset is far more rich/detailed than the public-facing "Zestimate". Traffic-data alone, segmenting the buyers clicking on each listing and their expressions of intent, would give them an incredibly-actionable trading/training signal. Zillow might see, nationally, the nationwide (and regional) direction of buyer and seller sentiment 2-4 weeks ahead of all but the largest regional brokerages.
  - ItsMonkk 5y ago
    That's all everything ever is anymore. You don't need to be a good stock picker if you know that someone sent a buy out, and you can get there first, buy it and then sell it to them. You don't need to find good domain names, just wait for someone to search if one is available and then buy it. Or when you Google for Verizon and the first thing you see is an ad for verizon.com. Most people will click the ad instead of the first listing.

drnonsense42 5y ago

I disagree strongly with this sentiment. Clearly Zillow is not going to buy all the houses in America and turn us into serfs overnight - that is an absurd strawman. What? Zillow is far from the only actor here trying to enter this space. It's quite ridiculous to claim, as you are, that industrial-scale home speculation is doomed to fail since there are boom and bust cycles and therefore we don't need to worry. That's ridiculous. We really don't have any direct, past precedent for this type of situation. It is rational to be concerned here. The fact that Zillow failed on their initial attempt does not imply that this can't work - it just means they're one of the first making a serious attempt and, unsurprisingly, they got overzealous and it didn't work on the first try! Quant firms for the stock market in the early 90s did not work overnight even though the market was much more inefficient than it is now. It takes time for groups of highly qualified and very smart people to figure this stuff out - but, they will.

secondaryacct 5y ago
Let them buy overpriced useless houses, if they buy too many we'll vote them out or we'll take the homes back by force. Everything is a balance and the only way to make money long term is to be undeniably useful to a majority of people. Anything below that bar will die down in shame, infamy or violence.
- sokoloff 5y ago
  What does “vote them out” mean in this context?
  - tablespoon 5y ago
    > What does “vote them out” mean in this context? I suppose it could mean voting in people to write a law that makes it exceedingly unattractive for institutional investors to buy single family homes. You could probably even do such a thing "neutrally" since people really only need one home and if you own more than two you're almost certainly investing in some way. Apply some onerous tax on each unit owned above 100, and all these investors will flee the market. Edit: IIRC, the companies that buy up all these single family homes are large corporations. I'm pretty sure you could write a law like I described that they wouldn't try to use some cheeky corporate shell game to try to bypass (e.g. in their tax filings require them to declare how many single family homes they're the beneficiary owner of, regardless of any intermediary shell companies/special purpose entities, and tax them for that). Require the auditors to sign off of on the number. If they lie, everyone's subject to even more onerous civil and criminal penalties (e.g. blow them up like Enron). Large corporations will stretch the law as far as they can, but it's rare for them to deliberately venture into fraud and other kinds of illegality (for the pedants out there, note I said rare not never). The systemic issues can be solved if they're made to comply, even if some relatively small fish still don't

adam_arthur 5y ago

You're right, but the difference these days is the Fed putting the pedal to the metal even when fiscal spending and economic data at all time records. We haven't seen this phenomena since the 70s when inflation was running hot and the Fed did nothing for many years. Back then, prices continued to rise nominally for many years. I suspect the Fed will tighten somewhat (taper should be announced tomorrow), but they keep stating that inflation is transitory. So clearly their intention is to kick the can as far down the road as possible. If inflation does start to inflect downward, they have the perfect excuse to do nothing until it levels off at an elevated level many months later. Rents alone will drive elevated inflation for years to come. However, used car prices will certainly tank at some point which will mask the effect. By moving so slowly, they seem to be facilitating the development of a new epic bubble, except it's a bubble in most asset classes. Stocks generally aren't too over valued, but hypergrowth is for sure. E.g. NET at 100x sales. Compare to Cisco in the dotcom bubble, which peaked at something like 200 PE and much smaller sales multiple. The PEs back then are now the PSs. Kind of insane, even accounting for the greater legitimacy of the businesses today. In the past the Fed used to preempt excesses and inflation. Anytime they haven't, has been a disaster in the long run, historically. Unfortunately I think a lot of their action is motivated by Powell trying to retain his seat. They really need to either renominate him or put somebody else up for vote so he stops optimizing for the job. His term ends in Feb 22.

SilasX 5y ago
>I suspect the Fed will tighten somewhat (taper should be announced tomorrow), but they keep stating that inflation is transitory. I hope so, but keep in mind, the Fed has lacked the will to tighten even in the most favorable conditions -- strong market, no covid -- merely because banks screamed bloody murder about having to pay slivers of a basis point more on overnight loans or (heaven forbid) stay more liquid so they don't need to get as many loans. HN stories about "liquidity injections": https://news.ycombinator.com/item?id=22559175 https://news.ycombinator.com/item?id=22559175 https://news.ycombinator.com/item?id=21731848 https://news.ycombinator.com/item?id=21731848 https://news.ycombinator.com/item?id=21477855 https://news.ycombinator.com/item?id=21477855
- 5y ago

edw519 5y ago

I'd love to know who signed off on this idea. They need to be fired. True for everywhere I've ever worked. Imagine how much better everything would be if we prioritized this problem before all the tech orgasms.

short12 5y ago

Correction, Zillow core business is crappy advertising

nradov 5y ago
Zillow also gets a lot of revenue from referrals to mortgage lenders.

HWR_14 5y ago

> History is littered with the corpses of those who tried and failed to corner a market. History is also filled with the bloated corpses of those who did successfully corner a market. Or, in modern times, those who participated in a synergistic duopoly to skirt anti-trust laws.

cs702 5y ago

> The people saying this have obviously never gone through a "bust" cycle. Yes, indeed. What's more, those people have a large, receptive audience: An entire generation that has never gone through a "bust" cycle. We're talking about nearly everyone in their early 20's to their mid-30's who joined the workforce after the global financial crisis. They have zero personal experience as to what it's like to be an asset owner in a prolonged bust or bear market.

jurassic 5y ago
It's ridiculous to suggest young people don't know anything about downturns. People who are now in their early-mid-30's were some of the biggest victims of the 2008 GFC because they bore the brunt of unemployment and delayed entry into careers (and other life milestones) as a result. If you're an employer, why would you hire a new grad when you could fill all your hiring needs with experienced hands? You wouldn't, and that was the reality in many industries back then. New grad unemployment reached nearly 15% in the period from 2008-2012, significantly higher than the overall unemployment rate. Then there was something like 20+% underemployment, with college grads working as baristas just to have some money coming in while they waited for the economy to thaw so they could start their lives. Many young people had no opportunity to pursue a real career after taking on four years of educational debt through no fault of their own. "Go to college and get a good job" was revealed to be a complete farce. A few years later as things picked up, there was a fresh crop of new grads behind them without any awkward employment gap or strange jobs to explain. Even those who managed to make their way into solid careers missed out on the stock market and housing asset boom of the last decade because they did not have the deposits and credit history needed to contemplate buying a home until fairly recently when prices went vertical.

infecto 5y ago

I don't know about your assessment, Zillow in my opinion is just a third party here. Sure we can agree Zillow bought too much for probably too high of a price but I think there is a larger discussion about the significant move of institutional money into real estate. I have not seen that slow down and I have been amazed with how entire new developments are being bought up by institutions to be rental home communities. That I think is a new change that we have not seen at this volume before.

tablespoon 5y ago

> It wasn't long ago that we were reading how Zillow et al were going to buy up all the housing stock and keep millenials and Zoomers homeless forever. I think you're making a significant error there: the narrative you're criticizing wasn't focused exclusively on Zillow, but rather "big investors" buying up single family homes and pushing actual single families out of that market. This news does nothing to repudiate that narrative, from the OP: > The company is seeking roughly $2.8 billion for the houses, which are being pitched to institutional investors, according to people familiar with the matter. Zillow will likely sell the properties to a multitude of buyers rather than packaging them in a single transaction, said the people, who asked not to be named because the matter is private.

refurb 5y ago

Yup. As someone who was in the real estate market in 2007 it’s pretty amazing how quickly we went from “be careful with housing” to “housing only goes up, it’s now or never”. I’d say it took about 5 years. Human recency bias is very strong. Whatever trend has happened in the last 6-12 months is assumed to continue ad infinitum. And that’s true on both sides. When the market crashed everyone assumed it was forever.

varelse 5y ago

They just need to hold all that inventory long enough for it to go black. But of course the market can remain irrational longer than they can remain solvent so that's not how it will play out. Also good luck convincing the sociopaths of VC to get rich slow here: they want their capital back so they can throw it at more promising get-rich-quick schemes.

hinkley 5y ago
> the market can remain irrational longer than [you] can remain solvent This deserves to be stated on its own.

FFRefresh 5y ago

Responding here given that you are calling out the 'fallacy' of others. You seem to be making quite declarative statements here that are false: -Buying real estate does not always end badly -Zillow's core business is not transactions Zillow's issue was not that they attempted to buy houses, it was that they didn't operate with enough fiscal discipline in doing so. They got too far out over their skis, as the saying goes. Given your suggestion that someone who signed off on the idea should be fired, is there any record of you stating publicly that the person should be fired for the idea when they first started this endeavor (or at least when you first heard of it)? If not, it seems like you are operating with the fallacy of hindsight bias.

ericmcer 5y ago

New monetary policy is designed to prevent any kind of bust from happening. It is only boom from here on out. 2009 was the last chance to get on the train.

throwawayyy181 5y ago
This comment feels a lot like Rockefeller’s shoe shine

decebalus1 5y ago

> History is littered with the corpses of those who tried and failed to corner a market. Real estate is no different. That's not to say we can't make the system better. We can and we need to. But serfdom isn't imminent either. Zillow is just a piece of the puzzle. I don't want to go down the 'collapse-porn' hole but with Zillow (and many others) doing this and pushing/pricing out family buyers + my city's new buildings being 99% rentals owned by financial corporations, I don't see a bright home ownership future. I'm driving around and all I see are 'vibrant' cities that look like https://archive.curbed.com/2018/12/4/18125536/real-estate-modern-apartment-architecture https://archive.curbed.com/2018/12/4/18125536/real-estate-mo.... I find that super depressing. Whenever I see cranes going up I get excited there's going to be a new condo building. NOPE. It's yet another 6 story matchbox owned by some no name shell in Delaware which ends up in 2 years under Berkshire Hathaway.

jdavis703 5y ago

Look at how short the last recession was in the US. It was 2 quarters, meeting the bare minimum definition of a recession. Since 2008 policy makers have shown a broad willingness to stimulate the economy at all costs. Barring a USA debt crisis or a change in the political climate, I’m skeptical the US will see a major recession any time soon.

scotuswroteus 5y ago

I think I agree with your ultimate conclusion, but that's not a fallacy it's an ageist trope, and also you're mistaking whoever generates oversimplified clickbait for the youth. I want to emphasize this: the youth do not control what the real estate media is urging various news outlets to say.

vb6sp6 5y ago

zillow isn't going to release these houses to you and me. they are going to blackrock and other such firms

vmception 5y ago

This is the weirdest take on so many levels. Like, in my filter bubble, I never saw any of that hype/doom. I saw Zillow and a few others making home buying and selling attractive and more efficient because it made the assets much more liquid. One of the most unattractive things to me about real estate was how long it takes to convert it back to cash, compared to other kinds of assets. The second is that Zillow's $2.8bn position isn't a problem even for Zillow or for the real estate market. There is simply not enough information to suggest its a bust or about the folly of trying to corner a market and there is more information to say that its just reached their corporate risk tolerance. For example, the article doesn't mention anything about the delta between buying price and price they are trying to sell at. Is it 2% off, 5%, 20%? And secondly does it matter? Zillow issued $4bn in corporate bonds at like 2% interest rate to do whatever they want. They've spent half of it on houses and still make revenue. That's nooooooothing like someone overleveraged on a mortgage 20:1. This isn't even 1:1 leverage, its way less. This is a complete nothingburger and that's before we even know the difference in value of their purchase price and new listing price. $2.8bn or 7,000 homes, is barely a dent in this several dozen trillion market. "The youth" is still not going to be able to afford anything, no matter if some institutional investors buy this bit, or if there was a fire sale.

jiveturkey 5y ago

Fired? Zillow has explored the market and is making an operating profit on these "losses". They charge exorbitant fees to sellers, effectively buying properties at a decent market discount, while publicly showing a sale price above market so as to inflate the price. Even though the first go at it may have failed due to whatever reason (stated or otherwise), whoever signed off on this should be promoted.