5 ms·

"The surprising exit, announced with pedestrian quarterly profits, thrashed shares in another rough trading session Tuesday, a day after an analyst said two-thi

"The surprising exit, announced with pedestrian quarterly profits, thrashed shares in another rough trading session Tuesday, a day after an analyst said two-thirds of the homes it bought are underwater." https://fred.stlouisfed.org/series/MSPUS https://fred.stlouisfed.org/series/MSPUS The fed chart shows almost hockey stick growth in housing prices this year. How can the Zillow properties be underwater, did they just massively overpay up-front?

edrxty 5y ago
Yes, yes they did. The vertical part of the hockey stick is EVERYWHERE. Homework: go on zillow and find the most depressing row house in urban Detroit/Cleveland/wherever with enough pricing history to have a graph. You will see that exact same line shape. Literally everything has doubled since around 2014. Completely bombed out crackhouses were a 300-500% ROI in that period. You couldn't lose money even if you set the structure on fire. The past year has eclipsed that though. Everything has gone up massively and for seemingly no reason. For comparison, since 2014 the US population has increased 4%. Also, people aren't moving from somewhere to fill up your town, go on a random city subreddit and you'll see a different local mythology to explain the prices. It's happening everywhere though. There's literally no significant area that's seeing an exodus with decreasing prices. Not California, not libruhl lockdown states, not Texas, it's happening everywhere.
- rafale 5y ago
  I wonder if Black Rock will fare better than Zillow. My understanding is that they are not planning to sell/flip, rather rent then and hold on them forever.
  - RayVR 5y ago
    BlackRock entered the market as a landlord all the way back in 2011. They are fine. Not only that, they have real investment knowledge. Zillow and OpenDoor are a bunch of amateurs that thought they could turn "data scientists" into quant traders.
- quickthrowman 5y ago
  > Everything has gone up massively and for seemingly no reason. The reason is quite obvious. Just like bond values and yields are inversely correlated, mortgage rates and home values are inversely correlated. Here is a chart of the 30Y mortgage rate, it should explain everything. https://fred.stlouisfed.org/series/MORTGAGE30US https://fred.stlouisfed.org/series/MORTGAGE30US
  - edrxty 5y ago
    Yes but it's a little more complicated than just rates. It's a multitude of factors including perceived worth, available cash, financing rules, supply, new construction costs, etc. People need to be willing to sign their lives away to pay off houses, otherwise rates would also be strongly tied to the price of everything from cars to toothpaste (they are very loosely, but those things don't cost 3x what they did in 2014).
latchkey 5y ago
That is a good chart, but this one answers your question: https://fred.stlouisfed.org/series/MSACSR https://fred.stlouisfed.org/series/MSACSR Supply is going up.
- edrxty 5y ago
  Similarly housing starts are increasing drastically now that lumber has stabilized https://fred.stlouisfed.org/series/HOUST https://fred.stlouisfed.org/series/HOUST
- tppiotrowski 5y ago
  Thanks. Definitely paints a contrast to 2009 when a lot more property was on the market.
topspin 5y ago
> did they just massively overpay up-front? That's the only possibility available as far as I can see. I recall seeing the housing stock they favored were all in the hottest US markets, so they're exposed to small fluctuations at the extreme end of the histogram. Otherwise the US median home price curve still looks like a boost phase ballistic missile track as of Q3 2021. Zillow only got into this flipping game in 2018. They've never seen anything but rapid price growth. I will not be surprised when we learn the place was off the hook with buyers snapping up properties with no adults at the table. There is always someone caught way over extended when markets move. This time one of them is named 'Zillow.' Expect a bunch of tedious 'insider' stories from Wired et al; wrecked hotel suites and orgies and $2e6 super cars. All the usual.
- selimthegrim 5y ago
  Well with only dos commas at least we know which way the doors will open on the super cars.
gravypod 5y ago
I am not an analyst but this is my armchair understanding of the market: 1. The construction of new homes was limited in late 2019 early 2020. This was due to covid and labor shortages and supply lines being blocked. 2. Demand for homes rose to an all time high. The people in big cities said: "Why quarantine with nothing to do in my Manhattan apartment when I can buy a house and sell it when the pandemic is over. House prices always go up so I'll make money" 3. Zillow, banks, etc saw the fed start printing money which was going to lead us into an all-time high inflation rate. Their inflation hedge was simple: shift all liquids into long term stable solid assets. For most of human history this has been housing (single family and rental properties). Zillow specifically got a massive credit line via taking advantage of "zero risk" money from the fed via their bank. 4. Zillow + banks + the middle and upper class families start buying homes at a record high. This compounds with the lack of new supply. 5. Foreign speculators move in and see the increase in property value. The common wisdom of "prices only go up for homes" has encouraged them to invest in these properties. I know some people who have been doing this. Foreign speculators are concentrating on some limited markets (USA, Canada, and Australia). Now that most of our liquid assets have shifted into properties any fluctuation in property value would have interesting implications so there will now be a large interest in keeping home prices high. The core problem: properties are only worth what people are willing to pay for them. Regardless of what has been going on with inflation or how much money you have put into flipping it. If no one will buy the home for 200k over assessment then you have to lower the price. This is slowly causing a large reversal in the market. I've been seeing homes steadily creep back to what inflation would account for in price delta.
- AussieWog93 5y ago
  >I've been seeing homes steadily creep back to what inflation would account for in price delta. Do you have any data or more info about this? I think many of us young 'uns would just like some hope right about now.
  - gravypod 5y ago
    Nothing scientific, just observing ~20 listings by my apartment (that I would love to live in some day). I would however offer that if anyone can give me unfettered access the data of multiple MLSs I could generate some visualizations. I really really really want this data.
deleted 5y ago
[deleted]

edrxty 5y ago

Yes, yes they did. The vertical part of the hockey stick is EVERYWHERE. Homework: go on zillow and find the most depressing row house in urban Detroit/Cleveland/wherever with enough pricing history to have a graph. You will see that exact same line shape. Literally everything has doubled since around 2014. Completely bombed out crackhouses were a 300-500% ROI in that period. You couldn't lose money even if you set the structure on fire. The past year has eclipsed that though. Everything has gone up massively and for seemingly no reason. For comparison, since 2014 the US population has increased 4%. Also, people aren't moving from somewhere to fill up your town, go on a random city subreddit and you'll see a different local mythology to explain the prices. It's happening everywhere though. There's literally no significant area that's seeing an exodus with decreasing prices. Not California, not libruhl lockdown states, not Texas, it's happening everywhere.

rafale 5y ago
I wonder if Black Rock will fare better than Zillow. My understanding is that they are not planning to sell/flip, rather rent then and hold on them forever.
- RayVR 5y ago
  BlackRock entered the market as a landlord all the way back in 2011. They are fine. Not only that, they have real investment knowledge. Zillow and OpenDoor are a bunch of amateurs that thought they could turn "data scientists" into quant traders.
quickthrowman 5y ago
> Everything has gone up massively and for seemingly no reason. The reason is quite obvious. Just like bond values and yields are inversely correlated, mortgage rates and home values are inversely correlated. Here is a chart of the 30Y mortgage rate, it should explain everything. https://fred.stlouisfed.org/series/MORTGAGE30US https://fred.stlouisfed.org/series/MORTGAGE30US
- edrxty 5y ago
  Yes but it's a little more complicated than just rates. It's a multitude of factors including perceived worth, available cash, financing rules, supply, new construction costs, etc. People need to be willing to sign their lives away to pay off houses, otherwise rates would also be strongly tied to the price of everything from cars to toothpaste (they are very loosely, but those things don't cost 3x what they did in 2014).

latchkey 5y ago

That is a good chart, but this one answers your question: https://fred.stlouisfed.org/series/MSACSR https://fred.stlouisfed.org/series/MSACSR Supply is going up.

edrxty 5y ago
Similarly housing starts are increasing drastically now that lumber has stabilized https://fred.stlouisfed.org/series/HOUST https://fred.stlouisfed.org/series/HOUST
tppiotrowski 5y ago
Thanks. Definitely paints a contrast to 2009 when a lot more property was on the market.

topspin 5y ago

> did they just massively overpay up-front? That's the only possibility available as far as I can see. I recall seeing the housing stock they favored were all in the hottest US markets, so they're exposed to small fluctuations at the extreme end of the histogram. Otherwise the US median home price curve still looks like a boost phase ballistic missile track as of Q3 2021. Zillow only got into this flipping game in 2018. They've never seen anything but rapid price growth. I will not be surprised when we learn the place was off the hook with buyers snapping up properties with no adults at the table. There is always someone caught way over extended when markets move. This time one of them is named 'Zillow.' Expect a bunch of tedious 'insider' stories from Wired et al; wrecked hotel suites and orgies and $2e6 super cars. All the usual.

selimthegrim 5y ago
Well with only dos commas at least we know which way the doors will open on the super cars.

gravypod 5y ago

I am not an analyst but this is my armchair understanding of the market: 1. The construction of new homes was limited in late 2019 early 2020. This was due to covid and labor shortages and supply lines being blocked. 2. Demand for homes rose to an all time high. The people in big cities said: "Why quarantine with nothing to do in my Manhattan apartment when I can buy a house and sell it when the pandemic is over. House prices always go up so I'll make money" 3. Zillow, banks, etc saw the fed start printing money which was going to lead us into an all-time high inflation rate. Their inflation hedge was simple: shift all liquids into long term stable solid assets. For most of human history this has been housing (single family and rental properties). Zillow specifically got a massive credit line via taking advantage of "zero risk" money from the fed via their bank. 4. Zillow + banks + the middle and upper class families start buying homes at a record high. This compounds with the lack of new supply. 5. Foreign speculators move in and see the increase in property value. The common wisdom of "prices only go up for homes" has encouraged them to invest in these properties. I know some people who have been doing this. Foreign speculators are concentrating on some limited markets (USA, Canada, and Australia). Now that most of our liquid assets have shifted into properties any fluctuation in property value would have interesting implications so there will now be a large interest in keeping home prices high. The core problem: properties are only worth what people are willing to pay for them. Regardless of what has been going on with inflation or how much money you have put into flipping it. If no one will buy the home for 200k over assessment then you have to lower the price. This is slowly causing a large reversal in the market. I've been seeing homes steadily creep back to what inflation would account for in price delta.

AussieWog93 5y ago
>I've been seeing homes steadily creep back to what inflation would account for in price delta. Do you have any data or more info about this? I think many of us young 'uns would just like some hope right about now.
- gravypod 5y ago
  Nothing scientific, just observing ~20 listings by my apartment (that I would love to live in some day). I would however offer that if anyone can give me unfettered access the data of multiple MLSs I could generate some visualizations. I really really really want this data.

deleted 5y ago

[deleted]