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That doesn't sound like an algorithm mistake, just like a policy to match sales nearby at the same price because of the assumption that prices will just keep go

That doesn't sound like an algorithm mistake, just like a policy to match sales nearby at the same price because of the assumption that prices will just keep going up coupled with the stupidity of not tracking what you've bought so far - yikes! Oh, on second thought, I guess it could be algo as that previously bought nearby condo could have been priced using some crazy algorithm.

not2b 5y ago
"Prices will keep going up" was a key belief that triggered the 2008 real estate crash. They keep going up until they don't, and then the house-flippers who weren't careful enough and the lenders that approved "liar loans" get burned badly.
- chii 5y ago
  > the lenders that approved "liar loans" get burned badly. the lenders "knew" of the bad loans, but because these lenders are going to on-sell the loan to some other investor, they didn't care as they profit off the sale, rather than the loan repayments. It's a moral hazard.
  - erik_seaberg 5y ago
    The loans were also bundled into opaque securities and the “low-risk” tranches were rated and priced for a typical rate of uncorrelated defaults, not a widespread crash.
    - aaronwall 5y ago
      The rating agencies would rate just about everything https://www.cnbc.com/id/27321998 https://www.cnbc.com/id/27321998 Official #1: Btw (by the way) that deal is ridiculous. Official #2: I know right...model def (definitely) does not capture half the risk. Official #1: We should not be rating it. Official #2: We rate every deal. It could be structured by cows and we would rate it. And the parts that were so junky they couldn't be rated got remixed into another deal to get rated.
      - chii 5y ago
        It stems from the idea that multiple junk bonds can be combined together to form a higher quality bond than otherwise. This is actually not true, but was the unquestioned underlying assumption. Its definitely wrong to make this assumption, but the people who got paid are all incentivized to turn a blind eye.
        rsj_hn 5y ago
        > multiple junk bonds can be combined together to form a higher quality bond than otherwise. Well it's obviously true. Take your good bond to get paid first from 1000 junk bonds. Then your 999 worse bonds get paid last. Even during the mortgage crisis, not all of the junk bonds returned zero. So there is some number of junk bonds that can be combined into a good bond and worse bonds. The problem is that people estimated that number to be lower than it actually was. It was a quantitative failure.
- angelzen 5y ago
  They keep going up until they don't, and then the Fed quantitatively eases the losses. Sounds like Zillow's problem was they didn't sink enough money into their scheme.
- lupire 5y ago
  The 2008 crash was undone in under 4 years.

not2b 5y ago

"Prices will keep going up" was a key belief that triggered the 2008 real estate crash. They keep going up until they don't, and then the house-flippers who weren't careful enough and the lenders that approved "liar loans" get burned badly.

chii 5y ago
> the lenders that approved "liar loans" get burned badly. the lenders "knew" of the bad loans, but because these lenders are going to on-sell the loan to some other investor, they didn't care as they profit off the sale, rather than the loan repayments. It's a moral hazard.
- erik_seaberg 5y ago
  The loans were also bundled into opaque securities and the “low-risk” tranches were rated and priced for a typical rate of uncorrelated defaults, not a widespread crash.
  - aaronwall 5y ago
    The rating agencies would rate just about everything https://www.cnbc.com/id/27321998 https://www.cnbc.com/id/27321998 Official #1: Btw (by the way) that deal is ridiculous. Official #2: I know right...model def (definitely) does not capture half the risk. Official #1: We should not be rating it. Official #2: We rate every deal. It could be structured by cows and we would rate it. And the parts that were so junky they couldn't be rated got remixed into another deal to get rated.
    - chii 5y ago
      It stems from the idea that multiple junk bonds can be combined together to form a higher quality bond than otherwise. This is actually not true, but was the unquestioned underlying assumption. Its definitely wrong to make this assumption, but the people who got paid are all incentivized to turn a blind eye.
      - rsj_hn 5y ago
        > multiple junk bonds can be combined together to form a higher quality bond than otherwise. Well it's obviously true. Take your good bond to get paid first from 1000 junk bonds. Then your 999 worse bonds get paid last. Even during the mortgage crisis, not all of the junk bonds returned zero. So there is some number of junk bonds that can be combined into a good bond and worse bonds. The problem is that people estimated that number to be lower than it actually was. It was a quantitative failure.
angelzen 5y ago
They keep going up until they don't, and then the Fed quantitatively eases the losses. Sounds like Zillow's problem was they didn't sink enough money into their scheme.
lupire 5y ago
The 2008 crash was undone in under 4 years.