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In defense of Zillow, they weren't looking to buy a "portfolio" of houses - they bought as many as they sold, and didn't have any net negative effect on housing

In defense of Zillow, they weren't looking to buy a "portfolio" of houses - they bought as many as they sold, and didn't have any net negative effect on housing supply. Yes, they're profiting off of a bad situation, but they're not the cause of it. Bev from the local council's planning department, as well as Michael Caton's horrific propaganda piece, has done more damage than every flipper combined.

arcticfox 5y ago
> Yes, they're profiting off of a bad situation That seems like it was the idea but amusingly, per this article, not exactly the right word for what they were doing
lokar 5y ago
They were trying to act as a market maker, providing liquidity for a price. Nothing wrong with that.
- iskander 5y ago
  It's more complicated than that since they also have a huge influence on prices through Zestimates. They undoubtably kept housing prices rising for the past few years, which was very profitable to them as large scale flippers.
- engineer_22 5y ago
  The market doesn't need any more liquidity. Banks will lend to anyone with a pulse.
  - lokar 5y ago
    That is not the kind of liquidity I'm talking about. Look up what companies like citadel securities do in equities markets.
- mym1990 5y ago
  More so than providing liquidity they are providing increased velocity. I would love to know if there are properties that Z has bought and sold more than once...
- maxsilver 5y ago
  > Nothing wrong with that. Zillow was literally scalping housing, a basic human need that all people must buy. That's generally considered very immoral by most reasonable people. And they didn't just do it once or twice, they did it at ridiculous scale (tens of thousands of homes sold last quarter, was a sale to a scalper to artificially drive up all housing prices). Most reasonable people would consider this behaviour to be evil (like, comic-book-villain level evil). Even scalping a optional-only luxury item like concert tickets or whatever is already considered unethical by most folks.
  - pcwalton 5y ago
    I don't consider it evil. When you buy a house, fix it up, and resell it, you're essentially providing a renovation service to whoever will buy it next. There's no meaningful difference between you renovating a house and selling it and an owner-occupant buying the house and renovating it themselves. In this case, Zillow bought houses too high and sold them too low. As a result, the market punished that irrational behavior.
    - 93po 5y ago
      If there's no difference then there'd be no profit for Zillow and they wouldn't be doing this to begin with. Clearly there's a difference and it's morally bankrupt
      - esyir 5y ago
        His argument is that Zillow was providing a valuable service in the renovation process. Value-add allows them to charge for it.
        93po 5y ago
        That would make sense if Zillow employees were literally the people painting the walls. As it is (or was), there's probably a project manager that managed hundreds of houses, spends all day on the phone call painting companies, and then just assumes they do a good job. I'm perfectly capable of calling a painting company myself and don't need to pay Zillow thousands of dollars extra to do it for me.
enlyth 5y ago
I'm not saying Z is the cause of the crisis, it's more like them trying to capitalize on it. How bad you view this is based on your political quadrant, so fair enough to those who don't think it's a problem. What I'm trying to bring attention to is that our generation is frustrated, we are priced out of owning a home unless we have some massive help from our parents or inheritance, and being repeatedly told that we will own nothing and it is for our own good is demoralizing. There might be a sizeable portion of people who do have help from their family of putting down massive six figure deposits or are up on their luck from investments, but I still think it's important to bring attention to the housing crisis for those of us who haven't had the same sort of luck.
- AussieWog93 5y ago
  >What I'm trying to bring attention to is that our generation is frustrated, we are priced out of owning a home unless we have some massive help from our parents or inheritance, and being repeatedly told that we will own nothing and it is for our own good is demoralizing. I don't disagree with you, and I'm in the same boat personally (young family currently renting, looks like we'll be able to afford a house but only because one of our businesses has taken off in a massive way). I just feel like we as a generation, when expressing our frustration, obsess over who has what rather than the systemic obsctacles getting in the way of us gaining a stake in society. Screaming at people who have more than us is cathartic, but ultimately achieves nothing. We need to refocus our efforts towards solutions that are achievable and impactful.
  - mistrial9 5y ago
    the reward for your pacifist approach is that you now rent, with a young family.
    - AussieWog93 5y ago
      Please re-read my comment. I never advocated for a "pacifist approach", but if we want housing to be affordable we need to pick the right battles. Advocating for things like tax reform, financial restrictions which limit the utility of residential property as an investment vehicle, incentives for empty nesters to downsize, less restrictions on property development, or even high-speed rail between metro areas and regional hubs will all put downwards pressure on property prices. Misdirected frustration, unfortunately, will not.
engineer_22 5y ago
Sounds like they have a couple billion in inventory. No matter how you slice it, they were speculating on housing inflation.
- stickfigure 5y ago
  No, not at all. They were trying to set themselves up as a market maker. They did not want to hold a position. They screwed up and got behind, which incurred the risk of the market moving against them (it did). Matt Levine's Money Stuff column covered this in detail. Incompetence, not villainy.
jnwatson 5y ago
They actually improved the market by providing liquidity.
Valakas_ 5y ago
Would there be a bad situation if there was nobody profitting from it? Maybe there is a root cause, but Zillow is certainly one cause why this is so bad. Not the root one, but a cause still.

arcticfox 5y ago

> Yes, they're profiting off of a bad situation That seems like it was the idea but amusingly, per this article, not exactly the right word for what they were doing

lokar 5y ago

They were trying to act as a market maker, providing liquidity for a price. Nothing wrong with that.

iskander 5y ago
It's more complicated than that since they also have a huge influence on prices through Zestimates. They undoubtably kept housing prices rising for the past few years, which was very profitable to them as large scale flippers.
engineer_22 5y ago
The market doesn't need any more liquidity. Banks will lend to anyone with a pulse.
- lokar 5y ago
  That is not the kind of liquidity I'm talking about. Look up what companies like citadel securities do in equities markets.
mym1990 5y ago
More so than providing liquidity they are providing increased velocity. I would love to know if there are properties that Z has bought and sold more than once...
maxsilver 5y ago
> Nothing wrong with that. Zillow was literally scalping housing, a basic human need that all people must buy. That's generally considered very immoral by most reasonable people. And they didn't just do it once or twice, they did it at ridiculous scale (tens of thousands of homes sold last quarter, was a sale to a scalper to artificially drive up all housing prices). Most reasonable people would consider this behaviour to be evil (like, comic-book-villain level evil). Even scalping a optional-only luxury item like concert tickets or whatever is already considered unethical by most folks.
- pcwalton 5y ago
  I don't consider it evil. When you buy a house, fix it up, and resell it, you're essentially providing a renovation service to whoever will buy it next. There's no meaningful difference between you renovating a house and selling it and an owner-occupant buying the house and renovating it themselves. In this case, Zillow bought houses too high and sold them too low. As a result, the market punished that irrational behavior.
  - 93po 5y ago
    If there's no difference then there'd be no profit for Zillow and they wouldn't be doing this to begin with. Clearly there's a difference and it's morally bankrupt
    - esyir 5y ago
      His argument is that Zillow was providing a valuable service in the renovation process. Value-add allows them to charge for it.
      - 93po 5y ago
        That would make sense if Zillow employees were literally the people painting the walls. As it is (or was), there's probably a project manager that managed hundreds of houses, spends all day on the phone call painting companies, and then just assumes they do a good job. I'm perfectly capable of calling a painting company myself and don't need to pay Zillow thousands of dollars extra to do it for me.

enlyth 5y ago

I'm not saying Z is the cause of the crisis, it's more like them trying to capitalize on it. How bad you view this is based on your political quadrant, so fair enough to those who don't think it's a problem. What I'm trying to bring attention to is that our generation is frustrated, we are priced out of owning a home unless we have some massive help from our parents or inheritance, and being repeatedly told that we will own nothing and it is for our own good is demoralizing. There might be a sizeable portion of people who do have help from their family of putting down massive six figure deposits or are up on their luck from investments, but I still think it's important to bring attention to the housing crisis for those of us who haven't had the same sort of luck.

AussieWog93 5y ago
>What I'm trying to bring attention to is that our generation is frustrated, we are priced out of owning a home unless we have some massive help from our parents or inheritance, and being repeatedly told that we will own nothing and it is for our own good is demoralizing. I don't disagree with you, and I'm in the same boat personally (young family currently renting, looks like we'll be able to afford a house but only because one of our businesses has taken off in a massive way). I just feel like we as a generation, when expressing our frustration, obsess over who has what rather than the systemic obsctacles getting in the way of us gaining a stake in society. Screaming at people who have more than us is cathartic, but ultimately achieves nothing. We need to refocus our efforts towards solutions that are achievable and impactful.
- mistrial9 5y ago
  the reward for your pacifist approach is that you now rent, with a young family.
  - AussieWog93 5y ago
    Please re-read my comment. I never advocated for a "pacifist approach", but if we want housing to be affordable we need to pick the right battles. Advocating for things like tax reform, financial restrictions which limit the utility of residential property as an investment vehicle, incentives for empty nesters to downsize, less restrictions on property development, or even high-speed rail between metro areas and regional hubs will all put downwards pressure on property prices. Misdirected frustration, unfortunately, will not.

engineer_22 5y ago

Sounds like they have a couple billion in inventory. No matter how you slice it, they were speculating on housing inflation.

stickfigure 5y ago
No, not at all. They were trying to set themselves up as a market maker. They did not want to hold a position. They screwed up and got behind, which incurred the risk of the market moving against them (it did). Matt Levine's Money Stuff column covered this in detail. Incompetence, not villainy.

jnwatson 5y ago

They actually improved the market by providing liquidity.

Valakas_ 5y ago

Would there be a bad situation if there was nobody profitting from it? Maybe there is a root cause, but Zillow is certainly one cause why this is so bad. Not the root one, but a cause still.