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Is it possible that Zillow artificially inflated the housing market? They bought up bunch of houses while having the most popular pricing tool? That's a strong

Is it possible that Zillow artificially inflated the housing market? They bought up bunch of houses while having the most popular pricing tool? That's a strong incentive to predict ever increasing prices. Plus it whipped up a frenzy and site traffic. Dangerous incentives all around. You can see how this could be self reinforcing with systems that all want the numbers to go up.

brodouevencode 5y ago
Zillow is just an aggregate typically MLS data. Sure it can probably have some influence via it's Zestimate product, but that's not what failed. Anecdotally 1/4 of the folks in my neighborhood currently have a for sale sign in their yard because of the price increases. I'm not sure where this upward pressure is coming from, but I fear another 2008.
- gpapilion 5y ago
  The economy itself has been good the last 12 months in coastal cities. The upward pressure is coming from those who have money to spend upgrading the life. I don’t fear another 2008 since the mortgage market hasn’t gone as crazy. I do think we’ll see a correction, but it’s more likely to be a slow down and increase in time to sell homes.
- poulsbohemian 5y ago
  > Anecdotally 1/4 of the folks in my neighborhood currently have a for sale sign in their yard because of the price increases. If I might offer some thoughts as a real estate agent... so we are seeing some of this in my market as well. In particular, we're seeing houses that are sitting on market longer than they have the rest of the past two years. This is causing many people in my market to prognosticate that the market is slowing down / we're in a bubble / this is the top, etc. Instead the problem is that there are sellers who see dollar signs and are listing their homes much higher than the market can actually bear. It's not that there aren't buyers or that the cost of capital has increased, they have just gotten greedy as seller. So - I don't know what market you are in, but my guess would be that many of those opportunistic sellers will be disappointed and that the market will self correct - not that it will crash, but simply self-correct.
  - brodouevencode 5y ago
    That makes sense. The ones I do know that are selling - they're not tied to this area by family/jobs/other commitments and they probably see an easy cash grab because of that. One family was in their house for 9 months then sold it for $80k, or ~25%, more than what they paid for it (according to Zillow). Honestly not a bad payday but how long can something like that last?
    - poulsbohemian 5y ago
      >Honestly not a bad payday but how long can something like that last? IMHO, it could be a while. Every market is different because real estate is so localized, but... there are relatively few asset classes. The general public invests in two of those: stocks and real estate. Sure, interest rates might rise but anything below 5% is a 50+ year low. Even pre Covid we were beginning to see a significant population reorganization, in part due to climate change, remote work, cost of living, and generational preferences. We simply do not have have enough housing - or enough of the right kind of housing - in areas people want to move. So, at least in my area I don't see a obvious stop to the demand. That isn't to say that people are going to see an $80K increase in 9 months ongoing, but just that the appreciation will be there and the demand will continue.
gpapilion 5y ago
I think this is an extremely likely probability in the markets it operated offers in. Even if they were buying 5-10% of those homes. I also think realtors were slow to sue Zillow homes to clients, but have no hard evidence to support this. I do see a Redfin listed home in my neighborhood gets 1/4 the traffic of anything else, and I have to believe that influence from realtors. This is something that happens with for sale by owner homes too.
TheGuyWhoCodes 5y ago
I think it's true for any platform for housing markets. Once you have easy access to pricing of houses sold or being sold around you, as a seller you will try to be at the same ballpark and higher. So everyone ups the price by 5-10% so it becomes the new normal and repeat.
algoatecorn 5y ago
The question should be, 'To what degree did Zillow influence the housing market?' Interest rates are low so people have cash. New housing development was lacking even before Covid disrupted supply chains. Now we are facing a labor shortage that could play out in a number of ways, not limited to proletariat uprising or in contrast, a new age of entrepreneurialism.
- thedougd 5y ago
  I agree. Those low interest rates are also driving a ton of refis which people are using to make improvements and renovations. There's tremendous pressure on trade labor. Also, I suspect immigration restrictions are putting a squeeze on the supply.
chiph 5y ago
I think there is a feedback loop involved. Someone wanting to sell their home will likely look at the Zestimate to help them set an asking price. And then tack on a few thousand for negotiating room. Zillow monitors the offer amounts by potential buyers, and if any are above the current Zestimate, that signals the algorithm to raise the home's value, even if the sale hasn't closed yet. This then becomes a "comp" for the neighborhood (since other realtors will check their site) and influences nearby sales.
modriano 5y ago
Per this US Census and HUD report [0], there have between 600k (2018) to 1M (2020) single family home sales per year over the years since Zillow started Offers. Per this Barron's article [1], Zillow bought 9680 homes in Q3 2021 and less than half of that in Q2 2021. So, yeah, they've probably driven the price up a little bit, but their purchases represent maybe 2% of all sales, so I assume the impact that has on the market in general would be pretty small. [0] https://www.census.gov/construction/nrs/pdf/newressales.pdf https://www.census.gov/construction/nrs/pdf/newressales.pdf [1] https://www.barrons.com/articles/zillow-opendoor-stock-price-home-buying-selling-51636148460 https://www.barrons.com/articles/zillow-opendoor-stock-price...
- nerevarthelame 5y ago
  Zillow only bought houses in certain markets (24 different metropolitan areas [1]). So their impact on prices within those regions would've been bigger than what you'd expect by comparing them to all home sales in the US. I admit that I have no idea how much bigger, though. [1] http://zillow.mediaroom.com/2020-08-04-Zillow-Resumes-Buying-Homes-in-4-More-Zillow-Offers-Markets http://zillow.mediaroom.com/2020-08-04-Zillow-Resumes-Buying...
asdff 5y ago
Do people actually use zillow for buying or just for perusing? Most of the listings on my zillow are these stale 60 day old listings where there is obviously something wrong with the listing, it doesn't look like the actual market that realtors are using considering homes here sell so fast. My understanding is real estate moves too quickly and you are going to be putting offers on homes your realtor shows you before they even hit market let alone aggregated on zillow.

brodouevencode 5y ago

Zillow is just an aggregate typically MLS data. Sure it can probably have some influence via it's Zestimate product, but that's not what failed. Anecdotally 1/4 of the folks in my neighborhood currently have a for sale sign in their yard because of the price increases. I'm not sure where this upward pressure is coming from, but I fear another 2008.

gpapilion 5y ago
The economy itself has been good the last 12 months in coastal cities. The upward pressure is coming from those who have money to spend upgrading the life. I don’t fear another 2008 since the mortgage market hasn’t gone as crazy. I do think we’ll see a correction, but it’s more likely to be a slow down and increase in time to sell homes.
poulsbohemian 5y ago
> Anecdotally 1/4 of the folks in my neighborhood currently have a for sale sign in their yard because of the price increases. If I might offer some thoughts as a real estate agent... so we are seeing some of this in my market as well. In particular, we're seeing houses that are sitting on market longer than they have the rest of the past two years. This is causing many people in my market to prognosticate that the market is slowing down / we're in a bubble / this is the top, etc. Instead the problem is that there are sellers who see dollar signs and are listing their homes much higher than the market can actually bear. It's not that there aren't buyers or that the cost of capital has increased, they have just gotten greedy as seller. So - I don't know what market you are in, but my guess would be that many of those opportunistic sellers will be disappointed and that the market will self correct - not that it will crash, but simply self-correct.
- brodouevencode 5y ago
  That makes sense. The ones I do know that are selling - they're not tied to this area by family/jobs/other commitments and they probably see an easy cash grab because of that. One family was in their house for 9 months then sold it for $80k, or ~25%, more than what they paid for it (according to Zillow). Honestly not a bad payday but how long can something like that last?
  - poulsbohemian 5y ago
    >Honestly not a bad payday but how long can something like that last? IMHO, it could be a while. Every market is different because real estate is so localized, but... there are relatively few asset classes. The general public invests in two of those: stocks and real estate. Sure, interest rates might rise but anything below 5% is a 50+ year low. Even pre Covid we were beginning to see a significant population reorganization, in part due to climate change, remote work, cost of living, and generational preferences. We simply do not have have enough housing - or enough of the right kind of housing - in areas people want to move. So, at least in my area I don't see a obvious stop to the demand. That isn't to say that people are going to see an $80K increase in 9 months ongoing, but just that the appreciation will be there and the demand will continue.

gpapilion 5y ago

I think this is an extremely likely probability in the markets it operated offers in. Even if they were buying 5-10% of those homes. I also think realtors were slow to sue Zillow homes to clients, but have no hard evidence to support this. I do see a Redfin listed home in my neighborhood gets 1/4 the traffic of anything else, and I have to believe that influence from realtors. This is something that happens with for sale by owner homes too.

TheGuyWhoCodes 5y ago

I think it's true for any platform for housing markets. Once you have easy access to pricing of houses sold or being sold around you, as a seller you will try to be at the same ballpark and higher. So everyone ups the price by 5-10% so it becomes the new normal and repeat.

algoatecorn 5y ago

The question should be, 'To what degree did Zillow influence the housing market?' Interest rates are low so people have cash. New housing development was lacking even before Covid disrupted supply chains. Now we are facing a labor shortage that could play out in a number of ways, not limited to proletariat uprising or in contrast, a new age of entrepreneurialism.

thedougd 5y ago
I agree. Those low interest rates are also driving a ton of refis which people are using to make improvements and renovations. There's tremendous pressure on trade labor. Also, I suspect immigration restrictions are putting a squeeze on the supply.

chiph 5y ago

I think there is a feedback loop involved. Someone wanting to sell their home will likely look at the Zestimate to help them set an asking price. And then tack on a few thousand for negotiating room. Zillow monitors the offer amounts by potential buyers, and if any are above the current Zestimate, that signals the algorithm to raise the home's value, even if the sale hasn't closed yet. This then becomes a "comp" for the neighborhood (since other realtors will check their site) and influences nearby sales.

modriano 5y ago

Per this US Census and HUD report [0], there have between 600k (2018) to 1M (2020) single family home sales per year over the years since Zillow started Offers. Per this Barron's article [1], Zillow bought 9680 homes in Q3 2021 and less than half of that in Q2 2021. So, yeah, they've probably driven the price up a little bit, but their purchases represent maybe 2% of all sales, so I assume the impact that has on the market in general would be pretty small. [0] https://www.census.gov/construction/nrs/pdf/newressales.pdf https://www.census.gov/construction/nrs/pdf/newressales.pdf [1] https://www.barrons.com/articles/zillow-opendoor-stock-price-home-buying-selling-51636148460 https://www.barrons.com/articles/zillow-opendoor-stock-price...

nerevarthelame 5y ago
Zillow only bought houses in certain markets (24 different metropolitan areas [1]). So their impact on prices within those regions would've been bigger than what you'd expect by comparing them to all home sales in the US. I admit that I have no idea how much bigger, though. [1] http://zillow.mediaroom.com/2020-08-04-Zillow-Resumes-Buying-Homes-in-4-More-Zillow-Offers-Markets http://zillow.mediaroom.com/2020-08-04-Zillow-Resumes-Buying...

asdff 5y ago

Do people actually use zillow for buying or just for perusing? Most of the listings on my zillow are these stale 60 day old listings where there is obviously something wrong with the listing, it doesn't look like the actual market that realtors are using considering homes here sell so fast. My understanding is real estate moves too quickly and you are going to be putting offers on homes your realtor shows you before they even hit market let alone aggregated on zillow.