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The scary thing is that it's easy to see how something how like this could drive a market boom and bust cycle. I'm imagining a scenario where two iBuyer compani

The scary thing is that it's easy to see how something how like this could drive a market boom and bust cycle. I'm imagining a scenario where two iBuyer companies try to outbid each other algorithmically, driving the prices further and further out of reach of people who are looking for a primary home. Tangentially related, I talked to a friend who works on geospatial data for one of the big vacation rental companies, and he was remarking how many homes in many desirable areas are now rentals. It's not that uncommon to see nearly entire neighborhoods converted to short term rentals now in some areas where they're still legal. Hearing that really depressed me. We often talk about automation in terms of replacing various types of labor, but I've become really interested in automation creating adverse market incentives for smaller market participants because that's exactly what buying real estate right now feels like. It's honestly quite scary how I'm in the top 2% of income earners in my generation and yet I could barely afford to buy a small place in a semi-desirable area. I can easily see myself not being able to compete in algorithmically dominated markets flush with venture cash in the future and I earn more than just about everybody I know today.

runamok 5y ago
Cities can regulate this. Recent example in San Diego: https://www.nbcsandiego.com/news/politics/san-diego-mayor-signs-short-term-rental-regulations-into-law/2576807/ https://www.nbcsandiego.com/news/politics/san-diego-mayor-si...
ddoolin 5y ago
The problem here is that they were buying the homes at prices above what they would actually sell for to real buyers and Zillow ended up racking up losses in that way. In your scenario in which two iBuyers outbid each other -- fine, but wouldn't the same situation as Zillow's happen? They'd just end up with overpaid inventory.
- mwt 5y ago
  Whether or not the market works itself out later, it puts everything into a weird state while the bidding war is going on. If iBuyer1 and iBuyer2 together buy up the inventory of a zip code for 120% of asking, then what are people who are willing to go to 105% to do? Maybe it just resets the market to whatever the drunken algorithm decided it to be.
  - sokoloff 5y ago
    Buy in one of the surrounding zip codes? Wait out the idiots?
    - mwt 5y ago
      In a housing bubble, hopping a zip code over isn't always possible. One can always wait out the market. You could tell me to simply wait for the next housing crash to buy up property, but until that happens, it's not an option. The whole observation the other person made > automation creating adverse market incentives for smaller market participants matters not just in the long-term state but while the adverse conditions exist.
  - chii 5y ago
    > who are willing to go to 105% to do? i too, want to only pay less money than the highest bidder for the mona lisa. There's no such thing as 105%. By definition, iBuyer paying "120%" is the true 100%. If they overpay, they lose when there's no buyer after them to sell to, and their debt will not be serviceable. At that time, the "105%" buyer could buy at a lower price.
rank0 5y ago
I think people should expand what "desirable" means to them. There's a ton of suitable houses all over the country. Everyone seems to need to own a SFH in a trendy part of a trendy city.
- kevingadd 5y ago
  Are there jobs near those houses? Specialist doctors? Good schools? I WFH so I could probably buy one of those houses, but most of my friends in my age bracket are expected to show up to an office 5 days a week, so those suitable houses are no good for them.
  - rank0 5y ago
    Yeah those are good points. I live in a bit of a bubble where most folks around me either WFH or have to travel to work. There are absolutely "specialist doctors" in every large city though...
    - giraffe_lady 5y ago
      Is my family there? My church? The park where I learned to play soccer? My daughter's best friend? When you sit around talking about choice of living area without weighing, or even acknowledging these connections, do you realize how inhuman this sounds? Do you not have similar things binding you to a place? Shit even specialist doctors, have you ever depended on one? If you're needing long-term specialist care you got some major shit to deal with. Rapport, trust, history with an individual doctor is an important part of that care. And people need care aside from just the doctors. Who is driving you to these appointments, caring for you afterwards? Are they coming to the new city with you? There are a lot of things in a place you know. You can't reduce all or really very many of them down to mere transactions in a marketplace.
      - rank0 5y ago
        I feel you. It’s horrible if you’ve grown up somewhere and suddenly can’t afford a home in the same spot. But life’s unfair. Houses get sold to the highest bidder. This is what happens when everyone wants to live in the same areas. I’m not arguing that you SHOULDNT be able to afford a home in your preferred spot. I’m observing that it’s IMPOSSIBLE for everyone to own property in their preferred spot within their budget. You can still rent, or buy cheaper homes in cheaper areas in your city. We can’t just will affordable housing into existence when ~97% of people live on ~3% of the land.
haroldp 5y ago
> I'm imagining a scenario where two iBuyer companies try to outbid each other algorithmically, driving the prices further and further out of reach of people who are looking for a primary home. But iBuyers are always low-balling. They are bidding under the asking price with an all-cash offer that they hope will make up in speed and ease what it lacks in price. > It's not that uncommon to see nearly entire neighborhoods converted to short term rentals now in some areas where they're still legal. Hearing that really depressed me. I lived in Lake Tahoe for ten years before AirBnB was a thing and three out of four homes there were absentee owners that only used them a few weeks a year. It made it a very hard place for small businesses to stay afloat. Most visitors stayed at big hotels or paid huge premiums for ad hoc "cabin rentals" through local realtors. The most depressing part was Halloween - kids hiking up and down steep hills to mostly empty houses. :)
- duck 5y ago
  Are you saying AirBnB fixed all this? I don't see them renting much in late October nor passing out candy.
  - pigscantfly 5y ago
    No, they're saying the problem existed before AirBnB.
- pixl97 5y ago
  >But iBuyers are always low-balling. They are bidding under the asking price with an all-cash offer that they hope will make up in speed and ease what it lacks in price. But is asking price "market" price. As in does the seller price a 10-20% premium calculating this. Always easier to negotiate down than up.
- uncomputation 5y ago
  > iBuyers are always low-balling Low-balling according to their own estimate (Zestimate) with imperfect knowledge. If this Zestimate overvalues a house, but the iBuyers assume “we are low-balling anyways,” they may find themselves in an iBidding war ending in the winner’s curse: whoever pays the most for the overvalued house wins. Not a problem though right? They overvalue some, undervalue others, it evens out. But, as the article points out, the nature of this algorithmic buying is that the iBuyers will only - or at least predominantly - end up with the houses they overpaid for or got only a slightly good deal on because many sellers will be willing to take longer for a better deal. The end result is very thin margins or, as seen with Zillow, substantial losses as they hold a lot of lemons.
colordrops 5y ago
Sounds like a good sci-fi story... Rebellion against the AI landlords.
paxys 5y ago
One can blame Airbnb, Zillow or whoever else, but the truth is that speculation in real estate and vacation towns have both been a thing for a very long time. If the population rises and we refuse to build more houses, the existing ones will get more expensive no matter what. The solution is out there in front of us but everyone prefers to dance around it.
- KETpXDDzR 5y ago
  In addition to the rising need for housing vs the number of new ones is leaving homes vacant. E.g., allegedly about 10% of San Francisco's housing stock is vacant. As with stocks, investors don't buy them anymore because of dividends, but only to hope they rise in value. https://hostagenews.com/report-10-of-san-franciscos-housing-stock-is-just-sitting-vacant-and-empty/ https://hostagenews.com/report-10-of-san-franciscos-housing-...
- jliptzin 5y ago
  There's even lower hanging fruit than that. I have a 6 bedroom house, but local regulations state that I am not allowed to live with more than 2 people unrelated to me. Plenty of parking, tons of people looking for housing, but legally I am forced to keep 3 bedrooms empty.
  - deleted 5y ago
    [deleted]
  - gnopgnip 5y ago
    Many of these laws are a family plus two unrelated people. There have been broad changes in how a family is defined in this context.
  - adflux 5y ago
    Good point, never thought about that. Here in the Netherlands, it used to be "common" to house other people than your direct family for some time, e.g. during harvest season.
  - paxys 5y ago
cheriot 5y ago
> The scary thing is that it's easy to see how something how like this could drive a market boom and bust cycle. iBuyers don't buy from each other or hold the house for long. As soon as they sell then everyone sees what a market price looks like without them. > automation creating adverse market incentives You seem interested in how markets drive outcomes so I'd suggest looking into the effects of residential zoning and other barriers to construction. The US has spent the last 50 years coming up with creative excuses to prohibit new housing and it gets more expensive every year. Probably related! Not the best example, but one I have handy: https://twitter.com/DurhamFella/status/1441808710066577410?s=20&t=DpZMte2LRU4lweRcPy1c3Q https://twitter.com/DurhamFella/status/1441808710066577410?s...
lordnacho 5y ago
This has perplexed me as well. Here in the UK, the top 1% of incomes is £175K. Assuming the bank lets you borrow 5x, and you're married to someone with a more middling income, you can borrow ~£1M. Yet there's a ring around London where it's hard to see any family homes that are under £1M. I mean sure maybe they're sitting on equity or mom and dad are contributing, but by my estimation there are a huge number of people who have thrown absolutely everything into owning a home. We'll see how they fare if rates rise.
- twic 5y ago
  > there's a ring around London where it's hard to see any family homes that are under £1M If you mean the Stockbroker Belt [1], well, yes. [1] https://en.wikipedia.org/wiki/Stockbroker_Belt https://en.wikipedia.org/wiki/Stockbroker_Belt
- sokoloff 5y ago
  What's the top 3% of income of people who work in London? It's probably not "all of the UK" that matters as an income reference, but rather the people who are earning incomes and wanting to live in that area (plus all the people from around the world who would consider buying a house in/near London, but not 100 miles away from London).
  - lordnacho 5y ago
    Yeah true, couldn't find London specific stats. Fair guess is that the lions share of UK to earners are based in London.
- eli 5y ago
  What's the top 1% for net worth though?
  - pharmakom 5y ago
    The problem is it is becoming impossible to be self made. Most people buying real estate in south east of UK and London have middling salaries but substantial help from their parents. The working class kid who made it to 70k/year? Tough luck.
a1pulley 5y ago
> It's honestly quite scary how I'm in the top 2% of income earners in my generation and yet I could barely afford to buy a small place in a semi-desirable area. I can easily see myself not being able to compete in algorithmically dominated markets flush with venture cash in the future and I earn more than just about everybody I know today. A thought exercise: suppose that no new houses are ever built and that housing turnover is nearly zero. What happens to the price of housing in that limit? Market forces do not necessarily entitle the top n% of the income distribution to housing. I was a bit cynical about this too: I live in Los Angeles, where a "small place in semi-desirable area" gets listed for 1.5M and goes for nearly 2M. I'm somewhere in the top 5% of earners in California, but that $2M 1950s tract housing would be >50% of my post-tax income.
- thebean11 5y ago
  > suppose that no new houses are ever built Why would you suppose that? I don't really see what you're getting at, that's a very unintuitive assumption; it shouldn't happen if market forces are allowed to run their course.
  - kevin_thibedeau 5y ago
    New afordable housing isn't built. Everything is "luxury" so that developers can maximize profit. When someone tries to build affordable duplexes the NIMBYs say not in my town.
    - sokoloff 5y ago
      Even luxury units add supply to the middle and affordable parts of the housing stock. Today's luxury units are often bought and moved into by someone moving up from a mid-market place, the buyer of which is likely moving up from a 25 year old now affordable place. (Alternately, if no luxury unit is built, many of those buyers will be forced to buy the best-of-the-rest if they want to move in, putting more pressure on the middle, which in turn puts pressure on the affordable.)
    - mirntyfirty 5y ago
javert 5y ago
It's because US monetary policy has created an enormous transfer of wealth to the wealthy and out of the general economy. They do this by extending credit at low interest rates with the collective understanding that the value of the dollar will continue to be printed away. The wealthy (like me...) buy stuff on credit now and pay it back later with much cheaper future dollars. COVID threw a wrench in the scheme temporarily and caused a lot of that money to start trickling down, which is why we're seeing wages rise rapidly and high consumer-level inflation. By the way, bitcoin fixes this.
- colinmhayes 5y ago
  Monetary policy and fiat currency are unequivocally good things. Deflation is what caused the 50 year recession from 1860-1910. Not being able to control inflation leads to mass unemployment.
  - javert 5y ago
    My comment explains in detail the specific mechanism I'm concerned about in a way that everyone can understand it. Your comment regurgitates something from a textbook that people have on reason to actually trust. I don't have a problem that you disagree with me. I have a problem that it's an argument from authority. Also, I wonder if you're conceding that the Fed steals from the economy in general and gives to the super wealthy, and simply think that that's a necessary side effect of having a well-functioning economy. It seems like it.
    - colinmhayes 5y ago
      Bitcoin is not a viable currency. It's value is not anywhere near stable enough. It's honestly incredible that you haven't even thought of the very first problem with using bitcoin as a currency. Yes, the rich abuse the current system. They will do the same with any system. Saying "we shouldn't ensure that our currency has predictable value because that would make the rich even richer" is insane when the rich will be richer no matter what you do. > I have a problem that it's an argument from authority. https://danluu.com/cocktail-ideas/ https://danluu.com/cocktail-ideas/ you are the developer who thinks building a bridge is easy. Please just admit that you don't understand what you're talking about.
runeks 5y ago
> I'm imagining a scenario where two iBuyer companies try to outbid each other algorithmically, driving the prices further and further out of reach of people who are looking for a primary home. That’s not how market making works. Market makers don’t consume other peoples’ orders, which is required to push up the asked price or down the bid price. Market making is effectively (1) observing that the market is currently willing to buy some asset at the price A and sell it at the price B (where A < B) and then (2) simultaneously submitting a buy order at price A1 (where A1 > A) and a sell order at price B1 (where B1 < B). Thus the market maker reduces the difference between the buy price and sell price (the “spread”).
asdff 5y ago
I would imagine if your algorithm was anything but the most simplest it could check for this. Having some check like "What is the median income among the workforce" and to not bid above a certain amount relative to that will help prevent overbidding on a house that no one in the area can realistically afford, short of bots.
mywittyname 5y ago
> The scary thing is that it's easy to see how something how like this could drive a market boom and bust cycle. It would take a lot more than a billion dollars to make a dent in the national housing market. Total housing sales in Feb22 amounted to $161 billion. That's enough to make a temporary splash in a rural market, but Zillow would need to spend 100x more than what they lost to even move the needle. And spend 10000x as much to really drive a boom/bust cycle nationally.
- HWR_14 5y ago
  Zillow lost almost $1 billion. The total transaction amount was much higher.
999900000999 5y ago
Honest to God, the founders of Airbnb should have been sent to prison. That would have fixed much of this, it's point blank illegal to run a bed and breakfast out of your home. Now if you're my buddy, and you want to slide me $200 to crash at my house for a week that's fine, but if you add technology to it, it ends up destroying entire neighborhoods. Ride-sharing is a bit different, since I'd argue the reduction in drunk driving deaths more than outweigh any negative side effects. It's amazingly easy to just call an Uber when you've had one too many. Countless lives have been saved already.
- cuteboy19 5y ago
  > That would have fixed much of this, it's point blank illegal to run a bed and breakfast out of your home. Why? It's your home, you can do anything in it. Why should you need a license to rent out your own home for a few days? Does it physically destroy neighborhoods or just your perception of it? If so, why should anyone care?
  - humanwhosits 5y ago
    > If so, why should anyone care? It's not about 'why' care, it's about the fact that they already do care enough to have caused regulation.
  - ramesh31 5y ago
    >Does it physically destroy neighborhoods or just your perception of it? Yes, it does. People buy homes for more than financial reasons. Living in a community of homeowners with neighbors you've known for years is a completely different experience than living in a revolving door community of renters. There's been a whole decade of news reports about Airbnb ruining neighborhoods and condo buildings, to the point that it's not even worth citing a particular incident.
    - cuteboy19 5y ago
      So we should criminalize perfectly harmless things because it ruins your experience? It doesn't seem logical
closeparen 5y ago
iBuyers are supposed to be playing a rational strategy over a large portfolio; they pay what they think the house is worth, and unlike an irrational/emotional human who really wants that property for his primary home, they have no reason to participate in bidding wars past what they think the house is worth. The the point of the iBuyer is to turn around and unload it after a few weeks or months on someone who wants it for a primary residence; it's not in their interest to pay more than such a buyer can afford. People are living longer and tolerating less construction. We're only building or freeing up enough homes in desirable areas to skim the very top of our generation.
bloqs 5y ago
Fundamentally, NIMBYism and dysfunctional thinking drives this, homes cannot both be affordable and a sure good investment as a matter of definition
cyberpunk 5y ago
Yep. You should see the situation in beautiful yet remote places like the Isle of Skye in Scotland or the Outer Hebrides. If you have some land, it's a no brainer to build a holiday rental. A pre-fab will cost you maybe 120k (after the land) and it's k/week or more during peak season to rent it out. Of course, it means prices are going insane. A complete wreck of a house we were interested in buying and turning into an actual home which I thought would be worth max 200k went for 450, cash, from a buyer who never even saw it. They'll tear it down, stick a new house on it, and make their investment back in 5 years. Meanwhile, all the locals kids, go away and don't come back. What is there for them there anymore? Not a lot.
Aunche 5y ago
We need a land value tax or at the very least higher property taxes. That would disincentivize people from speculating into housing. It's no surprise that cities with the highest home prices have some of the lowest effective property tax rates.
- MisterMower 5y ago
  "We need a land value tax or at the very least higher property taxes. That would disincentivize people from speculating into housing." That's like saying we need a bilge pump for our basement to fix that leaky pipe. You've properly diagnosed the problem, but your solution is idiotic. Why are people piling into hosuing right now? Answer that question and the solution becomes exceedingly obvious. It's the same reason Bill Gates and his ultra-rich friends are buying up farmland in the Midwest and the same reason people are buying into the stock market so heavily. They're trying to avoid inflation. Inflation was 8% year over year last month. The last thing any investor wants to hold right now is dollars. If inflation stays steady for the next 12 months, you are guaranteed a value loss of 8% if you just leave it in the bank. Almost anything, baseball cards, used cars, copper pipes, etc. is a better investment than that. And on top of that, people are realizing they can borrow $400k from the bank at 4% when inflation is raging at 8%. It's literally free money, with leverage to boot. There is no easier and faster way to use leverage to short the dollar right now than investing in real estate. It's no wonder housing prices are going nuts. Everyone and their dog is trying to avoid inflation, and the rush to buy housing exacerbates the price increases even further. The solution to the issue is one no one will ever get behind: raise interest rates such that the real rate of inflation (nominal interest rate minus the inflation rate) is positive. That means that if inflation is 8%, interest rates need to be at least 8%. And that's why the problem will persist for many years into the future: there is no way anyone at any level of our society will tolerate 8%+ interest rates. The housing market would collapse in such a way that 2008 would look like child's play. The bond markets would get destroyed. The stock market will absolutely crater 50%, easily. The interest due on the federal debt would go to astronomical levels, resulting in ridiculous tax increases to pay for it. That's the solution. Or, the government can just let inflation run rampant for a few years, and default on the debt without having to not pay anyone, and without having to have a big old nasty recession. We'll just have the 1970's style stagflation for the next decade. For those reasons inflation is here to stay. If you can find a better way to short the dollar over the next 10 years and use leverage to do it, by god, that's the best investment you can make right now. But the saddest part of this whole ordeal is that at some point in the future, the only way to solve this inflation crisis is to do exactly what I described: make interest rates positive again. That is the lesson of the 1970's. They tried to raise rates several times, but they never raised them enough such that the real interest rate was positive, and as you'd expect, any time the Fed got close to getting there, the economy teetered on the brink of a recession, and there was an election coming up, and well, they chickened out and lowered rates again. Regan's election was very much a result of the economic devestation of the 1970's. Another moral of the story is that if you don't want fiscally conservative reupblican's like Regan to get elected, the guy in the White House had better deal with this shit soon. But my money is on Desantis in 2028 after we see year over year inflation rates of 15%+ for most of the 2020's. You heard it here first.
bufferoverflow 5y ago
It's "easy to see" if you don't do any math. US real estate market is around ~$200 billion. That $0.881 billion of zillow is a rounding error.
MuffinFlavored 5y ago
> I'm imagining a scenario where two iBuyer companies try to outbid each other algorithmically, driving the prices further and further out of reach of people who are looking for a primary home. This is just my personal anecdote but... I'm pretty sure when I was rushing to show up to "new listings" on the weekends and waiting in line for 10-40 families to get a walkthrough "open house" wise, I feel like the sellers were going to pick a family that showed up over a Zillow website. What % of closed houses were being bought by families instead of "iBuyers" as you said it?
mdavis6890 5y ago
“ The scary thing is that it's easy to see how something how like this could drive a market boom and bust cycle.” The opposite really. Speculators do their best to buy low which pushes the price back up toward the mean in the aggregate, and sell high, which pushes it back down toward the mean. Speculation is a stabilizing force overall. The boom and bust cycle in real estate is very real, but driven by other things.
- chii 5y ago
  > Speculation is a stabilizing force overall. a sophisticated speculator is. an unsophisticated speculator is actually destabilizing, because they might incorrectly speculate capital (that they cannot really afford), causing a loss in market efficiency in allocating capital to where it's needed. The 2008 GFC is in part caused by unsophisticated speculators (home buyers) to speculate on property. Initially they saw some good profits, which lead to even more unsophisticated people to try get in on the game (and the banks happily obliged).
  - MisterMower 5y ago
    You made it halfway there. Keep going. What happens when that unsophisticatded speculator purchases a bunch of properties at prices above what they're worth? If he can't make the payments on them, eventually he'll be forced to sell, or perhaps even declare bankruptcy. Those properties will eventually be sold at the market equilibrium price, possibly even lower than that because he will likely need to sell in a hurry to meet his obligations, or because a bank forclosed on him and wants the money now and will also accept a below market price to liquidate them quickly. Which is exactly what happened to Zillow. They realized they paid too much and couldn't make money with them and are now unwinding their position at a loss. The 2008 crash was caused by fraud on the part of consumers on their loan applications. It was not caused by speculation. Income was not properly documented on a lot of those loans. Many lenders actually did verify income and required a significant down payment from buyers, and weathered the crisis well. The fraud coupled with low down payment requirements turned these loans into very risky assets, but the banks securitized them and sold them to third parties, who percieved them as nearly risk free assets. The real scandal was that those assets were rated as very low risk by Moody's and S&P but turned out to be basically junk quality. And then lots of investors used leverage to buy them and, lo and behold, they were not risk free assets, and the use of leverage when investing in those securities destroyed a lot of investors and institutions when those securities stopped performing. The fact that the ratings agencies stamped the assets as very low risk is the real scandal: banks thought they were almost as good as treasury bonds and they clearly were not. After the crash, a lot of those securities got picked up at basment bargain prices, and most of them actually did peform fairly well, with 90%+ of individual loans performing. I invested in a company that picked up a lot of those securities at fire sale prices after the crash and did pretty well. Which gets back to my original point: speculation is only a destabilizing force if the speculators are not well capitalized against losses, and things move against them. The 2008 crash would have turned out differently if the purchasers of those loans used less leverage or were better capitalized, or did their own due dilligence when investing.
conanbatt 5y ago
> rther and further out of reach of people who are looking for a primary home. This happens to all assets all the time. When it rains, umbrellas go up in price. Companies competing with this and failing is only a transfer of wealth between VC's and homeowners. You don't need to ascribe a moral sentiment to that transfer, its just what it is. If the prices then bust afterward, then homeowners that sold won, the ones that stayed didnt take advantage of the opportunity, and home buyers lost at the high and will win at the bottom. Like in any other price fluctuation!
IAmGraydon 5y ago
You honestly think 2 iBuyer companies would have the liquidity to move the entire housing market? I don’t think you understand the size of the US housing market. If you’re in the top 2% of earners and can’t buy a home, you either live in a ridiculously expensive city (outlier) or have a money management issue.
- HWR_14 5y ago
  iBuyers often move into a specific area. A huge percentage of Zillow's purchases was in one city in Arizona (or New Mexico, I forgot where). And two iBuyers in a city can totally move the market.
Melatonic 5y ago
Keep in mind you also will not (for now at least) have to spend a ridiculous amount on interest like many people did before you. It is going to get interesting when the millennial generation suddenly starts mass inheriting baby boomer houses - not sure how that is going to play out honestly.
soggybutter 5y ago
Top 2% puts you fairly deep into the six figures, no? I've not even surpassed top 10% and haven't had too much issue getting into 2 homes in the last 3 years. Both in areas I would consider "semi-desirable", which leaves me wondering what exactly do other folks consider "semi-desirable"? Unless of course you mean buying a home outright, in which case this makes total sense
- chii 5y ago
  top % income earners aren't the top wealth owners. One should examine the rate of wealth growth (not just via income, but via other forms of gains, such as capital gains and business income). I bet you will find that the top 2% income earners are barely even the top 50% wealth gainers that year.
BeetleB 5y ago
> It's honestly quite scary how I'm in the top 2% of income earners in my generation and yet I could barely afford to buy a small place in a semi-desirable area. Top 5% puts you at over $300K/year. Top 2% is much higher. Even a top 5% person can easily afford a house in any semi-desirable city. LA, Bay Area are not semi-desirable. They are highly desirable.
- jjcon 5y ago
  They did say in their generation which could basically mean anything at that point
kortilla 5y ago
> entire neighborhoods converted to short term rentals now in some areas where they're still legal. Hearing that really depressed me. Why? It makes me happy that more people get to enjoy a desirable area rather than using the law to keep them out.
username_my1 5y ago
The problem is not about homes being overpriced. The truth is that there is much much much more money in the middle class globally (almost 3x that of 2000) and on top of that the normal inflation, and freezing of supply. As long as “desirable location” stay the same, and the amount of people affording it growing so significantly. The expectation of being able to afford one is a strange one. See https://www.nasdaq.com/articles/world-reimagined%3A-the-rise-of-the-global-middle-class-2021-07-09 https://www.nasdaq.com/articles/world-reimagined%3A-the-rise...
- HWR_14 5y ago
  A bunch of Chinese and Indian people increasing their standard of living to middle class doesn't suddenly mean American middle class people (whose asset percentage has been shrinking) can afford US houses. Global middle class is meaningless in this discussion
screenbreakout 5y ago
But in a way if the rental prices were to stay reasonable (say it was a non profit running the schtick) isn't a great way for as many people as possible to share a limited ressource? Maybe property is like golden handcuffs, nice but locks you down...again it's more a western thing as we in the east tend to buy cash down... Though I would like to see some company buying out the inner city ground floor space of some of the banks or insurances that ghostify my town and inject some fun rental people instead
- thr0wawayf00 5y ago
  > But in a way if the rental prices were to stay reasonable There's zero evidence to believe that this will be the case. I will never trust large multi-family property management companies driven by software to consider keeping rental rates reasonable. That's antithetical to our capitalist system, profit is the one and only goal. > Maybe property is like golden handcuffs, nice but locks you down... In terms of utilizing the space, sure. However, buying property has been the primary method of wealth accumulation for most of the country going back the last several decades. Property ownership is also one of the best ways to protect yourself against inflation, which we're all getting serious exposure to. And with the speed at which houses are moving in this market (listings stay up 2-3 days in my area for the most part), property owners aren't very locked down either.
  - screenbreakout 5y ago
    "There's zero evidence to believe that this will be the case" Well I guess it depends on the regulatory framework, imo it's the constructor lobbies pushing such a narrative... in more developed societies where cheap labour isn't so available rental has become the norm...of course one could also argue that high real estate prices mean the rich and unscrupulous can hide and flip huge amounts of ill earnt gains... but it doesn't have to be so... Are there housing cooperatives in the US?https://en.m.wikipedia.org/wiki/Housing_cooperative https://en.m.wikipedia.org/wiki/Housing_cooperative
game_the0ry 5y ago
> Tangentially related, I talked to a friend who works on geospatial data for one of the big vacation rental companies, and he was remarking how many homes in many desirable areas are now rentals. It's not that uncommon to see nearly entire neighborhoods converted to short term rentals now in some areas where they're still legal. Hearing that really depressed me. Adding to your data points: this is happening in some CA beach communities. Many beachfront homes in Huntington Beach and Newport Beach have been turned into AirBnBs that seem to cater to social media influencers desperate for instagram-able pics. Some more anecdotal data: I know a couple of people who are professional AirBnB hosts and they're constantly in the market buying real estate to turn them into rentals. They buy cash in the cities I mentioned above, as well as San Diego, Las Vegas, Los Angeles, NYC, Brooklyn, Nashville, Austin, and others. This is a lucrative business, at least for the time being.
cyanydeez 5y ago
That's entirely what company valuations like Tesla are.

runamok 5y ago

Cities can regulate this. Recent example in San Diego: https://www.nbcsandiego.com/news/politics/san-diego-mayor-signs-short-term-rental-regulations-into-law/2576807/ https://www.nbcsandiego.com/news/politics/san-diego-mayor-si...

ddoolin 5y ago

The problem here is that they were buying the homes at prices above what they would actually sell for to real buyers and Zillow ended up racking up losses in that way. In your scenario in which two iBuyers outbid each other -- fine, but wouldn't the same situation as Zillow's happen? They'd just end up with overpaid inventory.

mwt 5y ago
Whether or not the market works itself out later, it puts everything into a weird state while the bidding war is going on. If iBuyer1 and iBuyer2 together buy up the inventory of a zip code for 120% of asking, then what are people who are willing to go to 105% to do? Maybe it just resets the market to whatever the drunken algorithm decided it to be.
- sokoloff 5y ago
  Buy in one of the surrounding zip codes? Wait out the idiots?
  - mwt 5y ago
    In a housing bubble, hopping a zip code over isn't always possible. One can always wait out the market. You could tell me to simply wait for the next housing crash to buy up property, but until that happens, it's not an option. The whole observation the other person made > automation creating adverse market incentives for smaller market participants matters not just in the long-term state but while the adverse conditions exist.
- chii 5y ago
  > who are willing to go to 105% to do? i too, want to only pay less money than the highest bidder for the mona lisa. There's no such thing as 105%. By definition, iBuyer paying "120%" is the true 100%. If they overpay, they lose when there's no buyer after them to sell to, and their debt will not be serviceable. At that time, the "105%" buyer could buy at a lower price.

rank0 5y ago

I think people should expand what "desirable" means to them. There's a ton of suitable houses all over the country. Everyone seems to need to own a SFH in a trendy part of a trendy city.

kevingadd 5y ago
Are there jobs near those houses? Specialist doctors? Good schools? I WFH so I could probably buy one of those houses, but most of my friends in my age bracket are expected to show up to an office 5 days a week, so those suitable houses are no good for them.
- rank0 5y ago
  Yeah those are good points. I live in a bit of a bubble where most folks around me either WFH or have to travel to work. There are absolutely "specialist doctors" in every large city though...
  - giraffe_lady 5y ago
    Is my family there? My church? The park where I learned to play soccer? My daughter's best friend? When you sit around talking about choice of living area without weighing, or even acknowledging these connections, do you realize how inhuman this sounds? Do you not have similar things binding you to a place? Shit even specialist doctors, have you ever depended on one? If you're needing long-term specialist care you got some major shit to deal with. Rapport, trust, history with an individual doctor is an important part of that care. And people need care aside from just the doctors. Who is driving you to these appointments, caring for you afterwards? Are they coming to the new city with you? There are a lot of things in a place you know. You can't reduce all or really very many of them down to mere transactions in a marketplace.
    - rank0 5y ago
      I feel you. It’s horrible if you’ve grown up somewhere and suddenly can’t afford a home in the same spot. But life’s unfair. Houses get sold to the highest bidder. This is what happens when everyone wants to live in the same areas. I’m not arguing that you SHOULDNT be able to afford a home in your preferred spot. I’m observing that it’s IMPOSSIBLE for everyone to own property in their preferred spot within their budget. You can still rent, or buy cheaper homes in cheaper areas in your city. We can’t just will affordable housing into existence when ~97% of people live on ~3% of the land.

haroldp 5y ago

> I'm imagining a scenario where two iBuyer companies try to outbid each other algorithmically, driving the prices further and further out of reach of people who are looking for a primary home. But iBuyers are always low-balling. They are bidding under the asking price with an all-cash offer that they hope will make up in speed and ease what it lacks in price. > It's not that uncommon to see nearly entire neighborhoods converted to short term rentals now in some areas where they're still legal. Hearing that really depressed me. I lived in Lake Tahoe for ten years before AirBnB was a thing and three out of four homes there were absentee owners that only used them a few weeks a year. It made it a very hard place for small businesses to stay afloat. Most visitors stayed at big hotels or paid huge premiums for ad hoc "cabin rentals" through local realtors. The most depressing part was Halloween - kids hiking up and down steep hills to mostly empty houses. :)

duck 5y ago
Are you saying AirBnB fixed all this? I don't see them renting much in late October nor passing out candy.
- pigscantfly 5y ago
  No, they're saying the problem existed before AirBnB.
pixl97 5y ago
>But iBuyers are always low-balling. They are bidding under the asking price with an all-cash offer that they hope will make up in speed and ease what it lacks in price. But is asking price "market" price. As in does the seller price a 10-20% premium calculating this. Always easier to negotiate down than up.
uncomputation 5y ago
> iBuyers are always low-balling Low-balling according to their own estimate (Zestimate) with imperfect knowledge. If this Zestimate overvalues a house, but the iBuyers assume “we are low-balling anyways,” they may find themselves in an iBidding war ending in the winner’s curse: whoever pays the most for the overvalued house wins. Not a problem though right? They overvalue some, undervalue others, it evens out. But, as the article points out, the nature of this algorithmic buying is that the iBuyers will only - or at least predominantly - end up with the houses they overpaid for or got only a slightly good deal on because many sellers will be willing to take longer for a better deal. The end result is very thin margins or, as seen with Zillow, substantial losses as they hold a lot of lemons.

colordrops 5y ago

Sounds like a good sci-fi story... Rebellion against the AI landlords.

paxys 5y ago

One can blame Airbnb, Zillow or whoever else, but the truth is that speculation in real estate and vacation towns have both been a thing for a very long time. If the population rises and we refuse to build more houses, the existing ones will get more expensive no matter what. The solution is out there in front of us but everyone prefers to dance around it.

KETpXDDzR 5y ago
In addition to the rising need for housing vs the number of new ones is leaving homes vacant. E.g., allegedly about 10% of San Francisco's housing stock is vacant. As with stocks, investors don't buy them anymore because of dividends, but only to hope they rise in value. https://hostagenews.com/report-10-of-san-franciscos-housing-stock-is-just-sitting-vacant-and-empty/ https://hostagenews.com/report-10-of-san-franciscos-housing-...
jliptzin 5y ago
There's even lower hanging fruit than that. I have a 6 bedroom house, but local regulations state that I am not allowed to live with more than 2 people unrelated to me. Plenty of parking, tons of people looking for housing, but legally I am forced to keep 3 bedrooms empty.
- deleted 5y ago
  [deleted]
- gnopgnip 5y ago
  Many of these laws are a family plus two unrelated people. There have been broad changes in how a family is defined in this context.
- adflux 5y ago
  Good point, never thought about that. Here in the Netherlands, it used to be "common" to house other people than your direct family for some time, e.g. during harvest season.
- paxys 5y ago

cheriot 5y ago

> The scary thing is that it's easy to see how something how like this could drive a market boom and bust cycle. iBuyers don't buy from each other or hold the house for long. As soon as they sell then everyone sees what a market price looks like without them. > automation creating adverse market incentives You seem interested in how markets drive outcomes so I'd suggest looking into the effects of residential zoning and other barriers to construction. The US has spent the last 50 years coming up with creative excuses to prohibit new housing and it gets more expensive every year. Probably related! Not the best example, but one I have handy: https://twitter.com/DurhamFella/status/1441808710066577410?s=20&t=DpZMte2LRU4lweRcPy1c3Q https://twitter.com/DurhamFella/status/1441808710066577410?s...

lordnacho 5y ago

This has perplexed me as well. Here in the UK, the top 1% of incomes is £175K. Assuming the bank lets you borrow 5x, and you're married to someone with a more middling income, you can borrow ~£1M. Yet there's a ring around London where it's hard to see any family homes that are under £1M. I mean sure maybe they're sitting on equity or mom and dad are contributing, but by my estimation there are a huge number of people who have thrown absolutely everything into owning a home. We'll see how they fare if rates rise.

twic 5y ago
> there's a ring around London where it's hard to see any family homes that are under £1M If you mean the Stockbroker Belt [1], well, yes. [1] https://en.wikipedia.org/wiki/Stockbroker_Belt https://en.wikipedia.org/wiki/Stockbroker_Belt
sokoloff 5y ago
What's the top 3% of income of people who work in London? It's probably not "all of the UK" that matters as an income reference, but rather the people who are earning incomes and wanting to live in that area (plus all the people from around the world who would consider buying a house in/near London, but not 100 miles away from London).
- lordnacho 5y ago
  Yeah true, couldn't find London specific stats. Fair guess is that the lions share of UK to earners are based in London.
eli 5y ago
What's the top 1% for net worth though?
- pharmakom 5y ago
  The problem is it is becoming impossible to be self made. Most people buying real estate in south east of UK and London have middling salaries but substantial help from their parents. The working class kid who made it to 70k/year? Tough luck.

a1pulley 5y ago

> It's honestly quite scary how I'm in the top 2% of income earners in my generation and yet I could barely afford to buy a small place in a semi-desirable area. I can easily see myself not being able to compete in algorithmically dominated markets flush with venture cash in the future and I earn more than just about everybody I know today. A thought exercise: suppose that no new houses are ever built and that housing turnover is nearly zero. What happens to the price of housing in that limit? Market forces do not necessarily entitle the top n% of the income distribution to housing. I was a bit cynical about this too: I live in Los Angeles, where a "small place in semi-desirable area" gets listed for 1.5M and goes for nearly 2M. I'm somewhere in the top 5% of earners in California, but that $2M 1950s tract housing would be >50% of my post-tax income.

thebean11 5y ago
> suppose that no new houses are ever built Why would you suppose that? I don't really see what you're getting at, that's a very unintuitive assumption; it shouldn't happen if market forces are allowed to run their course.
- kevin_thibedeau 5y ago
  New afordable housing isn't built. Everything is "luxury" so that developers can maximize profit. When someone tries to build affordable duplexes the NIMBYs say not in my town.
  - sokoloff 5y ago
    Even luxury units add supply to the middle and affordable parts of the housing stock. Today's luxury units are often bought and moved into by someone moving up from a mid-market place, the buyer of which is likely moving up from a 25 year old now affordable place. (Alternately, if no luxury unit is built, many of those buyers will be forced to buy the best-of-the-rest if they want to move in, putting more pressure on the middle, which in turn puts pressure on the affordable.)
  - mirntyfirty 5y ago

javert 5y ago

It's because US monetary policy has created an enormous transfer of wealth to the wealthy and out of the general economy. They do this by extending credit at low interest rates with the collective understanding that the value of the dollar will continue to be printed away. The wealthy (like me...) buy stuff on credit now and pay it back later with much cheaper future dollars. COVID threw a wrench in the scheme temporarily and caused a lot of that money to start trickling down, which is why we're seeing wages rise rapidly and high consumer-level inflation. By the way, bitcoin fixes this.

colinmhayes 5y ago
Monetary policy and fiat currency are unequivocally good things. Deflation is what caused the 50 year recession from 1860-1910. Not being able to control inflation leads to mass unemployment.
- javert 5y ago
  My comment explains in detail the specific mechanism I'm concerned about in a way that everyone can understand it. Your comment regurgitates something from a textbook that people have on reason to actually trust. I don't have a problem that you disagree with me. I have a problem that it's an argument from authority. Also, I wonder if you're conceding that the Fed steals from the economy in general and gives to the super wealthy, and simply think that that's a necessary side effect of having a well-functioning economy. It seems like it.
  - colinmhayes 5y ago
    Bitcoin is not a viable currency. It's value is not anywhere near stable enough. It's honestly incredible that you haven't even thought of the very first problem with using bitcoin as a currency. Yes, the rich abuse the current system. They will do the same with any system. Saying "we shouldn't ensure that our currency has predictable value because that would make the rich even richer" is insane when the rich will be richer no matter what you do. > I have a problem that it's an argument from authority. https://danluu.com/cocktail-ideas/ https://danluu.com/cocktail-ideas/ you are the developer who thinks building a bridge is easy. Please just admit that you don't understand what you're talking about.

runeks 5y ago

> I'm imagining a scenario where two iBuyer companies try to outbid each other algorithmically, driving the prices further and further out of reach of people who are looking for a primary home. That’s not how market making works. Market makers don’t consume other peoples’ orders, which is required to push up the asked price or down the bid price. Market making is effectively (1) observing that the market is currently willing to buy some asset at the price A and sell it at the price B (where A < B) and then (2) simultaneously submitting a buy order at price A1 (where A1 > A) and a sell order at price B1 (where B1 < B). Thus the market maker reduces the difference between the buy price and sell price (the “spread”).

asdff 5y ago

I would imagine if your algorithm was anything but the most simplest it could check for this. Having some check like "What is the median income among the workforce" and to not bid above a certain amount relative to that will help prevent overbidding on a house that no one in the area can realistically afford, short of bots.

mywittyname 5y ago

> The scary thing is that it's easy to see how something how like this could drive a market boom and bust cycle. It would take a lot more than a billion dollars to make a dent in the national housing market. Total housing sales in Feb22 amounted to $161 billion. That's enough to make a temporary splash in a rural market, but Zillow would need to spend 100x more than what they lost to even move the needle. And spend 10000x as much to really drive a boom/bust cycle nationally.

HWR_14 5y ago
Zillow lost almost $1 billion. The total transaction amount was much higher.

999900000999 5y ago

Honest to God, the founders of Airbnb should have been sent to prison. That would have fixed much of this, it's point blank illegal to run a bed and breakfast out of your home. Now if you're my buddy, and you want to slide me $200 to crash at my house for a week that's fine, but if you add technology to it, it ends up destroying entire neighborhoods. Ride-sharing is a bit different, since I'd argue the reduction in drunk driving deaths more than outweigh any negative side effects. It's amazingly easy to just call an Uber when you've had one too many. Countless lives have been saved already.

cuteboy19 5y ago
> That would have fixed much of this, it's point blank illegal to run a bed and breakfast out of your home. Why? It's your home, you can do anything in it. Why should you need a license to rent out your own home for a few days? Does it physically destroy neighborhoods or just your perception of it? If so, why should anyone care?
- humanwhosits 5y ago
  > If so, why should anyone care? It's not about 'why' care, it's about the fact that they already do care enough to have caused regulation.
- ramesh31 5y ago
  >Does it physically destroy neighborhoods or just your perception of it? Yes, it does. People buy homes for more than financial reasons. Living in a community of homeowners with neighbors you've known for years is a completely different experience than living in a revolving door community of renters. There's been a whole decade of news reports about Airbnb ruining neighborhoods and condo buildings, to the point that it's not even worth citing a particular incident.
  - cuteboy19 5y ago
    So we should criminalize perfectly harmless things because it ruins your experience? It doesn't seem logical

closeparen 5y ago

iBuyers are supposed to be playing a rational strategy over a large portfolio; they pay what they think the house is worth, and unlike an irrational/emotional human who really wants that property for his primary home, they have no reason to participate in bidding wars past what they think the house is worth. The the point of the iBuyer is to turn around and unload it after a few weeks or months on someone who wants it for a primary residence; it's not in their interest to pay more than such a buyer can afford. People are living longer and tolerating less construction. We're only building or freeing up enough homes in desirable areas to skim the very top of our generation.

bloqs 5y ago

Fundamentally, NIMBYism and dysfunctional thinking drives this, homes cannot both be affordable and a sure good investment as a matter of definition

cyberpunk 5y ago

Yep. You should see the situation in beautiful yet remote places like the Isle of Skye in Scotland or the Outer Hebrides. If you have some land, it's a no brainer to build a holiday rental. A pre-fab will cost you maybe 120k (after the land) and it's k/week or more during peak season to rent it out. Of course, it means prices are going insane. A complete wreck of a house we were interested in buying and turning into an actual home which I thought would be worth max 200k went for 450, cash, from a buyer who never even saw it. They'll tear it down, stick a new house on it, and make their investment back in 5 years. Meanwhile, all the locals kids, go away and don't come back. What is there for them there anymore? Not a lot.

Aunche 5y ago

We need a land value tax or at the very least higher property taxes. That would disincentivize people from speculating into housing. It's no surprise that cities with the highest home prices have some of the lowest effective property tax rates.

MisterMower 5y ago
"We need a land value tax or at the very least higher property taxes. That would disincentivize people from speculating into housing." That's like saying we need a bilge pump for our basement to fix that leaky pipe. You've properly diagnosed the problem, but your solution is idiotic. Why are people piling into hosuing right now? Answer that question and the solution becomes exceedingly obvious. It's the same reason Bill Gates and his ultra-rich friends are buying up farmland in the Midwest and the same reason people are buying into the stock market so heavily. They're trying to avoid inflation. Inflation was 8% year over year last month. The last thing any investor wants to hold right now is dollars. If inflation stays steady for the next 12 months, you are guaranteed a value loss of 8% if you just leave it in the bank. Almost anything, baseball cards, used cars, copper pipes, etc. is a better investment than that. And on top of that, people are realizing they can borrow $400k from the bank at 4% when inflation is raging at 8%. It's literally free money, with leverage to boot. There is no easier and faster way to use leverage to short the dollar right now than investing in real estate. It's no wonder housing prices are going nuts. Everyone and their dog is trying to avoid inflation, and the rush to buy housing exacerbates the price increases even further. The solution to the issue is one no one will ever get behind: raise interest rates such that the real rate of inflation (nominal interest rate minus the inflation rate) is positive. That means that if inflation is 8%, interest rates need to be at least 8%. And that's why the problem will persist for many years into the future: there is no way anyone at any level of our society will tolerate 8%+ interest rates. The housing market would collapse in such a way that 2008 would look like child's play. The bond markets would get destroyed. The stock market will absolutely crater 50%, easily. The interest due on the federal debt would go to astronomical levels, resulting in ridiculous tax increases to pay for it. That's the solution. Or, the government can just let inflation run rampant for a few years, and default on the debt without having to not pay anyone, and without having to have a big old nasty recession. We'll just have the 1970's style stagflation for the next decade. For those reasons inflation is here to stay. If you can find a better way to short the dollar over the next 10 years and use leverage to do it, by god, that's the best investment you can make right now. But the saddest part of this whole ordeal is that at some point in the future, the only way to solve this inflation crisis is to do exactly what I described: make interest rates positive again. That is the lesson of the 1970's. They tried to raise rates several times, but they never raised them enough such that the real interest rate was positive, and as you'd expect, any time the Fed got close to getting there, the economy teetered on the brink of a recession, and there was an election coming up, and well, they chickened out and lowered rates again. Regan's election was very much a result of the economic devestation of the 1970's. Another moral of the story is that if you don't want fiscally conservative reupblican's like Regan to get elected, the guy in the White House had better deal with this shit soon. But my money is on Desantis in 2028 after we see year over year inflation rates of 15%+ for most of the 2020's. You heard it here first.

bufferoverflow 5y ago

It's "easy to see" if you don't do any math. US real estate market is around ~$200 billion. That $0.881 billion of zillow is a rounding error.

MuffinFlavored 5y ago

> I'm imagining a scenario where two iBuyer companies try to outbid each other algorithmically, driving the prices further and further out of reach of people who are looking for a primary home. This is just my personal anecdote but... I'm pretty sure when I was rushing to show up to "new listings" on the weekends and waiting in line for 10-40 families to get a walkthrough "open house" wise, I feel like the sellers were going to pick a family that showed up over a Zillow website. What % of closed houses were being bought by families instead of "iBuyers" as you said it?

mdavis6890 5y ago

“ The scary thing is that it's easy to see how something how like this could drive a market boom and bust cycle.” The opposite really. Speculators do their best to buy low which pushes the price back up toward the mean in the aggregate, and sell high, which pushes it back down toward the mean. Speculation is a stabilizing force overall. The boom and bust cycle in real estate is very real, but driven by other things.

chii 5y ago
> Speculation is a stabilizing force overall. a sophisticated speculator is. an unsophisticated speculator is actually destabilizing, because they might incorrectly speculate capital (that they cannot really afford), causing a loss in market efficiency in allocating capital to where it's needed. The 2008 GFC is in part caused by unsophisticated speculators (home buyers) to speculate on property. Initially they saw some good profits, which lead to even more unsophisticated people to try get in on the game (and the banks happily obliged).
- MisterMower 5y ago
  You made it halfway there. Keep going. What happens when that unsophisticatded speculator purchases a bunch of properties at prices above what they're worth? If he can't make the payments on them, eventually he'll be forced to sell, or perhaps even declare bankruptcy. Those properties will eventually be sold at the market equilibrium price, possibly even lower than that because he will likely need to sell in a hurry to meet his obligations, or because a bank forclosed on him and wants the money now and will also accept a below market price to liquidate them quickly. Which is exactly what happened to Zillow. They realized they paid too much and couldn't make money with them and are now unwinding their position at a loss. The 2008 crash was caused by fraud on the part of consumers on their loan applications. It was not caused by speculation. Income was not properly documented on a lot of those loans. Many lenders actually did verify income and required a significant down payment from buyers, and weathered the crisis well. The fraud coupled with low down payment requirements turned these loans into very risky assets, but the banks securitized them and sold them to third parties, who percieved them as nearly risk free assets. The real scandal was that those assets were rated as very low risk by Moody's and S&P but turned out to be basically junk quality. And then lots of investors used leverage to buy them and, lo and behold, they were not risk free assets, and the use of leverage when investing in those securities destroyed a lot of investors and institutions when those securities stopped performing. The fact that the ratings agencies stamped the assets as very low risk is the real scandal: banks thought they were almost as good as treasury bonds and they clearly were not. After the crash, a lot of those securities got picked up at basment bargain prices, and most of them actually did peform fairly well, with 90%+ of individual loans performing. I invested in a company that picked up a lot of those securities at fire sale prices after the crash and did pretty well. Which gets back to my original point: speculation is only a destabilizing force if the speculators are not well capitalized against losses, and things move against them. The 2008 crash would have turned out differently if the purchasers of those loans used less leverage or were better capitalized, or did their own due dilligence when investing.

conanbatt 5y ago

> rther and further out of reach of people who are looking for a primary home. This happens to all assets all the time. When it rains, umbrellas go up in price. Companies competing with this and failing is only a transfer of wealth between VC's and homeowners. You don't need to ascribe a moral sentiment to that transfer, its just what it is. If the prices then bust afterward, then homeowners that sold won, the ones that stayed didnt take advantage of the opportunity, and home buyers lost at the high and will win at the bottom. Like in any other price fluctuation!

IAmGraydon 5y ago

You honestly think 2 iBuyer companies would have the liquidity to move the entire housing market? I don’t think you understand the size of the US housing market. If you’re in the top 2% of earners and can’t buy a home, you either live in a ridiculously expensive city (outlier) or have a money management issue.

HWR_14 5y ago
iBuyers often move into a specific area. A huge percentage of Zillow's purchases was in one city in Arizona (or New Mexico, I forgot where). And two iBuyers in a city can totally move the market.

Melatonic 5y ago

Keep in mind you also will not (for now at least) have to spend a ridiculous amount on interest like many people did before you. It is going to get interesting when the millennial generation suddenly starts mass inheriting baby boomer houses - not sure how that is going to play out honestly.

soggybutter 5y ago

Top 2% puts you fairly deep into the six figures, no? I've not even surpassed top 10% and haven't had too much issue getting into 2 homes in the last 3 years. Both in areas I would consider "semi-desirable", which leaves me wondering what exactly do other folks consider "semi-desirable"? Unless of course you mean buying a home outright, in which case this makes total sense

chii 5y ago
top % income earners aren't the top wealth owners. One should examine the rate of wealth growth (not just via income, but via other forms of gains, such as capital gains and business income). I bet you will find that the top 2% income earners are barely even the top 50% wealth gainers that year.

BeetleB 5y ago

> It's honestly quite scary how I'm in the top 2% of income earners in my generation and yet I could barely afford to buy a small place in a semi-desirable area. Top 5% puts you at over $300K/year. Top 2% is much higher. Even a top 5% person can easily afford a house in any semi-desirable city. LA, Bay Area are not semi-desirable. They are highly desirable.

jjcon 5y ago
They did say in their generation which could basically mean anything at that point

kortilla 5y ago

> entire neighborhoods converted to short term rentals now in some areas where they're still legal. Hearing that really depressed me. Why? It makes me happy that more people get to enjoy a desirable area rather than using the law to keep them out.

username_my1 5y ago

The problem is not about homes being overpriced. The truth is that there is much much much more money in the middle class globally (almost 3x that of 2000) and on top of that the normal inflation, and freezing of supply. As long as “desirable location” stay the same, and the amount of people affording it growing so significantly. The expectation of being able to afford one is a strange one. See https://www.nasdaq.com/articles/world-reimagined%3A-the-rise-of-the-global-middle-class-2021-07-09 https://www.nasdaq.com/articles/world-reimagined%3A-the-rise...

HWR_14 5y ago
A bunch of Chinese and Indian people increasing their standard of living to middle class doesn't suddenly mean American middle class people (whose asset percentage has been shrinking) can afford US houses. Global middle class is meaningless in this discussion

screenbreakout 5y ago

But in a way if the rental prices were to stay reasonable (say it was a non profit running the schtick) isn't a great way for as many people as possible to share a limited ressource? Maybe property is like golden handcuffs, nice but locks you down...again it's more a western thing as we in the east tend to buy cash down... Though I would like to see some company buying out the inner city ground floor space of some of the banks or insurances that ghostify my town and inject some fun rental people instead

thr0wawayf00 5y ago
> But in a way if the rental prices were to stay reasonable There's zero evidence to believe that this will be the case. I will never trust large multi-family property management companies driven by software to consider keeping rental rates reasonable. That's antithetical to our capitalist system, profit is the one and only goal. > Maybe property is like golden handcuffs, nice but locks you down... In terms of utilizing the space, sure. However, buying property has been the primary method of wealth accumulation for most of the country going back the last several decades. Property ownership is also one of the best ways to protect yourself against inflation, which we're all getting serious exposure to. And with the speed at which houses are moving in this market (listings stay up 2-3 days in my area for the most part), property owners aren't very locked down either.
- screenbreakout 5y ago
  "There's zero evidence to believe that this will be the case" Well I guess it depends on the regulatory framework, imo it's the constructor lobbies pushing such a narrative... in more developed societies where cheap labour isn't so available rental has become the norm...of course one could also argue that high real estate prices mean the rich and unscrupulous can hide and flip huge amounts of ill earnt gains... but it doesn't have to be so... Are there housing cooperatives in the US?https://en.m.wikipedia.org/wiki/Housing_cooperative https://en.m.wikipedia.org/wiki/Housing_cooperative

game_the0ry 5y ago

> Tangentially related, I talked to a friend who works on geospatial data for one of the big vacation rental companies, and he was remarking how many homes in many desirable areas are now rentals. It's not that uncommon to see nearly entire neighborhoods converted to short term rentals now in some areas where they're still legal. Hearing that really depressed me. Adding to your data points: this is happening in some CA beach communities. Many beachfront homes in Huntington Beach and Newport Beach have been turned into AirBnBs that seem to cater to social media influencers desperate for instagram-able pics. Some more anecdotal data: I know a couple of people who are professional AirBnB hosts and they're constantly in the market buying real estate to turn them into rentals. They buy cash in the cities I mentioned above, as well as San Diego, Las Vegas, Los Angeles, NYC, Brooklyn, Nashville, Austin, and others. This is a lucrative business, at least for the time being.

cyanydeez 5y ago

That's entirely what company valuations like Tesla are.