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Economics has long understood the strength pricing signals have to skew markets. I think a lot of the growth in real estate have been these phony buyer and pri

Economics has long understood the strength pricing signals have to skew markets. I think a lot of the growth in real estate have been these phony buyer and pricing platforms (open door, zillow & redfin). Sellers are constantly being bombarded with pricing signals about their house, even when off market. And because they are "algorithmic", sellers trust them more than a listing agent. A good example study followed pricing when a city set a cap on Payday loans that was higher than the average market rate. Once the cap went into effect, all of the lenders below the cap moved their rates up to the cap. You see this with Cars & Kelly Blue book as well. All of these pricing signals skew the market and should be banned.

rossdavidh 4y ago
Well, "pricing signals" skewing markets is what is supposed to happen, that's also how a healthy market works. As a counterexample, opacity in the labor market has long allowed employers to underpay, because most of their labor force don't realize what the pushy few who demand a raise are getting. I have also been able to get a better price on cars (not this year, but in normal car markets) by making it obvious to the dealer that I was looking at the Kelly Blue Book, so that they didn't think I would be willing to pay more than that. Removing price signals typically provides more power to the larger party, that does more transactions in that market, and thus has a large advantage in knowledge of price. The issue here wasn't that Opendoor had pricing signals, but rather that they were lying about what those market prices were.
- TedDoesntTalk 4y ago
  > “pricing signals" skewing markets is what is supposed to happen Only if the signals are accurate. Zillow calculates value based on comps in the same zip code since the range of properties in a zip code can vary tremendously. This is ridiculous in many zip codes. Ask any realtor what they think of “Zestimates”. You’ll get an earful.
  - rossdavidh 4y ago
    Oh, I'm sure it's flawed. However, their AI-generated prices did tell them to get out of the market, and despite their stated reasons at the time it looks like they decided to leave the home-buying business suspiciously close to the top.
happyopossum 4y ago
> All of these pricing signals skew the market and should be banned. Aside from the obvious issues with prior restraint, where do you stop? In real estate, a list of comparable sales (comps in RE speak) is commonly used to set an asking price. That list is clearly a pricing signal, would you advocate hiding the sales price of houses? Ok, now you’ve done that, how does the government assess property taxes? And when they do, are those assessments now secret as well? You’re going down a really dark and weird road to try to fix a small part of a big problem…
- tonymet 4y ago
  Comps are actual sales of similar but not identical property. Zestimates and Redfin offers are inflated figures with no basis in reality. They are a derivative of a derivative.
- s1artibartfast 4y ago
  I have lived in a market where list prices were tied to comps. It was always an arbitrary number to get folks in the door.

rossdavidh 4y ago

Well, "pricing signals" skewing markets is what is supposed to happen, that's also how a healthy market works. As a counterexample, opacity in the labor market has long allowed employers to underpay, because most of their labor force don't realize what the pushy few who demand a raise are getting. I have also been able to get a better price on cars (not this year, but in normal car markets) by making it obvious to the dealer that I was looking at the Kelly Blue Book, so that they didn't think I would be willing to pay more than that. Removing price signals typically provides more power to the larger party, that does more transactions in that market, and thus has a large advantage in knowledge of price. The issue here wasn't that Opendoor had pricing signals, but rather that they were lying about what those market prices were.

TedDoesntTalk 4y ago
> “pricing signals" skewing markets is what is supposed to happen Only if the signals are accurate. Zillow calculates value based on comps in the same zip code since the range of properties in a zip code can vary tremendously. This is ridiculous in many zip codes. Ask any realtor what they think of “Zestimates”. You’ll get an earful.
- rossdavidh 4y ago
  Oh, I'm sure it's flawed. However, their AI-generated prices did tell them to get out of the market, and despite their stated reasons at the time it looks like they decided to leave the home-buying business suspiciously close to the top.

happyopossum 4y ago

> All of these pricing signals skew the market and should be banned. Aside from the obvious issues with prior restraint, where do you stop? In real estate, a list of comparable sales (comps in RE speak) is commonly used to set an asking price. That list is clearly a pricing signal, would you advocate hiding the sales price of houses? Ok, now you’ve done that, how does the government assess property taxes? And when they do, are those assessments now secret as well? You’re going down a really dark and weird road to try to fix a small part of a big problem…

tonymet 4y ago
Comps are actual sales of similar but not identical property. Zestimates and Redfin offers are inflated figures with no basis in reality. They are a derivative of a derivative.
s1artibartfast 4y ago
I have lived in a market where list prices were tied to comps. It was always an arbitrary number to get folks in the door.