Zillow quoted a number for a house that I was selling right at the peak of all this, pending inspection. They couldn't come around and look at it though for about 6 weeks.
By that time the market had turned and they said they weren't interested.
This is completely subjective of course.
They are basically in charge of printing US dollars and buying their own assets.
And we think crypto is bad...
We should just end the Fed and replace it with a giant algorithm, with crowdsourced and transparent consumer price data. Maybe a few humans to keep the lights on, and to figure out how a 4K TV is better 'value' than a 1080p TV, etc.
Supply + demand. It's the law!
This is however surprising to me. During COVID, house prices have gone amok. A lot of buyers are now buying 10-20% over asking and waiving everything. Prices are going up 10% every 6 month in my area. If in this market if you can't make money buy flipping, I don't know how you can make money ever.
BlackRock does not have control over the money supply.
The software developers working for this company knowingly tried to make algorithms to flip and profit off of something that should be a human right
Replacing carpets and painting walls, trying to flip for a 20% profit, the people running Z must be geniuses
As a millennial looking at 2 bedroom flats selling for £575k (780k usd, not far from a million dollars) in my area, I cannot help but have tears of joy when corporations who hope to profit off of our desperate housing situation get hit by reality straight in the face
Ask yourself who benefits from housing prices rising. If you lie to yourself that it's people who are trying to move up the housing ladder, remember that your flat appreciating 50% in 2 years means the house you want to move into by selling your flat also appreciates 50%, so you win nothing
It's the rent seeking leeches of society that think that by buying a "portfolio" of houses, they can live out their lives without contributing society in any way
Anyone arguing against this has either a dog in the race, or loose screws in the head
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We detached this subthread from https://news.ycombinator.com/item?id=29090845.
What implication am I supposed to take from this? Everyone has must contribute meaningfully to society or they're shit?
> Anyone arguing against this has either a dog in the race, or loose screws in the head
So if I don't already agree with you, I'm either lying for finical gain, or insane? Rough options... :(
I think that is a little myopic.
Older buyers that are downsizing can make an excess profit in that situation. Although perhaps if excess numbers are downsizing to the same retirement homes, then maybe the retirement home owners win instead.
Also if you have a second investment property, you are definitely winning.
Finally, as house prices go up, you do end up with more equity (perhaps way more equity because a mortgage is geared lending). More equity can make a huge difference if you have any economic shocks, or if you care about passing on your equity to your children. Let’s say you have 10% equity in a $500k home, which then appreciates to $1M. If you die, you now have 550k equity, which is 11% house deposits for 5 children, or 27% deposits for each of two children. Not a bad trick.
I think a better way to think about it is that you need to own 1 house. If you don’t own a house, then you are shorting the housing market. If you own 2 then you are long the housing market. If you are a couple with kids, then you need to consider the chance of divorce (owning 1 home each is conservative, owning 1 home together is risky), and consider how much you want to give to your kids. Due to moral hazard I can’t see how you could insure against the risk of divorce.
You are born short housing.
Relevant: https://thezikomoletter.wordpress.com/2012/12/10/you-are-nat...
Granted plenty of mom and pop flippers are doing cheap flips in this market as well. Zillow was just jumping in on the action at a much larger scale. But if I was king for a day, I think I would pass a law that required inspection contingencies on all residential real estate transactions. And maybe some sort of escrow for undisclosed maintenance issues that occur in the first year or two after the sale.
artificially driving up the prices of basic human needs is literally Bond villain behaviour.
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.
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.
No matter how you slice it, they were speculating on housing inflation.
That seems like it was the idea but amusingly, per this article, not exactly the right word for what they were doing
A lot of people want this. Its basic human nature ... take or construct the path of least resistance. Its just that most people cannot do this and only top 1% can.
The whole FIRE movement makes ppl aspire for the day when they can live on passive income from the savings/investments.
The advent of free money to cover the insolvent institutions caught making stupid decisions, but managing to be "too big to fail", stole a lot of money from local economies, and my parents.
People that I know that are already FIREd or plan to don't actually intend not to work. They want to, but on things they actually enjoy. If there was UBI the FIRE movement would go significantly down because one of it's main goals would be achieved by default. Right now the only way to get those goals is with passive income from investments.
We have this one life, and wasting it is not the way to go. FIRE people don't want the riches or hoarding insanes amount of money for power trips with their buddies. Most are very frugal in fact, that's the only way to achieve FIRE in the firs place. They just want the freedom from forced work. That is the essence of the FIRE movement.
I admire your strong conviction. Cheers.
It must be this then that leaks some questions in my thoughts.
What if the money you buy the properties with is a result of your contributions?
Is there a decent and accessible way to have funds to buy such properties while not having to contribute first?
Let's say I've spent 20 years working 12 hours a day contributing about 4x the average productivity - would it be ok to buy properties and continue not contributing or should I be forced to continue contributing?
What is the optimal path to reap rewards of my contributions? Having taxpayers pay that money to me in a form of retirement is one way, but what if I paid 10x more taxes as a result of my contributions should 10 other people pool their taxes to pay my retiremenet to make it fair? Or will I get the same as those who worked half what I did?
I remember my father told me that in communism there were two options as well, you either had to contribute how you were told or else you were a parasite and put to jail. Seemed fair to many.
In 1920s Russia they mostly genocided them - this is not considered fair these days.
I guess the reason it seemed fair to many is that there is truth to the simplistic formulation of your feelings.
The best definition of evil I've ever heard was - "all evil is perverted good, and it is that aspect of the good which it retains that makes it attractive to many people"
Anyway, writing this as someone "without a dog in the race" what about your dogs in the race - you mentioned you were looking at properties right now?
This isn't math. Prior "good" contributions to society don't even out "bad" contributions, no matter how we define them. To put an extreme example, you're not allowed to steal from anyone no matter how many people you helped recover their money from scams.
> What is the optimal path to reap rewards of my contributions?
It's very easy: do not speculate with human rights. When you buy a house for "investment", you are adding demand to the market, pushing prices up. Housing is inelastic, specially in the short term, so you're probably driving someone that needed a place to live out of the market, just for what? To sell it later for a higher price, driving prices further up? To rent it to people that need a place to leave, making it so that they lose wealth to you instead of owning it?
There's no need to delve into deep philosophical discussions of what is right and wrong, what is fair and isn't, and what did the communists do. The discussion is simple: don't speculate with housing.
I do think there is a place for a service like this even in a less frothy market. Like a trade in for a car, there’s definitely some percentage of people willing to accept a deal that is not the top one if it means they can cash out faster and with less hassle.
Suppose house prices evolve from price p0 to price p. The market gains (or loses) p/p0 in that period. If you get a mortgage, you're borrowing money to buy at p0; at any point in time with a price p and total repaid r your total value is given by (deposit + r + p) - p0. You're in negative equity if (deposit + r + p) < p0. You're in the money if p > p0, but note that this isn't multiplying your investment by the market gain. Instead, it's exposing you to the absolute change in price. So suppose (deposit + r) = 40k ; p0 = 145k ; p = 190k. You're in the money for 40k + 190k - 145k = 85k, having invested 40k (roi=2.1). p1/p0 = 1.3 (<2.1), with your leverage (mortgage) having bought you more exposure to house prices. You can then liquify and re-lever back into the housing market, with a larger loan due to you larger deposit (and likely increased income). Historically this has worked very well for people as p has tended to be larger than p0. It does not work well if you end up in negative equity.
Real estate is going up in value for the following reasons:
- Almost 2 decades of QE and cheap loans
- More people working from home
- Boomers leaving the workforce and cashing in their retirement
- People leaving high cost of living areas
- Foreign investment
There is no conspiracy. As these things pull back, and they will in the next 5+ years, things will soften. What Zillow was trying to do is something a bit different but it doesn't matter because they ultimately failed.
They already did go up some. Most people can't count to save their lives, but $1M at 2.5% APR is about $4K monthly (borderline doable for quite a few folks on 2 incomes), whereas at 16% (historical peak) it's something like $13.5K (not really doable beyond the top 1%).
In spite of their large loss, this could prove to be a wise divestment under that scenario. If loans get a lot more expensive (which happened during Carter and then Reagan years, see "stagflation"), the housing market will tank right away and people will be desperate to lock in at least some of the gains they thought they had, creating excess supply. Not a good environment for flipping, especially at the mid- to low end of the market. The game of musical chairs seems to be coming to an end, and Zillow has just grabbed a chair. Three legged and busted chair, but a chair nevertheless.
What would you envision as the alternative to tenanted apartment complexes?
Let’s say you could wave a wand and outlaw rental housing as a business. Do you think the world would be a better or worse place?
If there absolutely must exist a category of housing that is rented and not owned, that's where the state can step in. Housing, like healthcare, is a commodity with perfectly inelastic demand in the aggregate. Offering such a commodity up to the "free" market is irrational in any system except one that values ability to make a profit over human rights.
If you'd please review https://news.ycombinator.com/newsguidelines.html and stick to the rules when posting here, we'd appreciate it.
We detached this subthread from https://news.ycombinator.com/item?id=29090845.
The reason "everybody" doesn't do it is that in order to do it, you have to already have money (even if you can do it on a loan, the terms won't be favorable unless you have significant starter capital). At that point, it's basically free money, yes, to the extent that you can pay someone to do all the actual work for you and still make a comfortable income.
Matt Levine's Money Stuff column covered this in detail. Incompetence, not villainy.
Hell, just last weekend I read a home inspection that specifically cited inability to assess interior and exterior wall cracking due to recent paint.
What would you envision as the alternative to tenanted apartment complexes?
Let’s say you could wave a wand and outlaw rental housing as a business. Do you think the world would be a better or worse place?
If there absolutely must exist a category of housing that is rented and not owned, that's where the state can step in. Housing, like healthcare, is a commodity with perfectly inelastic demand in the aggregate. Offering such a commodity up to the "free" market is irrational in any system except one that values ability to make a profit over human rights.
The old people with a reverse mortgage & the taxpayer subsidizing the associated losses.
People who put much of their excess savings into an appreciating home they planned to sell to fund their retirement as they moved elsewhere to somewhere cheaper, but now have a home which as a step function is worth far less.
People who would be quickly underwater if the property market tanks deciding to jingle mail, leading to blighted streets for those who stayed.
Local property taxes pay for schools, fire departments, police, etc.
As far as the state being a perfect provider to step in ... in the US about half of healthcare spending is fraud. That the bill is passed onto someone else is a big slice of that (along with ignoring antitrust laws, local CON laws, illegal to import pharmaceuticals directly as a consumer, etc).
I used to live near Chicago as a kid & recalled this https://en.wikipedia.org/wiki/Cabrini%E2%80%93Green_Homes "At first, the housing was integrated and many residents held jobs. This changed in the years after World War II, when the nearby factories that provided the neighborhood's economic base closed and thousands were laid off. At the same time, the cash-strapped city began withdrawing crucial services like police patrols, transit services, and routine building maintenance. ... On July 17, 1970, Chicago police patrolman Anthony N. Rizzato and Sergeant James Severin were shot and killed by gang members while patrolling community housing for an all-volunteer "Walk and Talk" project. As the officers proceeded across the Cabrini–Green baseball field, the assailants opened fire from an apartment window. The purpose of the shooting was to seal a pact between two rival gangs."
Which land will the free or subsidized housing go on? Will the people spending a grand or two a month in property taxes want the elevated crime levels near their own front door?
If you'd please review https://news.ycombinator.com/newsguidelines.html and stick to the rules when posting here, we'd appreciate it.
We detached this subthread from https://news.ycombinator.com/item?id=29090845.
Tool rentals?
Camera equipment rentals?
Leeches, all of them?
The reason "everybody" doesn't do it is that in order to do it, you have to already have money (even if you can do it on a loan, the terms won't be favorable unless you have significant starter capital). At that point, it's basically free money, yes, to the extent that you can pay someone to do all the actual work for you and still make a comfortable income.
No thanks. A lot of people are getting out of it, or finding it is often better to keep a house empty and just record the missing tenant as a loss to write off than risk renting to tenant who is anything but perfect. The future of renting is from big companies who have enough scale and experience to manage the risk. Small-scale private landlords are on the way out.
The immorality of such rent-seeking not with standing, it is just not a very good way to make money unless you are really. diligent or get lucky.
The old people with a reverse mortgage & the taxpayer subsidizing the associated losses.
People who put much of their excess savings into an appreciating home they planned to sell to fund their retirement as they moved elsewhere to somewhere cheaper, but now have a home which as a step function is worth far less.
People who would be quickly underwater if the property market tanks deciding to jingle mail, leading to blighted streets for those who stayed.
Local property taxes pay for schools, fire departments, police, etc.
As far as the state being a perfect provider to step in ... in the US about half of healthcare spending is fraud. That the bill is passed onto someone else is a big slice of that (along with ignoring antitrust laws, local CON laws, illegal to import pharmaceuticals directly as a consumer, etc).
I used to live near Chicago as a kid & recalled this https://en.wikipedia.org/wiki/Cabrini%E2%80%93Green_Homes "At first, the housing was integrated and many residents held jobs. This changed in the years after World War II, when the nearby factories that provided the neighborhood's economic base closed and thousands were laid off. At the same time, the cash-strapped city began withdrawing crucial services like police patrols, transit services, and routine building maintenance. ... On July 17, 1970, Chicago police patrolman Anthony N. Rizzato and Sergeant James Severin were shot and killed by gang members while patrolling community housing for an all-volunteer "Walk and Talk" project. As the officers proceeded across the Cabrini–Green baseball field, the assailants opened fire from an apartment window. The purpose of the shooting was to seal a pact between two rival gangs."
Which land will the free or subsidized housing go on? Will the people spending a grand or two a month in property taxes want the elevated crime levels near their own front door?
>People who would be quickly underwater if the property market tanks deciding to jingle mail, leading to blighted streets for those who stayed.
I really don't understand this point. If it's a house where they want to live, they would just stay. If they can't afford the mortgage, yes, they can leave and buy any of the other now cheap property on the market, and the financial institution that took on the risk on lending can either sell it back to them or to someone else. If they don't live there, they're literally part of the problem of speculators treating houses as assets rather than housing, in which case they should be selling it to whoever actually wants to live there, yes.
Now as for the second part:
>As far as the state being a perfect provider to step in ... in the US about half of healthcare spending is fraud.
I feel like you choosing the only first world country with primarily privatised healthcare kind of strengthens my point, not sure what you're getting at here.
>Which land will the free or subsidized housing go on?
It shows just how badly treating housing as a capital asset rather than a public utility has corrupted how people discuss housing, that when I suggest that the government would handle any absolutely necessary rental housing, you immediately jump to low income people. And I don't blame you for thinking that, but that's basically the opposite demographic of who rental property should be for.
There's no inherent reason that low-income people should be renting rather than owning - they have no particular need for short-term housing. The only reason those two things are associated is because housing is treated as a capital asset.
Rather, the only people who have reason to rent rather than own are those who have a short term need for housing, which is going to be largely moderate-income people who move around for work, as well as students aiming for a higher-income job.
There are other systems, of course, where no one can claim physical ownership of something like land, and everyone rents - like Singapore's public housing model. Singapore's model, by the way, sidesteps the rest of your concern:
>Which land will the free or subsidized housing go on? Will the people spending a grand or two a month in property taxes want the elevated crime levels near their own front door?
Where will lower income people go? The same places everyone else goes. The only reason you have "bad" neighborhoods is because you've shoved all the economically disadvantaged people into one spot, and allowed the wealthy to cloister themselves into enclaves where the issues with poverty are out of sight and out of mind. As I said, Singapore's public housing distributes income levels much more evenly, and shows major benefits from it.
>People who would be quickly underwater if the property market tanks deciding to jingle mail, leading to blighted streets for those who stayed.
I really don't understand this point. If it's a house where they want to live, they would just stay. If they can't afford the mortgage, yes, they can leave and buy any of the other now cheap property on the market, and the financial institution that took on the risk on lending can either sell it back to them or to someone else. If they don't live there, they're literally part of the problem of speculators treating houses as assets rather than housing, in which case they should be selling it to whoever actually wants to live there, yes.
Now as for the second part:
>As far as the state being a perfect provider to step in ... in the US about half of healthcare spending is fraud.
I feel like you choosing the only first world country with primarily privatised healthcare kind of strengthens my point, not sure what you're getting at here.
>Which land will the free or subsidized housing go on?
It shows just how badly treating housing as a capital asset rather than a public utility has corrupted how people discuss housing, that when I suggest that the government would handle any absolutely necessary rental housing, you immediately jump to low income people. And I don't blame you for thinking that, but that's basically the opposite demographic of who rental property should be for.
There's no inherent reason that low-income people should be renting rather than owning - they have no particular need for short-term housing. The only reason those two things are associated is because housing is treated as a capital asset.
Rather, the only people who have reason to rent rather than own are those who have a short term need for housing, which is going to be largely moderate-income people who move around for work, as well as students aiming for a higher-income job.
There are other systems, of course, where no one can claim physical ownership of something like land, and everyone rents - like Singapore's public housing model. Singapore's model, by the way, sidesteps the rest of your concern:
>Which land will the free or subsidized housing go on? Will the people spending a grand or two a month in property taxes want the elevated crime levels near their own front door?
Where will lower income people go? The same places everyone else goes. The only reason you have "bad" neighborhoods is because you've shoved all the economically disadvantaged people into one spot, and allowed the wealthy to cloister themselves into enclaves where the issues with poverty are out of sight and out of mind. As I said, Singapore's public housing distributes income levels much more evenly, and shows major benefits from it.
It is, the GP said that renting is a leech and you said "but what if I buy the house with money from my contributions". If doing something is bad (however you define bad) for society, it is bad no matter how many good things you did before.
> buying a property to rent is not a bad contribution
A lot of people have already explained how it can be a bad contribution. People need houses to live, and that's not optional. By buying a house to rent you're taking it out of the market, maybe from a family that wanted it to live in it. That family might need to move to a different, cheaper place (possibly offsetting the housing discount with extra expenses in commuting and transport) or might need to rent and pay money to you instead of investing it in their house. If enough people do the same thing they'll drive prices up in an area, and because they need to recover the investment they'll also put high rent prices, because people need housing and will end up paying increasing rent prices when there's no other option.
> Human rights is a nice buzzword used very loosely and it tends to mean whatever the user considers useful to themself at that moment, I recommend reading some fundamental bills and know what's in it.
I'll just leave you with Article 25, Universal Declaration of Human Rights [1]: Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services.
1: https://www.un.org/en/about-us/universal-declaration-of-huma...
No thanks. A lot of people are getting out of it, or finding it is often better to keep a house empty and just record the missing tenant as a loss to write off than risk renting to tenant who is anything but perfect. The future of renting is from big companies who have enough scale and experience to manage the risk. Small-scale private landlords are on the way out.
The immorality of such rent-seeking not with standing, it is just not a very good way to make money unless you are really. diligent or get lucky.
edit: Ah, to more directly address you point earlier, and lay it out in simple ethical terms: withholding essential goods (housing) from others is a moral wrong according to consequentialist ethics systems. Doing things with a motivation of greed (profit) is also considered a moral wrong in intent-based ethics systems. The agreed upon axiom that they contribute nothing in return means there is no moral good to outweigh the moral wrong in either system, so in combination it is a net moral wrong.
This really shouldn't need to be spelled out.
> Are you asking why, in a system that its supporters claim is a meritocracy,
who's made these assertions, and where? Not anywhere in the thread's I've read...
> it wrong for it to be easier for the rich to get richer than for the poor to achieve parity, given equal merit?
Is it wrong though? Should everything be equally as hard? Or is it permissible that some things should be harder than others. And where/how do I draw the lines to know when it's unfair?
> Is that a rhetorical question,
It was, I even said as much. I'd ready to agree, but I can't until you actually make a conclusion.
> or are you about to argue in favor of the ethics of feudalism? Because bridging that ethical divide would take more than a simple hacker news comment.
I'm not trying to argue anything, I'd like like try and tease out arguments worth considering.
> edit: Ah, to more directly address you point earlier, and lay it out in simple ethical terms: withholding essential goods (housing) from others is a moral wrong according to consequentialist ethics systems.
Perhaps, but this evaluation is shallow enough to be useless for me to apply in the reality in which I live. What about the consequence of destruction of value from freely allowing anyone without an interest from living off your property? But they might die, and life is more important than money? Sure, but what about in an area where they wouldn't die, then is it moral? But people deserve to be comfortable! So do I need to provide heat and water, and other utilities? To what extent? Any conclusion that adds more questions than answers is useless. Ethics aren't scientific research, answers that only create more questions aren't useful...
> Doing things with a motivation of greed (profit) is also considered a moral wrong in intent-based ethics systems.
This is new to me, I assumed it was amoral. What makes it immoral?
> The agreed upon axiom that they contribute nothing in return means there is no moral good to outweigh the moral wrong in either system, so in combination it is a net moral wrong.
So there is an example where the net morality could come out in the positive?
> This really shouldn't need to be spelled out.
And... we're back the the original problem that I tried to call out from the beginning. Anyone that doesn't already know what you know, and preemptively agree with you is the problem? Now who's arguing for feudalism if you don't already have knowledge and power, you're undeserving?
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.
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.
What crisis are you referring to?
edit: Ah, to more directly address you point earlier, and lay it out in simple ethical terms: withholding essential goods (housing) from others is a moral wrong according to consequentialist ethics systems. Doing things with a motivation of greed (profit) is also considered a moral wrong in intent-based ethics systems. The agreed upon axiom that they contribute nothing in return means there is no moral good to outweigh the moral wrong in either system, so in combination it is a net moral wrong.
This really shouldn't need to be spelled out.
> Are you asking why, in a system that its supporters claim is a meritocracy,
who's made these assertions, and where? Not anywhere in the thread's I've read...
> it wrong for it to be easier for the rich to get richer than for the poor to achieve parity, given equal merit?
Is it wrong though? Should everything be equally as hard? Or is it permissible that some things should be harder than others. And where/how do I draw the lines to know when it's unfair?
> Is that a rhetorical question,
It was, I even said as much. I'd ready to agree, but I can't until you actually make a conclusion.
> or are you about to argue in favor of the ethics of feudalism? Because bridging that ethical divide would take more than a simple hacker news comment.
I'm not trying to argue anything, I'd like like try and tease out arguments worth considering.
> edit: Ah, to more directly address you point earlier, and lay it out in simple ethical terms: withholding essential goods (housing) from others is a moral wrong according to consequentialist ethics systems.
Perhaps, but this evaluation is shallow enough to be useless for me to apply in the reality in which I live. What about the consequence of destruction of value from freely allowing anyone without an interest from living off your property? But they might die, and life is more important than money? Sure, but what about in an area where they wouldn't die, then is it moral? But people deserve to be comfortable! So do I need to provide heat and water, and other utilities? To what extent? Any conclusion that adds more questions than answers is useless. Ethics aren't scientific research, answers that only create more questions aren't useful...
> Doing things with a motivation of greed (profit) is also considered a moral wrong in intent-based ethics systems.
This is new to me, I assumed it was amoral. What makes it immoral?
> The agreed upon axiom that they contribute nothing in return means there is no moral good to outweigh the moral wrong in either system, so in combination it is a net moral wrong.
So there is an example where the net morality could come out in the positive?
> This really shouldn't need to be spelled out.
And... we're back the the original problem that I tried to call out from the beginning. Anyone that doesn't already know what you know, and preemptively agree with you is the problem? Now who's arguing for feudalism if you don't already have knowledge and power, you're undeserving?
There is no way to go back in time to make everything fair from some arbitrary starting point. All you can do is your best to do your best.
Pricing can lead to unequal outcomes, but it at least provides a signal that you are on the right track or not.
A quest for universal fairness can only work by lowering people rather than by promoting them doing what they are best at.
Anyone seeking universal fairness & equal outcomes in all aspects of life should read Kurt Vonnegut's Harrison Bergeron as many times as required to change that mindset. http://www.tnellen.com/cybereng/harrison.html "THE YEAR WAS 2081, and everybody was finally equal. They weren't only equal before God and the law. They were equal every which way. Nobody was smarter than anybody else. Nobody was better looking than anybody else. Nobody was stronger or quicker than anybody else. All this equality was due to the 211th, 212th, and 213th Amendments to the Constitution, and to the unceasing vigilance of agents of the United States Handicapper General."
Hacker News comments aren't this place for this.
https://news.ycombinator.com/newsguidelines.html
>Be kind. Don't be snarky. Have curious conversation; don't cross-examine. Please don't fulminate. Please don't sneer, including at the rest of the community.
>Comments should get more thoughtful and substantive, not less, as a topic gets more divisive.
Moreover, you've complained about no one providing explanations (they have) while providing none of your own.
There's no point in responding further to your questions, since you're providing no substance of your own, but have a very short list of what you should google for context, in the event you're not trolling, and are just somehow trying the socratic method while ignorant of philosophy:
>who's made these assertions, and where? Not anywhere in the thread's I've read...
The topic is Capitalism, read what its supporters say.
>This is new to me, I assumed it was amoral. What makes it immoral?
Virtue ethics, Judeo-Christian-influenced philosophy, some deontologists.
While you're at it, maybe look up logical induction. I recall Philosophy Tube [1] has a good video on it, if you're so inclined.
Tool rentals?
Camera equipment rentals?
Leeches, all of them?
In the San Francisco for example, the minimum wage is $16.32/hr or ~$33K/year. The median price per square foot is $1000/sqft. A person earning minimum wage will never be able to buy property in San Francisco. Instead they're forced to spend most of their income on rent creating a cycle of poverty by preventing property ownership & wealth accumulation. The property owning class of the Bay Area desperately depends the poverty class yet burns the ladder up. We complain about the homelessness and crime yet trap people into poverty by blowing up every bill that would create affordable housing.
I will absolutely cheer for the failure of any company looking to profit from exacerbating the problem. I hope you can now understand the difference between renting a camera and being permanently unable to afford a place to sleep.
Do they absolutely need the service? I assume you're going to give an example where someone buys out the market so they can control the price like a monopoly. If so, I'd like to point out controlling the market like a monopoly isn't the same description as "rent seeking is evil if you're selling a service people need". People need many things that can only be provided by an expert. Are they evil if they don't provide their service at cost too? If not what's the difference? Or was my assumption of your example wrong from the start?
> Otherwise, it's a service that some find useful. Home rentals would be awesome if it was only for vacations or because someone didn't feel like dealing with maintenance. In reality, everyone needs a place to sleep at night and many cannot afford it. The people who make it unaffordable to own a home by buying up all inventory and then renting it back are absolutely leaches. Comparing camera equipment rentals to home ownership likewise lacks morality.
I'm in agreement with you, but this nuance is *very* important, and you're the first to actually explain in detail exactly what's wrong.
> In the San Francisco for example, the minimum wage is $16.32/hr or ~$33K/year. The median price per square foot is $1000/sqft. A person earning minimum wage will never be able to buy property in San Francisco. Instead they're forced to spend most of their income on rent creating a cycle of poverty by preventing property ownership & wealth accumulation.
True, but a gross oversimplification of all the factors that go into something like this. The hyperbole becomes disingenuous with the reasonable expectation that not all parties are aware of the full content. Saying rent seeking makes you a leach, doesn't look like hyperbole. It looks like an assertion that owning property is immoral. This argument is going to drive people away from the realization that people are abusing the rules of the game at the expense of people who now can't even begin to play.
> The property owning class of the Bay Area desperately depends the poverty class yet burns the ladder up. We complain about the homelessness and crime yet trap people into poverty by blowing up every bill that would create affordable housing.
I suspect the intersection of the people opposing anything affordable aren't the same who actually complain about the problem. Here I'm trying to not equate the people complaining about the problem, or the injustice, from the people complaining because they're angry and need to complain. Or those complaining about the inconvenience of having to see someone poorer than they are.
> I will absolutely cheer for the failure of any company looking to profit from exacerbating the problem. I hope you can now understand the difference between renting a camera and being permanently unable to afford a place to sleep.
Me too, but it seems a bit unfair to state it like this. You're the first person to actually explain these real problems in enough detail to convey the idea and how unfair it really is. I say this because you didn't offer to explain deeper, or invite additional participation. The only thing I was able to parse out of this was a final mic drop because we both know you're right about it.
Likewise, long term car rentals exist, they're called leases.
Housing, for the most part, does not do this. New housing is rare, and I can't walk away from that market, or even reduce my usage without severe loss of quality of life.
So yes, the only thing a landlord did for me is have more money than me when I was born, which if you look closely, isn't actually a service at all.
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.
In this case, Zillow bought houses too high and sold them too low. As a result, the market punished that irrational behavior.
sorry, what were they doing?
Scalping may also refer to:
Scalping (trading), in trading securities and commodities either a fraudulent form of market manipulation or a legitimate form of arbitrage
Ticket resale, the resale of tickets to a public event such as a concert or sporting event
The arbitrage definition under "Scalping (trading)" (ie. making money off the bid/ask spread) doesn't seem very immoral to me. I don't think they were buying houses in an area, then recommending people to buy it, so it doesn't fall under the fraudulent definition. The "ticket resale" definition doesn't really fit, because zillow isn't really acquiring houses at below market value. They're buying houses from the same market as everyone else.
>a basic human need that all people must buy
you need to buy housing, not necessarily a house. They're not the same thing. You need to buy food to survive, but you don't necessarily to buy a farm.
>tens of thousands of homes sold last quarter, was a sale to a scalper to artificially drive up all housing prices
but the fact that they lost money suggests that they didn't drive up housing prices?
> Most reasonable people would consider this behaviour to be evil (like, comic-book-villain level evil).
This requires supporting evidence. Comic book villains do things like murdering half of all living things. Show me that study that says people think flipping houses is that bad.
I've met plenty of people who were flipping houses, and I'm pretty sure if most people thought it was on a par with comic book villainy, they would not just stand at a kids birthday party and talk about it.
For each property, they engage in two transactions for which all parties involved are willing participants. How is that immoral?
So if we go by Rawlsian concepts: if it's not fair, it's immoral. If the market maker makes too much, then it's economic rent (due to rent-seeking behavior), which a lot of people consider immoral.
In the San Francisco for example, the minimum wage is $16.32/hr or ~$33K/year. The median price per square foot is $1000/sqft. A person earning minimum wage will never be able to buy property in San Francisco. Instead they're forced to spend most of their income on rent creating a cycle of poverty by preventing property ownership & wealth accumulation. The property owning class of the Bay Area desperately depends the poverty class yet burns the ladder up. We complain about the homelessness and crime yet trap people into poverty by blowing up every bill that would create affordable housing.
I will absolutely cheer for the failure of any company looking to profit from exacerbating the problem. I hope you can now understand the difference between renting a camera and being permanently unable to afford a place to sleep.
Do they absolutely need the service? I assume you're going to give an example where someone buys out the market so they can control the price like a monopoly. If so, I'd like to point out controlling the market like a monopoly isn't the same description as "rent seeking is evil if you're selling a service people need". People need many things that can only be provided by an expert. Are they evil if they don't provide their service at cost too? If not what's the difference? Or was my assumption of your example wrong from the start?
> Otherwise, it's a service that some find useful. Home rentals would be awesome if it was only for vacations or because someone didn't feel like dealing with maintenance. In reality, everyone needs a place to sleep at night and many cannot afford it. The people who make it unaffordable to own a home by buying up all inventory and then renting it back are absolutely leaches. Comparing camera equipment rentals to home ownership likewise lacks morality.
I'm in agreement with you, but this nuance is *very* important, and you're the first to actually explain in detail exactly what's wrong.
> In the San Francisco for example, the minimum wage is $16.32/hr or ~$33K/year. The median price per square foot is $1000/sqft. A person earning minimum wage will never be able to buy property in San Francisco. Instead they're forced to spend most of their income on rent creating a cycle of poverty by preventing property ownership & wealth accumulation.
True, but a gross oversimplification of all the factors that go into something like this. The hyperbole becomes disingenuous with the reasonable expectation that not all parties are aware of the full content. Saying rent seeking makes you a leach, doesn't look like hyperbole. It looks like an assertion that owning property is immoral. This argument is going to drive people away from the realization that people are abusing the rules of the game at the expense of people who now can't even begin to play.
> The property owning class of the Bay Area desperately depends the poverty class yet burns the ladder up. We complain about the homelessness and crime yet trap people into poverty by blowing up every bill that would create affordable housing.
I suspect the intersection of the people opposing anything affordable aren't the same who actually complain about the problem. Here I'm trying to not equate the people complaining about the problem, or the injustice, from the people complaining because they're angry and need to complain. Or those complaining about the inconvenience of having to see someone poorer than they are.
> I will absolutely cheer for the failure of any company looking to profit from exacerbating the problem. I hope you can now understand the difference between renting a camera and being permanently unable to afford a place to sleep.
Me too, but it seems a bit unfair to state it like this. You're the first person to actually explain these real problems in enough detail to convey the idea and how unfair it really is. I say this because you didn't offer to explain deeper, or invite additional participation. The only thing I was able to parse out of this was a final mic drop because we both know you're right about it.
Likewise, long term car rentals exist, they're called leases.
It's interesting that you haven't made a single attempt to provide an actual counterpoint of your own, of what value rent seekers actually provide, especially since you're complaining that no one else is explaining their position. "No one" attempts to explain, including yourself?
Housing, for the most part, does not do this. New housing is rare, and I can't walk away from that market, or even reduce my usage without severe loss of quality of life.
So yes, the only thing a landlord did for me is have more money than me when I was born, which if you look closely, isn't actually a service at all.
> Be kind. Don't be snarky. Have curious conversation;
There is no way to go back in time to make everything fair from some arbitrary starting point. All you can do is your best to do your best.
Pricing can lead to unequal outcomes, but it at least provides a signal that you are on the right track or not.
A quest for universal fairness can only work by lowering people rather than by promoting them doing what they are best at.
Anyone seeking universal fairness & equal outcomes in all aspects of life should read Kurt Vonnegut's Harrison Bergeron as many times as required to change that mindset. http://www.tnellen.com/cybereng/harrison.html "THE YEAR WAS 2081, and everybody was finally equal. They weren't only equal before God and the law. They were equal every which way. Nobody was smarter than anybody else. Nobody was better looking than anybody else. Nobody was stronger or quicker than anybody else. All this equality was due to the 211th, 212th, and 213th Amendments to the Constitution, and to the unceasing vigilance of agents of the United States Handicapper General."
Hacker News comments aren't this place for this.
https://news.ycombinator.com/newsguidelines.html
>Be kind. Don't be snarky. Have curious conversation; don't cross-examine. Please don't fulminate. Please don't sneer, including at the rest of the community.
>Comments should get more thoughtful and substantive, not less, as a topic gets more divisive.
Moreover, you've complained about no one providing explanations (they have) while providing none of your own.
There's no point in responding further to your questions, since you're providing no substance of your own, but have a very short list of what you should google for context, in the event you're not trolling, and are just somehow trying the socratic method while ignorant of philosophy:
>who's made these assertions, and where? Not anywhere in the thread's I've read...
The topic is Capitalism, read what its supporters say.
>This is new to me, I assumed it was amoral. What makes it immoral?
Virtue ethics, Judeo-Christian-influenced philosophy, some deontologists.
While you're at it, maybe look up logical induction. I recall Philosophy Tube [1] has a good video on it, if you're so inclined.
> Be kind. Don't be snarky. Have curious conversation;
It's interesting that you haven't made a single attempt to provide an actual counterpoint of your own, of what value rent seekers actually provide, especially since you're complaining that no one else is explaining their position. "No one" attempts to explain, including yourself?
When I got started on the web I moved a couple states over to live with a friend who was going to college. We lived in a mobile home & our rentier extractor landlord captured like $110 a month. I was able to spend little time doing work I didn't want to do in order to pay rent & could spend a lot of time learning.
High rents can offer some level of exclusivity and give people an opportunity to express their values, what they value, and how much they value it. There's a reason that most people who are in subsidized public housing end up wanting to move away if they can afford to.
You wouldn't be proving a negative. The assertion is that doing so (extracting value without providing any) is bad requires that bad thing to be stated. It's bad because opportunity cost, it's bad because people have to exchange currency for goods or services, it's bad because houses being in possession of money is itself immoral. These aren't negatives that need to be proved. As for cheating, what should I call acting so that others don't get a chance to participate?
> It's interesting that you haven't made a single attempt to provide an actual counterpoint of your own, of what value rent seekers actually provide, especially since you're complaining that no one else is explaining their position. "No one" attempts to explain, including yourself?
I don't have an assertion I want to make. Nothing other than to point out the problematic rhetoric. As an example, pointing out that 2+2=6 is invalid, or unconvincing because if you only have 1,2 and another for 3,4 can't reach 6. Does contribute, because the assertion that 2+2=6 is bad to leave unchallenged. Just like me making an assertion that 2+2=5 which would also be wrong. I don't know enough about the housing market in CA to make an any argument I'd want to stand behind. But I'm willing to say, just owning and renting property isn't enough to call them malicious, leaches, nor shitty.
When I got started on the web I moved a couple states over to live with a friend who was going to college. We lived in a mobile home & our rentier extractor landlord captured like $110 a month. I was able to spend little time doing work I didn't want to do in order to pay rent & could spend a lot of time learning.
High rents can offer some level of exclusivity and give people an opportunity to express their values, what they value, and how much they value it. There's a reason that most people who are in subsidized public housing end up wanting to move away if they can afford to.
You wouldn't be proving a negative. The assertion is that doing so (extracting value without providing any) is bad requires that bad thing to be stated. It's bad because opportunity cost, it's bad because people have to exchange currency for goods or services, it's bad because houses being in possession of money is itself immoral. These aren't negatives that need to be proved. As for cheating, what should I call acting so that others don't get a chance to participate?
> It's interesting that you haven't made a single attempt to provide an actual counterpoint of your own, of what value rent seekers actually provide, especially since you're complaining that no one else is explaining their position. "No one" attempts to explain, including yourself?
I don't have an assertion I want to make. Nothing other than to point out the problematic rhetoric. As an example, pointing out that 2+2=6 is invalid, or unconvincing because if you only have 1,2 and another for 3,4 can't reach 6. Does contribute, because the assertion that 2+2=6 is bad to leave unchallenged. Just like me making an assertion that 2+2=5 which would also be wrong. I don't know enough about the housing market in CA to make an any argument I'd want to stand behind. But I'm willing to say, just owning and renting property isn't enough to call them malicious, leaches, nor shitty.
How is it possible for the market-maker to make “too much” in a free competitive market? They don’t have any special capability that the average home buyer doesn’t have.
I really don’t understand the angle. Capitalism is all about selling 5 cent pencils for 10 cents.
Half a billion dollar loss seems like a pretty good indication that maybe…
If they outbid everyone who actually wanted to live there, who were they planning to sell to? :P
Buying things you think are underpriced and reselling them is not frontrunning. (Ever since GME, a lot of people learned the word frontrunning and started using it in every possible situation.)
Zillow's plan was to act as a market maker. Market makers make a profit by buying things and then reselling them for slightly more. The difference is called the spread, and it's how market makers make money. Another example of a market makers is used car dealerships. Despite maybe seeming like a useless middleman, the reason market makers can exist is because they provide a valuable service to the buyer and the seller. They provide liquidity: you can go to a used car dealership and buy or sell a car today, instead of having to find someone to trade with directly. (If finding someone without a middleman were just as easy, the buyer and the seller would both benefit from just trading with each other directly. But they don't, which indicates that used car dealerships are actually providing a useful service.)
Zillow wanted to be a market maker for homes. They have a lot of data and thought they could use it to find homes that were underpriced, make a cash offer (benefiting the purchaser by giving them more liquidity via the faster sale), then quickly resell it. Their pricing algorithm didn't work, though, and they lost money. C'est la vie.
When a lower middle class guy in your town does this, he’s called a scalper and seen as a villain.
When rich elites do this with life essentials, they’re market makers doing a useful service.
If the spread is a large percentage of the assets value then it doesn't work as well and public perception is more negative. The housing market is much more difficult to properly become a market maker in because the transaction costs are high. The seller's realtor is going to want their >=3% commission. There's other costs like title transfer fee/cost, inspections, etc.
Also scalping is typically more of product's that are impossible to otherwise obtain and are sold at a huge premium.
I think Zillow frequently tried to make the seller cover these costs (whether directly or via a lower offer amount) but it seems they didn't do this successfully. It's also possible that the seller's who accepted Zillow's offer tended to have some X factor that would make their house more difficult to sell but properly handling every possible X factor is very difficult.
The same set of people who would move their price points up after a few months and get larger mortgages. This worked for all of 2020 and most of 2021 and only the past quarter did it fail as a strategy.
>Buying things you think are underpriced and reselling them is not frontrunning. (Ever since GME, a lot of people learned the word frontrunning and started using it in every possible situation.)
You're missing that this is Zillow, not a neutral market actor. They have unique information about demand for houses and even get to influence prices upward through Zestimates.
And that's the same shit booking.com tried to pull, that got them in trouble with the EU market authority. (If I remember correctly.)
The trading department should be separate from the affiliate department. Otherwise it's LIBOR scandal all over again. :|
> The same set of people who would move their price points up after a few months and get larger mortgages. This worked for all of 2020 and most of 2021 and only the past quarter did it fail as a strategy.
If they have a few months. Sitting on empty houses is not free.
Though the whole problem with Zillow seems to be that they disrupt the local markets, because due to their sheer volume they effectively corner each local market where they operate, which makes them able to set prices.
(But then why have they stopped? Probably they realized they'd need more money to do that effectively, or that they'd get a huge asswhoop eventually. Or that they were unable to hedge their risks.)
I mean, exactly - they lost $550 million. Didn't stop them from burning massive capital reserves to outbid tons of people and fuck up the market a bit for them on a bad bet.
Well, and also because it's illegal in some states to buy directly from a car manufacturer, so you're forced to go to a dealership whether they provide value or not.
Would eBay and Amazon be considered market makers, as they pair up buyers and sellers?
New car dealerships really don't many any sense and regulated into existence haha. I was referring to used car dealerships
Back in the early days of the auto industry car companies sometimes existed just long enough to sell some crappy cars and fold before angry customers with defective cars came calling.
That's why the laws around manufacturers having dealers exist, no matter what Elon Musk tells you.
Ever notice that bodywork, parts, and repairs for Teslas are very expensive and difficult to come by? Plenty of Teslas with relatively minor body damage end up in limbo for months or more even though the insurance company is ready to pay for repairs. Why? Tesla's bodyshops have long backlogs because there are no parts, because Musk is desperate to get as many cars out of his factory as he can.
Lots of Teslas also get totaled because Tesla charges outrageous pricing for replacement parts. Musk is exploiting the insurance industry.
Insult to injury is that Tesla can decide one day that your vehicle is too damaged for their tastes, and refuse to sell you parts. No other manufacturer does that, not even Ferrari, and that's really saying something.
other investors. housing is only "underpriced" because it's become a commodity market that investors play in. the people who want to live in the houses have no hope of affording them when they have to compete with all the various capital funds that are buying houses and hoping to flip them to other capital funds using a slightly different algorithm to calculate value.
was that their goal? it's possible to be a market maker without cornering/manipulating the market. see: market makers on stock markets.
(In case it's not clear, I'm legitimately curious and know basically nothing about dealerships.)
If Alice has season tickets to a basketball team, and Bob buys some of them to scalp later, isn’t he adding liquidity?
I know nothing.
But the whole point is that the entertainer doesn't want liquidity, they want illiquidity, for two reasons:
1. The marketing value of a ticket being impossible to obtain. The best way to do this is to sell the ticket below the market clearing price. Then you get rows of people sleeping before the day they go on sale, etc. A lot of people want that image as they believe long term the marketing will generate more revenue.
2. They want fanatical fans rather than rich fans. They may feed off the worship or cheering and want those who go through a lot of hoops to get the tickets, rather than a salesman using the company expense account to wine some client who might not throw their bras on the stage or paint their face green and scream for their team. In this sense, you can think of the money the entertainer gives up by selling below market as the purchase price of audience enthusiasm.
Now if the scalper steps in, and instead of having the underwear tosser you get the businessman, then many entertainers/performers would be pretty upset as the scalper took for themselves the enthusiasm payment and left the entertainer with the market-rate fans.
Scalpers always buy stuff where there is already high organic demand from actual end users, because scalping only works if demand outstrips supply. This demand is the liquidity the producer of the stuff needs, and it's already sufficient for them to sell all their inventory quickly, so the scalper obviously does not provide any useful service to the producer.
For the buyers, they act as a seller, but for each item they offer, the original producer has one less to offer, as the scalper has bought it from the original producer. Therefore, they provide exactly no additional liquidity for the end user.
The only thing they do is ratchet up prices and reduce customer service levels (the original producer or an actual, professional reseller will most likely offer better customer services than some random guy on eBay), which are both net negatives for everyone but the scalper.
They were scalping housing.
"Scalping" makes zero sense in this context. Scalping exploits ticket mispricing and asymmetrical access to the market (waiting in line). Houses are bought at auction; you can't "scalp" at an auction. Try it at Christie's sometime.
They were literally scalping properties. And, like a scalper who has too much inventory, they’re now selling at a loss.
Zillow seeks to sell 7k homes for $2.8B after flipping halt - https://news.ycombinator.com/item?id=29081118 - Nov 2021 (521 comments)
It seems the current article adds significant new information, so we won't treat it as a follow-up (or dupe).
The algorithms are fooling themselves... Opendoor matches Zillow who matches Opendoor and that's how you get ever increasing offers.
Edit: oh, and now Zillow has that unit on the market, priced 14% lower than they paid for it, after 3 price cuts so far.
Edit 2: Phoenix/Scottsdale AZ market
I have read this article and the one before it and it sounds very much like some folks who fell in love with their own idea and got early feedback that it was "working", went all in and never checked to see if it was still working.
The lesson should have been, "When you perturb an emergent system, never assume that the current state is the new steady state."
The most interesting thing for me back when I was in college was a discussion on of the professors on feedback systems gave on LA's freeway systems. There are three major interconnected freeways, 405, 110, and 10 which at the time formed a triangle. Now there is the 105 which cuts off the tip so perhaps a smaller triangle. The professor shared a paper that tracked "brake waves" which were aggressive braking maneuvers that would "propagate" backwards on crowded freeways. The paper showed that at the right time of day, an aggressive braking on any of these three segments could result in your own braking wave to "lap around" and hit you again. Sort of a ringing of the system.
This sort of effect can be present in any system that isn't centrally organized but is instead a result of the interactions within the system. Buying and selling real estate is such a system, especially when you are a 'market maker' in that system.
There are a lot of papers on how HFT trading algorithms interfere (both constructively and destructively) with each other on wall street exchanges. Just interesting stuff in my opinion.
I found I could "break" the wave by letting a gap grow in front of me that would absorb the wave, and I wouldn't have to brake to a stop (and so my clutch would last longer).
It never occurred to me to write a paper about it :-)
If Zillow was the only iBuyer in a particular market, then that ceiling would likely have held, as all other non-zillow sales would still be operating under the loan approval constraint, and that would get reflected in the comps. But in a market with multiple ibuyers, none of which are capital constrained, it would make sense that they run up the prices against each other, past what the local homebuyers can afford.
Not sure how much that actually played a role here. But could be fun to do some back of the napkin math to see if that was the case in some of these markets.
In the more irrationally-hot markets, why assume that housing is even being purchased on a mortgage by your average home-buyer, rather than being purchased cash-in-hand by a private or corporate investor looking to park wealth they've already generated? (Even if that isn't the majority of houses in those markets, the sales like that that do happen would still have an impact on property values in the affected neighbourhoods.)
This is particularly pernicious because while there is a ton of housing, very few actual units in a city are ever on the market at once, making it easier for a well capitalized buyer to corner. My small city (pop ~1mil) only has 638 units for sale according to Zillow, which is pretty small all considered.
0 - What an unfortunate name we’ve settled on. Reminds me of the era where every cheap infomercial product had to ape Apple naming conventions.
- It's easy to get wrong. If you see a lot of opportunity all the time, it's your model that's wrong, not the market. Very trivial things can mess up your model, like not understanding what the input data means.
- Good trades are hard to get, common rule of thumb that your boss will tell you. Someone selling a house too cheaply? Either there's lots of other buyers or there's something about the house that you didn't think of.
I remember seeing an FX volatility model that almost never traded. It always said "the market is right, plus minus costs". Now and again it would ding and we'd carefully try to get it done in the market, you wouldn't do like Zillow and surprise all the sellers with a massive payday.
I also wrote an arbitrage bot from Bitstamp to MtGox once. I looked at it, didn't turn it on. Percentage wise it was a massive arb, but you couldn't see this in the raw numbers: credit risk on one of the legs. It just shows you that you still need to understand how things actually work. The model is only a calculator for quantifying opportunities that you understand.
This is perhaps the oddest thing about this story. Zillow must have run into several situations where they were paying more than what's sensible, and their staff must have reported this? Surely at the start of an algo buying program, you are vigilant to evidence that the program is wrong?
Counterparty risk, that is where the profit came from. I did the same thing, but went into it knowing what the exposure was and how to mitigate it: don't leave crypto in an exchange's hot wallet any longer than it takes to execute a trade and take profit only on exchanges that you could legally pursue in the event that they fail to execute a USD transfer. I also anticipated the debanking that followed... as far as I know I'm still blacklisted by one bank and two money transfer services. What I didn't anticipate was how many exchanges would get hacked and what that would look like to anybody who aggregated the transactions: I get cold called by actual financial institutions a few times a year, always looking to bulk up their dark pools - they somehow have it in their heads that I'm sitting on billions of dollars in BTC. They likely don't have enough of the puzzle to put together the fact that arbitrage doesn't take much when you only need three confirmation blocks - USD wire transfers were the bottleneck.
The issue with that arbitrage is that it was always one-sided. If you're arbing 2 equivalent markets (e.g. name trading on two different US exchanges), you'd expect to buy and sell on both markets in equal amounts, on average.
Bitstamp vs Mt Gox arb required traders to always buy BTC on Mt Gox and sell on Bitstamp (which is a strong indicator of cp risk). This makes inventory management very difficult - especially towards the end of Mt Gox where fund withdrawal times were of the order of months.
It was madness trying to code around people not thinking about their effects on the market and still turn a profit. Spoiler: we never did turn a profit on bozo powered listings, because at some point, it’s better to free the inventory space instead of waiting for the bozo to sell their items and let the price climb back up over the course of months or years.
I think about that a lot these days given the absolute oceans of capital sloshing around. I'm glad you got a piece of it! But this is a really weird way to redistribute excess wealth.
After a 14% cut, that would still be an absurd YoY increase (I think still the largest single year increase in a major metro in the US on record?).
I get that Zillow is losing 14% - but the market is not yet even back to normal appreciation - let alone "crashing".
A single padded first sale on a new development would be factored into offers. Classic wash trade.
I think the environmental crisis is already effecting the supply chain, I don't think we humans can see it yet. Are we Soviet Russia circa 1931, pretending like everything is going swimmingly while an enormous amount of us are about to starve?
Or Opendoor buys a house from themselves at way over market to trick Zillow into bankrupting itelf.
I saw quite a few houses that sold a few years prior for much lower prices. The disparity in estimated values and previous sales versus the list price was astronomical in most cases. The banks will happily give you a loan for whatever price so there is no check on the runaway prices except for your own personal knowledge of the historical market demand in an area.
it was purely about marketing driving up its own value via poorly considered metrics that invariably included positive reenforcement loops. eg, yahoo sells an ad for a company which sells ads on yahoo.
That's quite a statement. The head of a company with a privileged view of the US residential real estate sector says that the market is "unpredictable." Not the good kind of unpredictable where you can't figure out how heavy the money bags that get dropped at your door will be. No, it's the bad kind of unpredictability where you can... lose money.
Reading between the lines, I conclude that Zillow sees a major shakeout in real estate on the horizon. They've already been hit with losses and see a lot more where that came from. In an effort to get ahead of whatever is approaching, the company is making an abrupt exit from the home flipping business.
Zillow was founded in 2006, as the last US housing market bubble was furiously inflating. It has seen a complete cycle of boom/bust. If anybody knows the US residential real estate sector, it is Zillow.
There's no way that OpenDoor doesn't follow them out the door here in the next couple of months. The business model is exactly the same. Anecdotally I haven't seen any reason to think OpenDoor is doing much better around here.
This coupled with the Fed tapering could cause the real estate market to cool pretty quickly.
If you're buying a home right now, make sure you're moving somewhere you're willing to live for a while and that you're not going to be in financial duress if your home loses 20% of its value.
Flash forward eight or nine months, the housing market explodes and they triple down on their iBuys. My friend sells his home again, again with Zillow (I couldn’t believe he chose them either), and they offer him more than they did in Jan. 2020 (he sold sometime in 2021). Even with the extra mortgage payments he had to make, he still ended up making some money on the deal. Clearly, these companies were in over their heads, making bad decisions on algorithms and not doing real due diligence. The fact that they had an out 18 months ago and stopped doing this, only to triple down and lose $550m in a quarter is just staggering.
[1]: https://www.forbes.com/sites/brendarichardson/2020/03/28/zil...
They were for a long time the de facto neutral party everyone used to look at houses. Great. Then they got into doing contracts apparently, still OK.
Then they started competing against people and overbidding everyone, at the height of what appears to be the biggest housing boom of my lifetime. This was not only apparently financially dangerous, but an act that puts them in a bad light, publicity wise.
I cannot think of how anyone thought this was an OK idea.
It's crazy to think an institution like this would get FOMO, but I think what happened is in 2020 they saw housing prices go through the roof, thought to themselves "hey we have all of this data, we can make a quick buck here" and piled in only to now get burned.
So yes it was FOMO, but not based on quickly appreciating real estate.
I guess they assumed flipping houses would have more revenue and profits.
I imagine they felt the only way to prove how good their Zestimates are was to start acting on them.
And it's entirely possible that the problem is they have spent the last 10 years tweaking their Zestimate algos to make listing agents happy, increasing prices. Like, nobody sues you when your estimate is too high, but when you get it too low, get your legal counsel prepped: https://www.marketwatch.com/story/do-zillow-zestimates-misle...
Also they prioritize those listings now, with no way to filter them out, so when looking at houses I end up just scrolling past several pages to get to other listings that I actually want to see.
It's amazing that this whole scheme has made their traditional user experience worse at the same time.
Couldn't get the inspection done within first 9 days(inspection contingency is 10 days) of signing the contract and only got a response when we said we were going to cancel escrow. Got the inspection complete on the 10th day and there were so many issues with the house and repairs done that we felt it was not worth the negotiation to sort it out with Zillow and decided to back out. Not sure if this is a general trend but my agent was fed up and he said he will never deal with Zillow again. This was 3 weeks ago.
I tried using a discount broker back in the day, my experience was similar to yours.
https://fred.stlouisfed.org/series/MSPUS
The fed chart shows almost hockey stick growth in housing prices this year. How can the Zillow properties be underwater, did they just massively overpay up-front?
https://twitter.com/WallStCynic/status/1192663938720292864
Steve Eisman, the short seller who was Mark Baum in 'The Big Short' also predicted this in 2019.
https://www.cnbc.com/2019/08/08/big-short-investor-steve-eis...
Calling bullshit simply isn't worth the hassle these days (e.g. see Tesla and cryptocurrency fans). Better to figure out how to identify the top and keep opinions to yourself.
Also I’m really curious about the geographic distribution of their inventory… let’s do some Data Science on this blow up!
Didn't make any sense to us at the time on why Zillow (and also Opendoor) was making such a high offer, the process was very smooth AND fast. Too bad they won't be around.
So this is pretty big additional news from the context of this morning's article.
There were rumors that Zillow was trying to test if they could manipulate small markets - and they were trying to buy a significant portion of listings in those markets. If true - in those areas - they could get completely destroyed if they list a lot of places at once. And if true - I hope they get a huge fine for trying to manipulate the housing market.
The workforce gets the consequences for leaderships decisions
How can this even be possible? These numbers make zero sense.
The reason that local realtor groups will never get displaced by a Zillow is that in almost every area, those local realtors control access to the MLS. But...if a company like Zillow could come along and get a significant number of listings in an area that weren't represented on the MLS then Zillow could start to replace the MLS in that area without fear of being cutoff by the local realtor group.
To see that all they were trying to do was make money flipping houses...I'm honestly a little shocked.
But, this gets me back to my belief that Redfin is the only tech company in real estate with a real chance to be disruptive.
It’s a grotesque situation in Australia with property appreciating by exorbitant amounts every month to keep up with the rate of cash printing.
This assumes that OD isn't a house of cards.
https://www.wsj.com/articles/zillow-quits-home-flipping-busi...
https://finance.yahoo.com/news/zillow-shuts-down-home-flippi...
https://www.businessinsider.com/zillow-homebuying-unit-shutt...
https://www.cnbc.com/2021/11/02/zillow-shares-plunge-after-a...
https://www.seattletimes.com/business/real-estate/zillow-to-...
Planning renovations, sourcing materials, finding and scheduling contractors all involve a lot more than writing clever code.
1. ZO overpaid for homes, offering over asking price for most homes 2. During the pandemic, housing inventory/supply (the number of houses for sale) tanked. This hurt Zillow's primary business, which thrives on the velocity of the market 3. ZO continued to purchase homes during the pandemic, overpaying, and adding huge liabilities 4. The inevitability of increasing interest rates could (probably will) cause housing market fluctuations that leave Zillow-owned homes in the red for awhile
Zillow was leveraging their primary business to make Zillow Offers work. Unfortunately, a really bad year makes it difficult to justify the huge liability.
Zillow's iBuyer program hit the scene like a bull in a china shop. The real story is that they rushed into this space, had underdeveloped algorithms, overpaid for homes, and now the chickens are coming home to roost.
The reason you fire-sale that house at loss, is because you believe market value is unlikely to catch up.
Zillow hasn’t ever bought and sold homes (until now). That’s not their business.
But one day we hit a period with high volatility, lots of price crashing and spiking. The handheld systems and the servers that drove them were too laggy to keep up, so the monkeys would get taken advantage of both on the way up and on the way down. It was a very expensive lesson for the execs who put too much reliance on the tech and not enough on the expert humans.
It seems so wild to me that not only are people making the same mistake, but at a much, much larger scale. Half a billion dollars lost. So far!
> In April 2018, the company entered the fledgling on-demand home buying market (often referred to as ibuying) with a service called Zillow Offers. Prospective sellers in 11 markets (and growing) can go to the Zillow listing for their own home and ask for an offer. Within two days they’ll be sent a price derived from the Zestimate and other algorithms. Two local experts also provide input on each house, and if the seller likes the initial offer, a Zillow employee comes to inspect the property. (If a home is in poor condition the offer may be withdrawn or lowered.)
https://www.forbes.com/sites/samanthasharf/2019/07/01/rich-b...
It really calls into question their pricing algorithm, but I give them credit for actually trying to get into buying and selling properties.
The reason? No comparable homes that were recently sold AND available via MLS (private sales are ignored). The rules for appraisals breakdown when there is no liquidity. At least Zillow still considered private sales. The Zestimate was much more correct than the "expert" appraiser.
I don't think it's hyperbole to say Zillow has more data on residential real estate than any other company in the US.
If you could statistically trade houses people would have been doing it before we were born.
The interesting question is around their bonds. They were basically convertible bonds which likely triggered, but now they have to pay back the cash. How much of a liquidity crisis will this introduce to the company?
The more interesting thing is that this business crisis won't be reflected in their last quarter 10-Q which should be coming out soon. I'm assuming this is going to be talked about in that earning call, so that will be an interesting one to listen to.
I think Opendoor's model is a lot better, but I guess we will have to wait to see if there are any repercussions to their business.
That's an odd way to say "I think you should probably consider renting right now" (which is absolutely what you should do if you think housing is likely to drop 20%).
Yes, they have to pay taxes. They have to maintain the property, and check on it against break-ins. There is a lot of cost to holding a property.
Hope those come from a different model than they used for buying.
There could also be the issue summed up as "thr market can stay irrational longer than I can stay solvent" issue. Even if your bet is right if you lack available capital for the temporal range and trajectory you can never capitalize on any theoretical gains. Even if you were right about Atari going bankrupt if you shorted at the very beginning of their existence in the late 70s and it took until the 90s for it to happen chances are you would default even though you were right.
lol, there is zero chance that Opendoor stops iBuying in the short term.
They are indeed much better at systematically valuing houses than Zillow. This was already the case 5 years ago when I worked there, and they have relentlessly improved on their core model since.
Selling or shorting Opendoor due to Zillow’s flaws is akin to shorting Google due to Yahoo’s inability to monetize search well or return long tail queries properly.
https://fred.stlouisfed.org/series/MSPUS https://fred.stlouisfed.org/series/FEDFUNDS
The Fed is (likely) going to announce bond purchase tapering this week, they’re currently buying $80B of US Treasuries and $40B of MBS every month. I believe the plan is to taper buying completely before raising rates.
The lack of QE could see the long end of the yield curve start to rise, which would push home prices down. If and when they start hiking the FF rate, look out!
The aftermath when they decide to unwind their positions will be far-reaching. Probably not another 2008, but it'll certainly depress valuations across the country. Like you said, if you're buying now, buy because you need a nice place to live, not because you intend to flip.
Only for flipping. The real value was buying during the pandemic and holding as housing supplies starts tightening up.
All models are wrong, some are useful.
Zillows were wrong, and apparently not useful.
Extrapolate that out a hundred thousand times and you get a sense of what they were trying to manage. How did they predict remodel costs? Pre-pandemic material costs and back-of-the-napkin labor estimates?
For comparison, since 2014 the US population has increased 4%.
Also, people aren't moving from somewhere to fill up your town, go on a random city subreddit and you'll see a different local mythology to explain the prices. It's happening everywhere though. There's literally no significant area that's seeing an exodus with decreasing prices. Not California, not libruhl lockdown states, not Texas, it's happening everywhere.
The reason is quite obvious. Just like bond values and yields are inversely correlated, mortgage rates and home values are inversely correlated. Here is a chart of the 30Y mortgage rate, it should explain everything.
1. The construction of new homes was limited in late 2019 early 2020. This was due to covid and labor shortages and supply lines being blocked.
2. Demand for homes rose to an all time high. The people in big cities said: "Why quarantine with nothing to do in my Manhattan apartment when I can buy a house and sell it when the pandemic is over. House prices always go up so I'll make money"
3. Zillow, banks, etc saw the fed start printing money which was going to lead us into an all-time high inflation rate. Their inflation hedge was simple: shift all liquids into long term stable solid assets. For most of human history this has been housing (single family and rental properties). Zillow specifically got a massive credit line via taking advantage of "zero risk" money from the fed via their bank.
4. Zillow + banks + the middle and upper class families start buying homes at a record high. This compounds with the lack of new supply.
5. Foreign speculators move in and see the increase in property value. The common wisdom of "prices only go up for homes" has encouraged them to invest in these properties. I know some people who have been doing this. Foreign speculators are concentrating on some limited markets (USA, Canada, and Australia).
Now that most of our liquid assets have shifted into properties any fluctuation in property value would have interesting implications so there will now be a large interest in keeping home prices high.
The core problem: properties are only worth what people are willing to pay for them. Regardless of what has been going on with inflation or how much money you have put into flipping it. If no one will buy the home for 200k over assessment then you have to lower the price. This is slowly causing a large reversal in the market. I've been seeing homes steadily creep back to what inflation would account for in price delta.
Do you have any data or more info about this? I think many of us young 'uns would just like some hope right about now.
https://fred.stlouisfed.org/series/MSACSR
Supply is going up.
That's the only possibility available as far as I can see. I recall seeing the housing stock they favored were all in the hottest US markets, so they're exposed to small fluctuations at the extreme end of the histogram. Otherwise the US median home price curve still looks like a boost phase ballistic missile track as of Q3 2021.
Zillow only got into this flipping game in 2018. They've never seen anything but rapid price growth. I will not be surprised when we learn the place was off the hook with buyers snapping up properties with no adults at the table.
There is always someone caught way over extended when markets move. This time one of them is named 'Zillow.' Expect a bunch of tedious 'insider' stories from Wired et al; wrecked hotel suites and orgies and $2e6 super cars. All the usual.
So this has some obvious issues: * Areas without a ton of very similar houses that have also sold recently will basically have no 'comps' to use. * It's really easy to keep identifying differences (pros/cons) until the adjusted prices equal each other but it's hard to know if all of the meaningful differences have actually been identified. * It gives average homes and average buyers a huge advantage. This model assumes that the housing market is hot but not hot enough that someone will pay 10-15% more for some specific feature. Anything unique to a home/property is only going to be worth a fraction of the time & money it would cost to add. Anything super common (kitchen remodel, finished basement, etc.) can actually add 100% or more of it's cost to the houses value because the buyer is paying with 5x or more leverage so paying a bit extra to have it included. This is also why it's often better to fix a few things as the seller than give a discount on the sale price - the buyer will often pay a premium to get things move-in ready since it doesn't impact their monthly costs significantly.
Second, there are droughts popping up all around the world, our fisheries are collapsing but our supply chain might be absorbing the problems of it until suddenly it doesn't anymore.
That is my deep worry -- that we are seeing the start of a generalized system collapse.
Bidding algorithms can model the price of winning the auction, you can maximize profit without fancy RL
One thing to keep in mind about list prices: if the sellers do a good job of estimating the current market price, then the house will sell quickly. If you're checking listings infrequently, there's going to be some sampling bias in the listings you see; overpriced houses that aren't selling will be disproportionately represented in active listings.
(The negative signal was equivalent to an email hard bounce for an email marketing AI. Like, if that signal is there, the customer is gone forever)
This reliance on AI magically figuring things out is pretty annoying.
Source: worked on MLS ingesting software.
People need to be willing to sign their lives away to pay off houses, otherwise rates would also be strongly tied to the price of everything from cars to toothpaste (they are very loosely, but those things don't cost 3x what they did in 2014).
My understanding is that Zillow relies on realtors to add their listings, so that means, maybe-it-happens, maybe-it-doesn't, entry errors, maybe-it's-updated, maybe-it's not...
Rising interest rates is absolutely going to have an impact on home values and mortgage rates. What it does to home transaction velocity is yet to be seen.
Mobilizing professional contractors is very difficult unless you are the highest bidder. And even then, shit happens...a lot.
Zillow, in many cases, just bought and instantly relisted the property on their own site.
This is the hard part. All the good contractors do this themselves, or they charge so much you don't make any money on the sale, or they're booked out 3 months in advance.
Flipping is low touch compared to that. To flip, all you need is a buyer willing to pay money, and it's a single transaction.
I would however offer that if anyone can give me unfettered access the data of multiple MLSs I could generate some visualizations. I really really really want this data.
It sounds like a really interesting story that’s missing a few steps due to space - it’d make a great blog post in detail!
https://www.goodreads.com/book/show/23209924-the-water-knife
the lenders "knew" of the bad loans, but because these lenders are going to on-sell the loan to some other investor, they didn't care as they profit off the sale, rather than the loan repayments. It's a moral hazard.
Official #1: Btw (by the way) that deal is ridiculous. Official #2: I know right...model def (definitely) does not capture half the risk. Official #1: We should not be rating it. Official #2: We rate every deal. It could be structured by cows and we would rate it.
And the parts that were so junky they couldn't be rated got remixed into another deal to get rated.
The price you pay when entering the housing market is substantial. It corresponds inversely to the capital you'll have later to do other things. If you pay $900k for the same house your neighbor paid $600k for, your neighbor has an extra $300k to work with over 30 years, which is significant.
But inflation being as high as it is today...that $300k will be worth much less over time, and you aren't saving it all at once if the down payments are the same.
That isn't even to mention selling at a loss or close to it if you have a pressing need, which will hurt your chances of getting into the next house.
it's a bit tautological - because the expectation of value not catching up is the definition of overpaying!
https://www.sciencedirect.com/science/article/abs/pii/019126...!
A simplified theory of kinematic waves in highway traffic, part I: General theory
Also:
https://www.sciencedirect.com/science/article/abs/pii/019126...!
A simplified theory of kinematic waves in highway traffic, part II: Queueing at freeway bottlenecks
Its definitely wrong to make this assumption, but the people who got paid are all incentivized to turn a blind eye.
Well it's obviously true. Take your good bond to get paid first from 1000 junk bonds. Then your 999 worse bonds get paid last. Even during the mortgage crisis, not all of the junk bonds returned zero. So there is some number of junk bonds that can be combined into a good bond and worse bonds.
The problem is that people estimated that number to be lower than it actually was. It was a quantitative failure.
How do you prevent someone from just filling the gap? If it's large enough to absorb the wave, someone will fill it just out of spite.
Besides saving your clutch, you can do this type of brake-early maneuver at stoplights. Decelerating early and coasting at a lower speed means you don't have to stop and can increase your gas mileage significantly.
On further reflection, that's not necessarily selfishness, more that they don't understand what I am trying to do, but there's no way to communicate complex information car to car on a highway.
Bluetooth had started to become standard in all cars, and as I was working on a train project, the idea occurred that if we could link all the freeway cars in series, and treat it as one long train, then I would essentially just have to steer, and we all would avoid brake-waves.
One car only needs to be able to talk to the one car in front of and the one car behind itself.
Which is better: more vehicles on the freeway at lower average speeds - or fewer, faster ones?
This is a problem that can probably be solved someday with self driving cars collaborating to make highways huge coordinated conveyor belts.
If big institutional money is going to cause a frenzy it would need to be irrational money managers that somehow clear their purchases through a panel and none of them say anything. Some point out that blackrock is on the other side of this zillow unloading but they have trillions in assets and only 60 billion in real estate. This is the largest money manager in the world and thats all the exposure they have.
lol.
2007 was the end of a long road, paved by unsophisticated "money managers" and doubly unsophisticated "bank regulators" and even more unsophisticated "politicians" since WW2.
There are people buying houses for more than their rental value right now where I live. Because there's one crime-ridden trailer park maintained on the freeway nearby to make them all within a certain distance of a "disadvantaged zone" and thus every former manufacturing country factory boss looking to move to the US only has to lose $400-$500 dollars a month to buy his way to the top of the green card list.
You can always just stick your money in an ETF.
Also if you WOT a modern car you get the instant response without the ecu calculating pedal angle, comparing to accelerator history, humidity factors etc etc but kiss fuel efficiency bye bye. There are mods and tunes that reprogram the fuel map to cut out this processing time
I also drive a big turbo family sedan and am used to saying 2 Mississippi before the engine pulls at full boar
Unfortunately I cannot find an easy good reference on what exactly that difference is quantifiably. Also many of the Electric cars right now are higher end even sporty vehicles, and more likely to have a throttle mapping that is more direct.
> Under regulations ... an EB-5 investor would need to invest ... a minimum of $1 million normally or $500,000 in economically disadvantaged areas...
> You'll need to plan on having your money tied up in the business for several years. When you first get your green card, your permanent resident status will be conditional for two years. During the 90-day period before the end of the two-year conditional residency, you'll need to submit a petition to remove the conditions—to show you invested the required amount and created ten jobs. These two years and government processing times result in your money being parked until you finally get your unconditional permanent residency.
https://www.alllaw.com/articles/nolo/us-immigration/investme...
Edit: Not OP, just guessing
So practically it's pretty cheap to get yourself to the top of the list for permanent residency. All you have to do is buy a couple of $500k houses, rent them for whatever rent you can get for them, claim you created 10 jobs by hiring maintenance guys and landscapers and whatever else to maintain them, and then when you've got your paper from the US government you can turn around and sell them for what you paid for them (or even a little less, who cares, you bought your American residency).
The rules were changed from the original law to not only allow properties in economically disadvantaged areas but near them.
As I said, that's why there's a trailer park which resembles some "third world" country slums right on the freeway in the wealthier north Dallas suburbs where I live. All of those realtors selling rental houses to Chinese factory bosses, Russian mobsters' children, South American cartel finance guys, etc need them to be near the trailer park to qualify for the program. Similarly, via a ridiculous string of foot paths and bike lanes, Hudson Yards in NYC was determined to be economically disadvantage due to its proximity to Harlem, so they could also sell apartments that no one else wanted to Chinese factory bosses, children of Russian mobsters, South American cartel finance guys, etc.
Do you not have them in the US?
Additionally the removal of hard shoulders is just dangerous.
Lol, why adopt the UK's variable speed limit when we have already de-facto reinvented the Autobahn....
(Of course, taxes and regulations complicated this discussion.)
It doesn't complicate the discussion, it is the discussion. Basically the only reason foreign investors are buying real estate in North America is because of issues directly related to regulations and taxes.
Even now, with retail being the most powerful they've ever been in human history, they might be able to squeeze a single, small or mid cap equity (GME being the most famous example) but they cannot move sectors of markets, much less create a generalized bubble in ANY asset class.
Crypto 2017 is the only "bubble" which you might claim was retail-driven (even then, you'd need to provide evidence for such a claim), and even that had institutional money such as Grayscale, high-net-worth speculators, and algotrading from high-net-worth speculators driving the bubble. Not to mention that was a tiny bubble relative to any equity market bubbles.
It's well-known Tech bubble 2001 was driven by investment banks. It's even more well known that the 2008 bubble was driven by investment banks, hedge funds, and derivatives trading. The current $2.5T+ market cap crypto bubble has been formed by large institutional buyers, high net worth individuals, and corporations pumping money.
Dutch Tulips, South Sea Trading Company stocks, 90s Japan were all from institutions or high-net-worth individuals (nobles, royalty, corporations, etc) as well. Your post really couldn't be further away from reality. The historic bond bubbles have all been inflated by institutions and governments. Making a claim that even one bubble, much less "most" bubbles are caused by retail, is an outrageous claim which requires extraordinary evidence that you would need to provide.
FYI, the reason this is happening is that interest rates are so low that people are desperate for yield, and rental yield fits the bill.
There are a lot of benefits:
- professionally managed properties. Most small time landlords are incompetent -- the horror stories you see about landlords being petty or vindictive is from the small time landlord, not the professional manager.
- lower rental prices for properties people want to own. Institutional investors can move funds more quickly to increase rental stock where it is most in demand. Here, too, the yield will fall, which is another way of saying lower rents.
Moreover despite the moral panic by journalists that ordinary households are being priced out, this doesn't actually happen because most institutional investors operate in unconstrained areas, where home prices track construction costs, at most with a small delay. In these areas, an increase in renter demand will result in more property built much more quickly if the institutional investors participate. This actually drives down prices over the long term by increasing supply.
However in constrained areas, this would drive up prices for SFHs. But I thought people weren't supposed to buy SFHs in constrained areas - and institutional investors have been in the multi-unit market for over a century.
But construction costs track home price so this doesn't prevent an unbounded faster than inflation growth.
You're embarrassing yourself at this point between the barber and stating housing was "clear cut retail debt" in 2007 when it was actually a trillion dollar derivatives market that caused the bubble/crash, significantly driven by predatory/abusive from the mortgage lending side? Where do you think retail got all the money for the houses? "the entire crypto _thing_ is retail" uh, no, it's not. Tesla bought over a billion in bitcoin earlier this year, and large investment banks opened crypto desks early this year. And bringing up companies like Blackrock(?) which I didn't mention, oh my you are all over the place. Grayscale is not Blackrock... Can you present any evidence at all that retail has caused historical asset bubbles?
Sorry, you're just straight making things up and have a very poor or nonexistent understanding of markets. I won't waste my time here any longer.
https://www.investopedia.com/terms/h/hnwi.asp
No, you're wrong on this and basically every single other statement you made. High net worth individuals are typically considered separate from retail traders, and yes, just because they have a lot of cash/assets. Part of the reason I kept saying [institutions OR high-net-worth individuals]. I didn't think that was such a challenging concept.
> Derivatives made things worse but they were...derivatives, they're called that for a reason dimwit.
>Please get real on this because you sound like a clown.
Real classy. Well at least I know now you were here just to be pompous and find a way to broadcast your lack of understanding of the market.