rip zillow

Love it. Ibuying dead as they overpaid.

amazing they could lose so much money in a bull market, does make you question the narrative on housing

Those algos can’t really differentiate between the condition of the different houses and precise location. And labor and material costs are way up.

Then there could be market cooling down in places where prices were up 25 percent in one year. I think George alluded to that in his nowhere.

I’ll bet they didn’t consider they’d get picked off so badly. The only sellers who’d take the action are the ones where the algorithm’s offer was over market, but never the other way around.

exactly

The seller know the condition of their house and their micro location.

It just never seemed like a sound business model, but I always feel a little uncomfortable questioning the leadership of a billion dollar company. But I guess everybody makes mistakes, 'new' Coke didn't actually go over so well ; )

Anyway, I've always preferred redfin when searching for homes outside of New York City. And although it's dried up a bit, at least redfin offers you discounts on listing fees along with commission rebates.

Zillow still hasa big pile of cash to get them through this set of purchasing errors. I'd expect to see them come back with a revised program in 2022-23, if they don't first get bought (or sell themselves) for the value of their RE data beforehand.

I guess open door has better computer models? Or did they just get lucky?

It's really not that difficult to understand where a property should trade. However, similar to zestimates, there's a potential that computer models can't differentiate between upgrades, additional work, renovations, etc. Can you scale this up successfully if you have to have a set of human eyes go over the final data the computer generates?

I like the idea, I like when there are new and innovative processes that offer consumers options. I think overall it makes the entire market more efficient, and weeds out the inefficient and bad players.

https://www.cnbc.com/2021/11/10/opendoor-q3-earnings-beat-estimates.html

I disagree with the fundamental assertion that it's not difficult to understand where a property should trade. We have some of the smartest minds in NYC (and Nowhere; hi NYC alums) on this board, and we regularly disagree about where the price for property X or property Y is going to end up.

I do think BigTech has managed to successfully demonize labor (and concomitantly, professional service) to the point where the incursion of more and more automation into the real estate industry is inevitable, but that doesn't mean it's good for the consumer. For some consumers, i-buying will provide a faster process that's good enough -- but for many consumers who aren't in that middle sweet spot, it will be a worse -- and by that I mean expensive -- experience.

Remember that line from the SNL Spectrum skit this weekend?: "Want premium channels without premium prices? Not gonna happen; we'd lose a ton of money."

Similarly as "innovative" as i-buying is... where are the customers' yachts?

ali r.
upstairs realty
{disclosure: I've known Rich Barton for years and am often long Z, though I am not at the moment}

Prior to becoming a real estate agent, I had a long career in capital markets...first as a practitioner and later as a trainer/training manager. At one point I worked for a training consultancy where we had one of the leaders in quantitative finance as a member of the firm. It was his philosophy that every financial model has a flaw and it's a problem when a firm uses the model without that assumption. Zillow just learned this lesson the hard way.

The algorithm used by Zillow was incorrect in so far as the data point that was provided was incorrect for what was to be accomplished.
It was a technical error.
Tech does not demonize labor, it’s very impersonal. In order to move forward in productivity necessary changes have to be made. Not to worry about the consumer, they will benefit.

Figuring out where a condo or co-op should trade for an end user, residential primary residence, is not difficult.

However, since a residential home purchase is loaded with a lot of emotional baggage, it may not trade where logic dictates.

I understand that many real estate broker / agents are not thrilled with the idea of I-buying, or other real estate platforms that offer an alternative to the traditional process. That's only natural....

As far as big tech demonizing labor, I think 'big finance' might do a better job of that ; )

Ironic they lost money using their own software to value real estate. RIP Zillow. No worse advertisement than to admit you lost money using your own product

Zillow wasn't making money in their core business, so they upped shareholder risk and decided to speculate. It's an old story and the ending was all too predictable. Rhymes with how AIG went down

Since more than a couple of people were buying houses specifically to flip to Zillow it seams somewhat likely that there was some insider knowledge of how the model worked and what it would overvalue.

1. So it wasn't really algos. Zillow management just wanted to buy more and paid more than what their own algos supplemented by human insight believed to be fair price.
2. In addition, the whole game of Zillow seemed to be predicated on essentially earning the selling commission by buying without commission and doing cosmetic clean up. Seller's incentive was avoiding broker's 5% or a part of it.
3. They never seemed to have a clue about what is a reasonable revenue to make for inventory market risk defined as how much the price could more in the time it takes to sell and how much could be the pricing error. Essentially they underestimated the risk by not factoring in market moves and that most people know that the selling price of a particular mid-range house can only be estimated within a few percent even with rich data of many similar sales.
4. Then of course, there is adverse selection Nada pointed out.

https://www.wsj.com/articles/zillow-offers-real-estate-algorithm-homes-ibuyer-11637159261?mod=hp_lead_pos5

the leaderships of billion dollar companies are extremely stupid, at least most of them are