[HN Gopher] Zillow seeks to sell 7k homes for $2.8B after flippi...
___________________________________________________________________
Zillow seeks to sell 7k homes for $2.8B after flipping halt
Author : prostoalex
Score : 261 points
Date : 2021-11-02 13:46 UTC (9 hours ago)
(HTM) web link (www.bloomberg.com)
(TXT) w3m dump (www.bloomberg.com)
| boringg wrote:
| Plot twist - competitor buys them for discount to flip them on an
| even better margin.
| sam0x17 wrote:
| Recall that they recently said they would never do something like
| this after that tik tok "conspiracy" calling them out for this
| behavior
| IAmGraydon wrote:
| When I heard that Zillow was buying in the middle of an extremely
| exuberant residential market, it surprised me and I thought they
| must know something I don't. Surely they aren't stupid enough buy
| and hold a fairly illiquid asset class during market all time
| highs. Guess I was wrong.
| ineedasername wrote:
| Yes-- Also unless you're buying some type of financial vehicle,
| "buy & hold" doesn't encompass the full picture since they are
| physical assets with IRL needs. Unlike a security/stock/bond
| etc., in real estate unless you have tenants paying rent then
| even if the asset value remains the same, you're losing money
| due to costs like property taxes.
| bchris4 wrote:
| I find that every time I catch myself thinking this way I'm
| typically wrong- nobody knows anything, big orgs in particular
| are dumb, and a little common sense usually wins out.
| specialp wrote:
| This is something like running a high end restaurant that is not
| easy to do or benefits from scale. You need a proprietor
| interested in it. Most people that "flip" homes successfully are
| personally involved in the projects. They have relationships with
| local subcontractors, know the area, and often professionally
| work in one of the trades or related fields such as law.
|
| The world is awash with cheap money now, so simply having deep
| pockets is not going to get you what you want. You can't just buy
| people that have the skill to manage the people involved and the
| projects at a large scale.
|
| The analogous restaurant situation is if you have a great chef
| that can run a location, why are they going to work for you? They
| will just open their own restaurant. Businesses where the only
| thing you can offer at scale is money don't work.
| disgruntledphd2 wrote:
| > Businesses where the only thing you can offer at scale is
| money don't work.
|
| Except for banks and VC's I guess.
| DrBazza wrote:
| Did Zillow factor themselves into their algorithm telling them to
| buy/sell? We had the same thing in our ML trading system. The
| first few iterations worked well because the system was set to
| run on small positions and volumes, and then we increased that,
| the PnL in the market was completely different to our models. As
| soon as we added ourselves into the model, we ended up trading
| more much like our original predictions.
| api wrote:
| Best news I've seen all month. I hope anyone doing this kind of
| thing with residential real estate falls hard.
| IAmGraydon wrote:
| Why?
| xuki wrote:
| Because houses are for people to live in not to make a
| profit.
| zip1234 wrote:
| They are not the problem with residential real estate prices.
| The real problem is people that prevent additional housing from
| being built.
| giantg2 wrote:
| "The real problem is people that prevent additional housing
| from being built."
|
| If you go deeper, it's about personal preferences and
| distribution of jobs. There are plenty of areas that allow
| houses to be built and have affordable houses. Many of those
| places may have limited job choices, although remote is
| becoming bigger. If companies didn't cluster as much, then
| overpopulation or constrained resources in specific areas
| wouldn't be as much of problem. But there's also the side of
| people wanting single family homes instead of apartments -
| both existing owners and many prospective buyers.
|
| It seems some companies and individuals are realizing this
| and moving to areas with lower density and lower cost of
| living (or cost of business).
|
| Sure, you could take the other way of removing many zoning
| regulations, but the regulations are the product of
| democracy. Nothing wrong with people in a community wanting
| to set standards for their area.
| tomrod wrote:
| Remote does resolve some of the advantages to clustering.
| Other factors connecting transaction costs and physical
| distance may prove harder to overcome, but here is hoping.
| whimsicalism wrote:
| It's pretty obvious that there are large returns to
| density. This has been repeatedly studied.
|
| This is why people move to cities and why employers move to
| cities.
|
| As more people are brought into the world, those cities
| will get larger. Effectively prohibiting construction is a
| ridiculously stupid policy
|
| > Nothing wrong with people in a community wanting to set
| standards for their area.
|
| There certainly can be. I don't buy this perspective of
| extreme local control - it obviously can't apply for
| everything, and housing is one of the things it shouldn't
| apply to.
|
| It's also not just about "personal preference" - building
| more housing in these areas would be societally welfare
| improving. That is more than just my preference.
| giantg2 wrote:
| "Effectively prohibiting construction is a ridiculously
| stupid policy"
|
| But one has to convince the residents or other voting
| population of that.
|
| "it obviously can't apply for everything, and housing is
| one of the things it shouldn't apply to."
|
| I generally agree that government should take the
| smallest role possible. It seems that this topic has a
| long and expansive precedent - code requirements for how
| structures are built and where they can be, zoning for
| where structures can be built and their uses, property
| taxes (and seizure of non-paying), ordinances restricting
| what people can do on their own property, property state
| restrictions (disrepair ordinances), etc.
|
| We could do away with basically all these restrictions.
| The question is where we draw that line, what we consider
| problem activity, and how we come to those
| determinations.
|
| "It's also not just about "personal preference" -
| building more housing in these areas would be societally
| welfare improving."
|
| What the preference was aimed at is that many people want
| single homes, garages, yards, etc. If they can't get
| them, they will end up moving to where they can. If they
| have them, they (and the other neighbors) will advocate
| to keep the neighborhood that way.
|
| You can call something societally beneficial, but others
| might not see it the same way. It seems the boom-bust
| housing cycle and migrations between various cities or
| other areas can also provide societal benefit, and may
| even be self-correcting as we see people and companies
| select away from the highest COL areas to more attractive
| areas. This could lead to sufficient remaining voter base
| to make the building more permissible or eliminate the
| need by reduction in demand.
| whimsicalism wrote:
| > But one has to convince the residents or other voting
| population of that.
|
| There's plenty of other things that that has obviously
| not been true for, I don't see why we should default to
| this extreme localism you seem to be advocating.
|
| We didn't let local voters decide to continue imposing
| testing requirements to vote, we didn't let them allow
| businesses to continue to determine patrons based on
| race, we don't allow local jurisdictions to unilaterally
| confiscate land/property from private owners.
|
| Given that this is a large problem, I don't see why non-
| local governmental action should be given an effective
| veto power by residents who don't want to see anyone new
| in their neighborhood. The burden is on you to justify
| that, given extensive evidence on how this would be
| welfare & growth enhancing.
|
| > What the preference was aimed at is that many people
| want single homes, garages, yards, etc. If they can't get
| them, they will end up moving to where they can. If they
| have them, they (and the other neighbors) will advocate
| to keep the neighborhood that way.
|
| Yes, plenty of people advocate for things that are in
| their self-interest yet bad for society. Your point?
|
| > You can call something societally beneficial, but
| others might not see it the same way.
|
| Sure. By beneficial, I mean net welfare enhancing for
| society. It's obviously not beneficial if your criteria
| is "increasing the price of my home by constricting
| supply."
| giantg2 wrote:
| "Given that this is a large problem, I don't see why non-
| local governmental action should be given an effective
| veto power by residents who don't want to see anyone new
| in their neighborhood."
|
| So my question still stands and just moves up to the next
| level. Now you have to convince the majority of the state
| or country to support that sort of law. At the federal
| level, the 10th ammendment might even prevent this type
| of law.
|
| The second half of that sentence is pretty inflammatory.
| There are many people who don't want new houses
| constructed and changing the density of their
| neighborhood but would welcome someone new if they're
| moving into an existing house.
|
| "Yes, plenty of people advocate for things that are in
| their self-interest yet bad for society. Your point?"
|
| My point is that people want single homes with these
| amenities and in that sort of setting. Why shouldn't they
| have that? You're implying that this is bad for society,
| yet I see no support for this. I see nothing that
| prevents the free market from addressing or self
| correcting housing issues. Vaguely claiming that your
| position is beneficial and others are not is unproven.
| Even if it would be beneficial, you still have to
| convince the voters to support it.
|
| "Sure. By beneficial, I mean net welfare enhancing for
| society. It's obviously not beneficial if your criteria
| is "increasing the price of my home by constricting
| supply.""
|
| We would have to prove the net benefit part. Nobody said
| it was about home values. Some people support many
| restrictions for reasons other than property value, like
| quality of life, infrastructure issues, etc.
| ClumsyPilot wrote:
| "But there's also the side of people wanting single family
| homes instead of apartment'
|
| Most people who can't afford a home would not reject a
| decent apartment, they just want somewhere to live. Also
| those are not the only two choices, there are duplex and
| triplex homes, illegal in most of us, and other variations
|
| https://youtu.be/CCOdQsZa15o
|
| "Nothing wrong with people in a community wanting to set
| standards for their area."
|
| So in this "democracy" people who don't own a house have no
| voice and no right? Why does this remind me of some other
| mechanism for opressing undesirables?
| giantg2 wrote:
| "So in this "democracy" people who don't own a house have
| no voice and no right?"
|
| You don't have to own a house to vote. This isn't the
| 18th century where only land owners vote. If you have a
| sufficient number of renters, they can outweigh the
| owners.
|
| For example, a municipality in CA decided to raise taxes
| on land lords of rentals. Land lords didn't want this,
| the renters did (probably misguided since the cost gets
| passed on to them).
|
| "Why does this remind me of some other mechanism for
| opressing undesirables?"
|
| You could tell us instead of being rhetorical. Otherwise
| the obvious answer is that you are missing details in
| your comparison and wrongly concluding that it's about
| oppression.
| konschubert wrote:
| In fact, they provide liquidity, which is a good thing.
| justinph wrote:
| Zillow's attempt at flipping was certainly not helping. Even
| if it doesn't improve things, at least it is not hurting
| anymore.
|
| The trend of big companies buying single family homes and
| attempting to flip them is demonstrably bad for individuals
| trying to purchase a home.
| jdavis703 wrote:
| I don't know what sort or homes Zillow buys, but I know
| locally a lot of flippers purchase homes that most banks
| wouldn't lend to a regular consumer. Then they fix them up.
| These are hoarder homes, abandoned buildings, condemned
| housing, etc. In so far as they're making homes more
| accessible to folks without contracting skills I don't see
| a problem.
| ineedasername wrote:
| Sounds like they got in too close to the peak (not to mention
| delays & increased costs in refurb) and didn't factor increased
| carrying costs on the potential that these would sit on the
| market a bit longer if they wanted to sell at a higher premium.
|
| A hard lesson for them that listing aggregation & analysis of the
| market is far different than direct investments & flipping.
| Flippers take a big risk and offset inevitable losses on some
| homes with the profits on others. And generally if they do well
| it has a lot to due with deeper knowledge of the subtleties in
| the local housing market & partnerships with realtors that have
| customers in the pipeline already. There's a lot more to it than
| what might appear on the outside to "tech disruptors", or anyone
| else who thinks it looks easy from the outside.
| deelowe wrote:
| I think there's more going on here than simply RE speculation.
| Most importantly, Zillow is building capability. Capability to
| buy & sell quickly through processes, tooling, networking, and
| brand recognition. There is a long play here. Zillow's goal has
| always been to fully disrupt the real estate market. Why should
| this stop with brokerages and agents? Shouldn't investors also
| be on the list?
| ineedasername wrote:
| > Investors
|
| Sure, medium/large flippers may have investors putting up the
| money.
|
| And I agree that Zillow is not likely backing out of the game
| all together. They just had an expensive lesson learning what
| they don't know about how to go about this. But their current
| strategy was also only viable during rapid price increases. A
| completely different one is needed in other market condition.
|
| Making money flipping in a flat market is even harder: It
| takes more work to find depressed homes at below-market
| prices. There's no good algorithm that will do that without
| boots on the ground looking at the property in person, not to
| mention the surprises you get when you open up the walls or
| floors to start a refurb. That doesn't mean Zillow can't do
| it: what I'm saying is that it's very much not in the realm
| of their core competencies. Building out large scale
| logistics networks for this IRL is much different than their
| current line of business. I'm sure they'll try again, but I'm
| also almost as sure that they'll have a few more significant
| stumbles along the way.
| deelowe wrote:
| Since when has SV startup culture relied on the whims of
| the market to generate their profit? I believe Zillows end
| game is to become the market. Once the scale is large
| enough, it's no longer an issue. hey just mistimed it or
| had some other unforeseen issues in this case.
| monkmartinez wrote:
| They simply overpaid. My neighbor received an offer of $150k
| over the z-estimate in Tucson. He felt that it would be stupid
| not to sell and wasn't even thinking about selling before the
| offer came in, so he sold. He paid a slight premium to buy his
| new house out in the boonies, but the gain offset the rise in
| price. They are currently listing his old house at the
| zestimate... I doubt they find a buyer even at that price
| unless its someone from out of state that has no clue.
|
| I don't think it takes a rocket scientist to see the hockey
| stick graph on Zillow's price div to see this isn't a great
| time buy. It makes me giggle to think about what they were
| thinking. Some houses have tripled in "value" in a year. It's
| artificial and it will revert to the mean. Income in this city
| simply doesn't support the price level we are at for renting or
| buying. People are moving into apartments or out into the
| sticks to wait it out.
| matt_s wrote:
| I think you highlighted an important concept. Rather than
| overpay, people can look further out from a city center and
| get cheaper housing. Sure the commute may be longer but there
| has been a lot of remote working over the last year or so,
| many companies going fully remote.
|
| Home buyers have many choices and at a certain price, its
| simply too much and they go elsewhere.
|
| I think zillow is trying to unload their mistake onto some
| entity they can convince it is still worth it.
| ineedasername wrote:
| >look further out
|
| This is what has driven up housing prices where I live.
| It's having a ripple effect as those with more flexible WFH
| schedules decide they can now afford to buy a home outside
| of the city, and those outside the city realize they can
| get a significant upgrade in home quality for no extra cost
| by moving still further away.
|
| As people begin to make choices like this at a systemic
| level, I really think the WFH genie is well & truly out of
| the bottle for good: When people can get a significant
| boost in quality of life & w/l balance with nicer living
| quarters & more flexible schedule, we simply won't be
| willing to take a job that doesn't allow for this.
| Especially once we've made the move away from central
| business hubs already and would otherwise have to move
| back.
| matt_s wrote:
| What would be really nice to see is some of the nearly
| vacant small rural towns see a resurgence of some kind.
| Grant programs by the government to spark a movement to
| these areas would be interesting.
| lordnacho wrote:
| And $150k is how much of the house? Needs some more numbers
| so we can get an idea of the scale of overpayment.
|
| Because if they're just off a few percent, I don't know why
| Zillow wouldn't just hold on for a bit.
| malyk wrote:
| Carrying costs. Electricity, landscaping, water, sewer,
| city taxes, etc.
| shmatt wrote:
| >as of October 27. Out of 224 homes, 208 -- or 92.9% --
| were priced below what Zillow paid.
|
| >36.5% were listed for less than the company first paid for
| them from the outset.
|
| So these are ZillowBots numbers in Phoenix. They start off
| with a third going for less than they payed. The rest "hold
| on for a bit" and slowly the price keeps dropping
|
| Eventually there are so many price drops where 93% of the
| homes are on the market (so, even now, not even sold) for
| less than what ZillowBot thought was a good idea
|
| source: https://www.businessinsider.com/zillow-offers-
| ibuyer-sell-ph...
|
| so 2/3 of these houses go with the "hold on for a bit"
| strategy then fail
|
| I don't live there, but from the outside it seems like the
| Phoenix market is on a downwards trend, and they chose
| horrible timing, or really bad algorithm coding
| gitfan86 wrote:
| Maybe on paper it costs 10k to do cosmetic fixes on a house
| that will now sell for 80k more. But there is no guarantee that
| workers will be available and interested in doing that small
| budget work. More importantly to your point the local realtors
| and other people in the area are likely to pick up any really
| good deals before Zillow gets to them.
| noodle wrote:
| They hit the wall that most people are hitting. There are just
| not enough people out there to meet the demand right now for
| residential construction and remodeling. More people want work
| done, and fewer people are getting into the industry, so the
| calendars are booked and costs are going up.
| dang wrote:
| Ongoing related thread:
|
| _Zillow to stop flipping homes, loses more than $550M, lays off
| 25% of staff_ - https://news.ycombinator.com/item?id=29087479
| samsolomon wrote:
| This isn't surprising to me.
|
| Early on in our home search we found a house that we loved, but
| was extremely overpriced--even in a hot market. The house was not
| owned by Zillow, but a similar company. When we asked for
| disclosures we did not receive them for almost a week.
|
| My agent warned me that there were going to be things wrong with
| the house and that they probably would not be disclosed. I found
| a thread on reddit about making purchases from this company, and
| one user who was an agent said that they always asks for the
| previous seller's disclosures--that's how they know where to look
| with the inspectors. Apparently the company frequently hired
| handymen to do specialized work. They did the bare minimum to
| make sure the house passed inspection.
|
| Anyways, we made what I thought was a reasonable offer, even
| though it was for about 10% less than the list price. It was
| rejected.
|
| Three months later it sold for almost the same price as our
| offer. We probably dodged a bullet though.
| edrxty wrote:
| Wow I just had the _exact_ same thing happen to me. Problem was
| they tried to wait me out through inspections to avoid agreeing
| to concessions. The place was nice but turned out to need a
| full roof and hvac replacement immediately.
| skizm wrote:
| I'm actually excited for hedge funds and financial institutions
| nail this process down and houses are both 1) very liquid, and 2)
| priced "correctly". Moving when you own a house will be as easy
| as moving when you're renting.
| dragonwriter wrote:
| > I'm actually excited for hedge funds and financial
| institutions nail this process down and houses are both 1) very
| liquid, and 2) priced "correctly". Moving when you own a house
| will be as easy as moving when you're renting
|
| Once financial institutions get it nailed down, they'll be
| selling to each other in large tranches based on the strategies
| and target asset mixes of different funds, because the
| transaction costs are lower than doing piddling individual
| sales, interacting with the remaining individual owners only to
| buy inventory into the institutional system, and for
| individuals all that will be left is renting through management
| companies employed by the institutions.
| PragmaticPulp wrote:
| On one hand I'm relieved to see that this business model isn't
| working out. I didn't want to see institutional players start
| putting even more upward pressure on home prices.
|
| On the other hand, this highlights just how insignificant their
| purchasing was. 7000 homes is nothing relative to the 1,200,000
| homes they have listed for sale right now.
| axxl wrote:
| I can't read the original article, but this appears to be an
| identical article at least from the start:
| https://www.eastbaytimes.com/2021/11/02/zillow-to-sell-7000-... I
| don't know which is the original and which is the copy. Edit: It
| seems like they are both sites owned by the same company? But one
| has a more aggressive paywall? I don't know.
|
| The schadenfreude is real for me seeing this. A company like
| Zillow getting into flipping seems questionable to me. The
| customers are no longer aligned with the company on goals with
| something like this. It's like when the realtor offers to buy
| your house... they obviously feel like they can make more than
| you, when they're supposed to represent you!
|
| Edit 2: What I'm surprised at as well is how short-term their
| forecasting seemed to be. They just started doing this and the
| market cooled a tiny bit (also, what? where?) and they're selling
| everything off? Were they incapable of sustaining anything but
| massive constant growth?
| JumpCrisscross wrote:
| > _Zillow getting into flipping seems questionable to me. The
| customers are no longer aligned with the company on goals with
| something like this_
|
| I'm currently looking to buy a house. Having a Zillow in
| between the seller and myself (as a dealer, not a broker)
| wouldn't be a slam dunk, but it would be worth some non-zero
| premium to me. (Just offering a counterpoint to the "uselessly
| driving up prices" narrative.)
| brendoelfrendo wrote:
| Can I ask why? I'm also looking to buy a house and the Zillow
| offerings, from what I've seen, are not particularly
| competitive. They don't seem to care much about the quality
| of their housing stock. I'd also be leery of dealing with
| someone removed from the initial seller. It sounds like a
| great way to "launder" issues with the home where Zillow can
| say "eh, we didn't know about that."
| mrkstu wrote:
| I'm looking to do this- I'm going to move out of state, and
| having a counter-party buying my house that is likely to
| offer maximum flexibility as I'm looking for another house
| elsewhere is valuable.
| sigstoat wrote:
| > Can I ask why?
|
| john q homeowner (probably) generates significantly more
| counterparty risk in transactions than giant corporation's
| house flipping algorithm.
|
| no shortage of stories of home sellers doing all sorts of
| weird shit, that zillow et al just wouldn't have
| time/energy to engage in.
| JumpCrisscross wrote:
| > _Can I ask why? I 'm also looking to buy a house and the
| Zillow offerings, from what I've seen, are not particularly
| competitive._
|
| I agree. (I'm not buying from them.) I _am_ having to deal
| with sellers who change their ask at the last minute, have
| past financial issues (if something goes wrong and I have
| to sue, will they have assets?), want to stay through the
| winter, _et cetera_. In most home purchases, expedience isn
| 't the most important thing for the buyer. For some, it is,
| and in those cases something like Zillow's offer _in
| theory_ makes sense. (Counterpoint: homes aren 't
| fungible.)
| nradov wrote:
| Checking if the seller has assets in case you have to sue
| is just bizarre. That's not how residential real estate
| works.
| [deleted]
| arthurcolle wrote:
| Not only that (it's true though) but what if they committed
| to a certain $ figure of upgrades/renovations for the house
| in question? Seems valuable in terms of property values even
| if it costs the seller/buyer some additional premium up front
| judge2020 wrote:
| As someone selling to Zillow, they do retain a certain
| amount ($x thousands) from the seller for repairs and
| cleaning, at least for relatively new construction. I
| imagine it's a larger number depending on how old the house
| is and how much repair they think they need based on their
| appraisal/final walkthrough.
| sjg007 wrote:
| You can also just refuse their offer too if they want to
| take too much off the top.
| hellbannedguy wrote:
| I have felt for awhile that the USA should limit the number of
| homes a company, person, or foreigner can buy, especially in
| tight areas of the country--for instance the Bay Area.
|
| 1. No more wealthy foreigners buying our homes with an email.
|
| 2. No one person can own more than 5 homes.
|
| 3. Eliminate buying up swaths of realestate by companies
| period.
|
| My reasoning is obvious. Try it for a few years, and see what
| happens. Yes--realestate speculators will be crying in their
| Laginitas Pale Ale. Gorgon Gekko will have to liquidate his
| Realestate Speculation portfolio. Yes--those parasites with We
| buy Your Home within 24 hours will be crying in their whatever.
| Yes--those non citizens who want buy a vacant house in our
| country will be crying.
|
| It might make buying a home for Joe Six Pack something he might
| be able to work towards?
| Kalium wrote:
| > The schadenfreude is real for me seeing this. A company like
| Zillow getting into flipping seems questionable to me. The
| customers are no longer aligned with the company on goals with
| something like this. It's like when the realtor offers to buy
| your house... they obviously feel like they can make more than
| you, when they're supposed to represent you!
|
| I've personally dealt with selling real estate within the past
| calendar year. Having someone willing to offer me an option
| highly likely to close quickly at a small discount to the
| prospective market rate would have been a pretty attractive
| option. Otherwise it can take months upon months to close a
| sale. Months in which I'd really like to have that money and
| perhaps be thousands of miles away.
|
| Do they think they can make more money than me? I have no
| doubt. Am I as patient or able to invest as a business much
| larger than me? Probably not. The real estate market is not
| always a particularly liquid or quick one to operate in.
| HWR_14 wrote:
| Where do you live that it takes "months upon months" to close
| a sale? Usually the complaint is that the market moves so
| fast people have to make risky snap purchasing decisions.
| Kalium wrote:
| A national average is about two months, from what I can
| find, depending greatly on where you are and what you're
| selling. That standard deviation can be quite a pain. It's
| certainly challenging to plan around an unknown and
| potentially unbounded number of months. The ability to make
| that into a known number might thus be valuable to some
| people in some situations.
|
| You're absolutely right, of course. There's no shortage of
| stories about markets moving fast! That said, it's been my
| personal experience that people don't generally share their
| stories about a house or condo moving slow. Perhaps
| complaints and stories might not be an ideal guide to
| reality in this instance?
| gfosco wrote:
| In the very hot markets only. Anecdote that matches your
| experience: I sold a house at the beginning of this year
| (sf east bay), and it was on the market for a few days and
| closed ~30 days later. More than a dozen offers, most with
| _no_ contingencies. Top offer was more than 120k over ask.
| adamhp wrote:
| I bought in Northern Virginia this year, and lost 3 or 4
| offers to competitors that were 15-20% over asking.
| Standard was always no contingencies (no inspection, no
| financing, nothing) and settle as fast as the mortgage
| company could underwrite you. You had to _really_ trust
| your mortgage broker and your agent to pull through.
| Probably saw 50 houses before getting lucky on an offer
| because our agent had a connection. It was a pretty awful
| experience and you were forced to make a terrifying
| decision very quickly. I still remember the surreal
| experiencing of clicking the DocuSign button that evening
| that would result in me being on the hook for multiple
| hundreds of thousands of dollars...
| tablespoon wrote:
| > Where do you live that it takes "months upon months" to
| close a sale? Usually the complaint is that the market
| moves so fast people have to make risky snap purchasing
| decisions.
|
| IIRC, when I bought my home, the closing date was about two
| months after we'd made the deal with the seller.
|
| But that's not as long as it seems: there's stuff you have
| to do in that time, like getting the inspection done,
| haggling over any issues found, and getting ready to move
| in/moving out.
| nradov wrote:
| Buyers frequently waive the inspection contingency in hot
| markets with limited supply. Sellers are more likely to
| accept offers with fewer contingencies.
| slezakattack wrote:
| You're not wrong. However, even if you make an all-cash
| offer and remove every single contingency, you're still
| looking at roughly 2 weeks minimum to close. You're
| making the assumption that title companies are competent
| (they are not) and move quickly (they do not). Wire
| transfer takes a few days, need to find a notary to sign
| all of the closing docs, and title companies are slammed
| with all of the other home purchases happening as well.
| lelandfe wrote:
| > this appears to be an identical article
|
| Check the authorship: "Bloomberg." This is a syndicated
| article, you can find the original here:
| https://archive.md/gND5q
|
| After getting purchased by Conde Nast, ArsTechnica similarly
| began reprinting articles from sister publication Wired:
| https://arstechnica.com/author/wired-com/
| nikprasad wrote:
| So they thought they saw a market opportunity and it didn't pan
| out and now they're panic selling because they have too many
| houses on their balance sheet. Ain't nothing new about this and
| in any liquid market you will have people who think they can
| corner the market and make money. The markets see-saw between
| greed and fear and there will always be those who want to
| allocate capital to gain from it. If you're a value investor,
| you're actually waiting for something like what Zillow has
| managed to do i.e. over leverage themselves and now will have to
| rapidly get rid of assets as they're probably hemorrhaging money.
| They'll sell pennies on the dollar and I'm sure the likes of
| blackrock will swoop in and get those assets. Nothing new here
| guys!
| ineedasername wrote:
| Since this is unlikely to be the end of Zillow's ambitions in
| this area, I foresee an arms race between Zillow and local
| sellers & their agents:
|
| Just like with SEO, algorithmic home buying will open up the
| opportunity for people to infer from the algorithms behavior
| which metrics or keywords it's triggered off of and respond
| accordingly.
| t-writescode wrote:
| How do you see that? Zillow uses local agents and their sellers
| to sell houses. There's no battle there. In fact, the sellers
| get more money from this transition because the artificial
| price increase positively impacts them.
| ineedasername wrote:
| I don't think Zillow points their agents at it without their
| own analysis first: I'm assuming Zillow leverages their data
| set to identify a large portion of opportunities. A local
| agent on the ground can sort through things with some
| judgement, but if a lot of their leads are directed to them
| by Zillow's algorithm for identifying worthy investments then
| there could be room to game that system.
| rel2thr wrote:
| very tough to build a model like this to purchase homes cause you
| hit a really rough adverse selection problem
|
| even if your model is 99% great , the 1% that you overvalue are
| going to be the sellers that come to you and agree to sell you
| their homes because your offer is too good to be true
| foogazi wrote:
| That's the paradox of home buying / or any other bidding
| mechanism - did you get a good price ?
|
| No one else was willing to offer a better deal to the seller
| colinmhayes wrote:
| Yea, I'm sure everyone with a lemon house was licking their
| lips when they heard Zillow would buy sight unseen.
| 34679 wrote:
| We need a property tax rate multiplier for entities and
| individuals who own multiple properties. The more you own beyond
| 2 or maybe 3, the higher your rate is. Imagine being a single
| parent who was outbid for a home in Phoenix by a faceless
| algorithm - 300 times.
| epa wrote:
| Just announced they will layoff 25% of their staff (zillow
| offers).
| webinvest wrote:
| 7k millennials will be happy to buy them up at affordable prices.
| ishjoh wrote:
| sure, and that would be great, but unfortunately it's more
| likely this is going to be sold to Invitation Homes Inc or a
| similar company that will just turn them into rentals and
| they'll never enter the housing market for sale.
|
| Invitation Homes was created after the last crash and currently
| owns ~80k [1] homes, so an additional 7k would represent ~10%
| more, and if the discount is right from Zillow they will do it.
| I'm speculating but I bet that's why Zillow is trying to do
| this in a bigger deal, they don't want to crash the housing
| market by actually selling these houses to individuals.
|
| [1] - https://en.wikipedia.org/wiki/Invitation_Homes
| ineedasername wrote:
| Unfortunately, at an average price of about $400,000 most of
| them are not going to be affordable for a typical young first-
| time buyer.
| brendoelfrendo wrote:
| Most millennials are in their 30s now, so they're either not
| typical young first-time buyers or have deferred buying
| housing until now.
| jdavis703 wrote:
| $400k seems very affordable. I could easily buy a house today
| if that's what FHA-grade (i.e. something more than a burned
| out shack) housing went for. In my county the median house
| goes for over $1 million.
| Loughla wrote:
| The median home price in Q3 2021 is $404,000.
|
| That is shockingly high, but definitely not close to the 1
| million figure.
| jdavis703 wrote:
| According to Zillow the median price is $1.018 million in
| Alameda County. I probably should've been more specific
| in my post since "my county" could be anywhere.
| ineedasername wrote:
| Affordable for _you_ (and any US-based millennial with a
| strong education & job in the tech sector or other high
| skilled labor) is very different than affordable for the
| _typical_ millennial, especially ones born in the last 1 /3
| of that generation that haven't had as much time to work up
| the salary scale a bit.
| jdavis703 wrote:
| Assuming 20% down and good credit, the bank will make a
| loan to someone earning $61,000 a year for that. This is
| hardly "tech sector" level income, but yeah it also isn't
| affordable to the bottom third of millennials either.
| webinvest wrote:
| What country is that?
| jdavis703 wrote:
| USA.
| kadomony wrote:
| He said "county", not country.
| PragmaticPulp wrote:
| Not really. Mortgage rates are so low that even with only 5%
| down the monthly mortgage payments on a $400K house are
| similar to what someone would be paying for monthly rent in
| these cities.
|
| Mortgage rates are incredibly low and there are a number of
| options to reduce down payment requirements right now.
| Meanwhile, wages are up and better paying jobs are more
| common for young people. $400K isn't out of reach at all for
| a lot of first-time home buyers in this economy.
| ineedasername wrote:
| I'm not so sure: At current rates, assuming excellent
| credit, that's about $1700/month. If you're anywhere near
| the suburbs of a city, you can add another $500 to
| $1500/month in property taxes, and sometimes another $100
| to $400/month in HOA fees. on that for a total pre-utility
| rate of ~$2400-$3600/month or roughly $30k to $43/ year.
|
| I live in the higher end of that range even though I'm in a
| modest home in a lower-middle class town, in an area where
| the median _household_ income is about $50k. _before
| taxes_.
|
| $400k on a house is simply impossible for many millennials,
| especially those born towards the end of the millennial
| generation that haven't had more time to establish
| themselves and work up the salary scale a bit.
| PragmaticPulp wrote:
| > If you're anywhere near the suburbs of a city, you can
| add another $500 to $1500/month in property taxes,
|
| $1500/month property taxes would be $18,000 per year. On
| a $400K home that would be 4.5%, which is significantly
| more than you'd find anywhere in the United States. The
| average property tax rate in the US is around 1.1%.
|
| Moreover, most locations have an exclusion for the first
| $XXX,000 of home value. For example, a city might tax the
| first $100,000 of home value at 0% and then only apply
| the 1.1% rate (using the average here) to the remaining
| $300K.
|
| Assuming a $100K home value exclusion and a 1.1% rate
| (average national rate), that comes to $275/month, which
| is about half of the lower end of the range you quoted
| and nowhere near the $1500/month upper end of your range.
|
| Also, $400/month HOA fees would be several times higher
| than the average. HOAs aren't actually as common as the
| internet suggests, but when you get into an HOA in a
| neighborhood with $400K houses, you're probably going to
| be paying more like $100-150/month, not $400/month.
|
| > $400k on a house is simply impossible for many
| millennials
|
| Sure, but so is $2K/month rent. I never suggested that
| _every_ millennial can afford a $400K house, but rather
| that it 's not an impossible reach for many millennials.
|
| This is especially true for married millennials who
| haven't had children yet. I think too many people focus
| on the idea of the single millennial purchasing a home on
| a single income and living there alone, but in practice
| it's usually people getting married and settling down
| somewhere together on two incomes.
| BizarroLand wrote:
| I think you're overlooking married millennials, many of
| whom are in their late 20's-late 30's and many of whom
| have no children, and many of whom are two-income
| families.
|
| A $400k home would be quite affordable if each of them
| were earning an average of $24/hr or more, which isn't
| too crazy.
| t-writescode wrote:
| I, singularly, make far more than $48/hour ( which is 96k
| / year ); and, a 400k home is barely in _my_ price range,
| with the HOA and property taxes included.
| gizdan wrote:
| What the sibling comment said, but also, the minimum wage
| is still $7.25, with _some_ companies only now pushing
| this up to ~$15. For many, including married couples, $24
| an hour is a pipedream.
| whimsicalism wrote:
| I doubt they are $400k in the city.
| gizdan wrote:
| 5% is still $20k. When you're living payslip to payslip,
| even $5k is too much as a deposit is too much.
| ct0 wrote:
| But 5% is better than 20% down. Most have the capacity to
| save but choose not to.
| gizdan wrote:
| At current minimum wage, saving 20k will take years and
| years. Most non-tech folks just do not earn enough to
| save. It's not that they don't want to, or choose not to.
| It's that they don't have disposible income.
|
| 5% is certainly better than 20%, but when you don't have
| the money, even 1% deposit is too much.
| t-writescode wrote:
| 5% down on a 400k place is 20k.
|
| Sure, I suppose someone earning a normal wage could
| scrounge together 20k in, let's say, 5-10 years, but then
| they would use *ALL* of their savings and have no
| emergency fund anymore, to use that 20k. Further, then
| you look at all the costs you get hit by when buying a
| house such as closing, etc, and that 20k turns out to be
| 28k, so they'll need to save for even more years.
|
| And now the house isn't 400k, it's 450 or 500, so instead
| of 20k, they instead need 25k, and with closing costs,
| now it's 35k because those went up proportionally, as
| well.
| barbazoo wrote:
| But will they stay low for the next 30 years? Probably not.
| It's not a good idea to justify ones house buying decision
| with an all time low interest rate.
| whimsicalism wrote:
| ? No, it's a great idea if we are talking a standard
| fixed rate
| Loughla wrote:
| In the US, fixed interest mortgage rates are sort of the
| standard. So, the decision to buy now based on interest
| rates is a keen driver of many buyers.
|
| Source; I've refinanced three times based on rates going
| down. I dropped 10 years and 200/mo. off of my mortgage
| for the low, low price of $750 worth of appraisals.
| barbazoo wrote:
| I didn't know there were 30 year fixed interest rate
| mortgages. Interesting, here in Canada it's usually 5
| years as far as I can see.
| Loughla wrote:
| Just off the shelf, in the US, you tend to have access to
| 10, 15, 20, and 30 year fixed rate mortgage. Variable
| rate mortgages used to be pretty common, but they're
| nearly non-existent anymore.
|
| When we shopped to refinance, there were no adjustable
| rate mortgages to be found, only fixed rate.
|
| Anyway, what we saw was that, depending on who you
| finance through, you can get a term anywhere from 5-50
| years.
| ineedasername wrote:
| _I dropped 10 years and 200 /mo. off of my mortgage_
|
| Roughly the same here, and I had a very low mortgage from
| a small line of credit.
|
| Between sticker price on a house and interest rates,
| prices tend to equalize-- people can always only afford
| $X/month, regardless of the proportion going to interest.
| This means that, all else being equal. the most fortunate
| time to buy is when slightly higher % rates have kept
| sticker prices down a bit. That way when rates inevitably
| go down at some point in the future you can refi at a
| lower rate, getting the benefit of having purchased a
| lower price and then dropping down to a lower interest
| rate as well. Certainly not something you can choose to
| do, given that trends often measure by a decade or two,
| so this is just an observation, not advice to wait for
| higher interest rates to suppress sticker prices.
| Loughla wrote:
| That is 100% my experience. We bought when interest was
| still relatively high compared to today (5-7% I think).
| Prices for homes were still being suppressed by the crash
| of 2008. Then the whole world went to pot and interest
| bottomed out for a decade. It just kept going down.
|
| I realize how fortunate we are. Timing is literally
| everything.
| usefulcat wrote:
| ..unless maybe the interest rate is fixed for the
| duration of the loan, which is frequently the case in the
| US..
| wayoutthere wrote:
| There is plenty of idle money in the investment world that
| needs places to go, unfortunately. Homebuyers are still being
| priced out by institutional investors looking to be long-term
| landlords. The market consensus right now is that inflation is
| here to stay for the next decade and bond prices aren't
| adjusting accordingly, so there's a flood of cash into all
| asset classes to try to hedge.
| silisili wrote:
| Sorry if this is a stupid question/thought... but wouldn't a
| mass run to asset classes itself cause inflation? Like some
| self fulfilling prophecy?
| wayoutthere wrote:
| The cause of the problem is that companies are claiming an
| outsized share of productivity growth such that the house
| is simply worth more to them. There's more money in the
| investment class than there is among homebuyers, and the
| investment class needs somewhere to put their money that
| won't depreciate.
|
| This is what happens when real wages stagnate for 20 years
| but the economy keeps growing and consolidating. Eventually
| it catches up to you and you end up with a decade of
| stagflation while the imbalance corrects itself and a
| competitive market is re-established. Unchecked free-market
| capitalism has its drawbacks in the long term; we fucked
| around and we're about to find out.
| whimsicalism wrote:
| Can we please stop using the term inflation to mean rising
| asset prices?
| silisili wrote:
| The two are often intrinsically linked, especially in the
| case of housing. It's not that one sees house prices
| rising and says 'inflation!', but more where it would
| naturally lead.
|
| Or another way...a rise in house prices means a rise in
| rents which means rise in renter wages which means rise
| in prices. Over the course of some time, naturally.
| whimsicalism wrote:
| They are often linked, but they are not _intrinsically_
| linked. I 'd argue that "often intrinsically" is
| oxymoronic anyways.
|
| A rise in the specific asset class of housing lowers the
| dollars ability to purchase housing, I'll give you that.
| But asset prices hiking in general are not inflationary.
| It could be because people are chasing yields (probably
| inflationary) or it could be that there is new
| information/discoveries making it so that the expected
| productivity of these assets is going to be much greater,
| which is not inflationary.
| webinvest wrote:
| Yes!
| djrogers wrote:
| > Homebuyers are still being priced out by institutional
| investors looking to be long-term landlords.
|
| There's really no evidence that this is the cause of any of
| the housing bubble. Sure, it makes a good twitter thread, but
| institutional investors make up a tiny percentage (1%ish) of
| single family rentals...
|
| [1] https://www.vox.com/22524829/wall-street-housing-market-
| blac...
| orangepurple wrote:
| Yet for some reason we are always being outbid by them
| 88913527 wrote:
| As percentage of the entire market, 1% is small. But prices
| are set on the margin: the currently active buyers and
| sellers. Only a small fraction of the entire housing stock
| churns over each year. So if institutional investors want
| to buy a few thousand homes, it's absolutely substantial on
| its impact to prices. Only 40,000 homes are sold annually
| in San Diego county, despite there being 1.4 million
| residents.
| mellavora wrote:
| Actually, yes there is. My brother has a senior position at
| HUD, they've been very concerned about this the last few
| years.
|
| You won't hear this at the cabinet level, because those are
| all political appointees, but when you get down to the
| career people, they have grave concern over institutional
| buyers.
| astuyvenberg wrote:
| They're not selling them to retail buyers, they're selling to
| institutional investors.
| agilob wrote:
| Even more people are happy that this scam failed
| pcurve wrote:
| Zillow is doing it at scale, but I also see smaller companies
| also advertising "Web buy your house!" online.
|
| I wonder if we're at a tipping point.
| [deleted]
| wayoutthere wrote:
| Turns out that mass flipping houses doesn't work when you can't
| hire contractors to do the work for a price that makes your
| budget assumptions hold.
|
| I am disappointed that they're looking to offload them to
| institutional investors rather than individuals. Housing should
| probably not be an investment vehicle, but here we are.
| throw123123123 wrote:
| Housing is an investment in the sense that you need a certain
| amount of capital to create one, and in that sense you want to
| allocate it the best way possible: the best value at the best
| prices. There's no better way to do that than with markets.
|
| Housing will always be expensive in one way or the other, but
| you can make it cheaper and more plentiful. And that should be
| the goal.
| wayoutthere wrote:
| > Housing will always be expensive in one way or the other,
| but you can make it cheaper and more plentiful. And that
| should be the goal.
|
| When housing becomes an investment, the goal is to get that
| sweet ROI which generally means working to restrict the
| supply of housing to make prices rise. Lobbying is a high-ROI
| activity.
|
| And housing doesn't _need_ to be expensive. Japan is a good
| example. It's only expensive because we instituted policies
| that make it an effective investment vehicle when it's a
| necessity in life. Many cities outside the US have policies
| in place making property taxes very expensive for an investor
| who doesn't live in the house. In particular many countries
| prohibit foreign investors from purchasing real estate
| without a local intermediary who is legally responsible for
| any shenanigans.
|
| The free market works well for many things, but there are
| areas where the motive to create artificial scarcity create
| some dystopian outcomes (see also healthcare). We have to ask
| ourselves as a society if our belief in the free market is
| strong enough to accept the societal issues (crime, mental
| health, etc) that have been proven to come along with
| unstable housing.
| sremani wrote:
| Projected population of US in 2050 is 458 million from the
| current 330 million. Given that underlying reality, housing is
| going to be an investment.
| onion2k wrote:
| Assuming that the additional 128m people need about 50m - 70m
| new homes it would make sense that there's going to be a boom
| in supply of homes in the near future. Without the ability to
| control or limit that growth it could _easily_ result in an
| oversupply, especially in any given geographic region, which
| would lead to a contraction in prices. Unless you 're also
| able to predict _where_ these new citizens will live I 'd
| suggest real estate investing could be quite risky.
| mywittyname wrote:
| >Unless you're also able to predict where these new
| citizens will live
|
| Larger cities, especially those in warmer regions, is a
| very good bet.
| wayoutthere wrote:
| Climate change will drive a lot of people to the
| northeast and Midwest in our lifetimes. Much of the Deep
| South will become unlivably hot and humid, and much of
| the west will become dry enough that water rationing
| makes life in the sun not so much fun anymore.
|
| If you want to invest, put your money in places like
| Pittsburgh and Buffalo. Some values along the coast in
| Baltimore and Philly too. Plenty of cheap real estate out
| and I suspect we'll see a revitalization of the rust belt
| as climate change makes other areas untenable.
| ClumsyPilot wrote:
| They are gonna need cars and furniture, yet those are not an
| investment.
|
| Is USA running out of land, or Timber, or unemployed people
| that could be employed to build a house?
|
| We need to get institutional 'investment' out if house
| flipping and fix zoning.
|
| https://youtu.be/CCOdQsZa15o
| epistasis wrote:
| We have run out of "zoned capacity" in the areas that
| people want to live.
|
| Fortunately, this is an infinite resource, and we could
| flip simple governmental switches to allow more housing,
| which generates more property tax to grow the
| infrastructure.
|
| However, existing homeowners are a political bloc that
| mightily resists flipping that switch, both because they
| don't like to see change, and also because they benefit
| financially from a housing shortage.
|
| The institutions investors name these exact dynamics in
| their SEC filings: they know it's a good investment because
| local politicians listen to homeowners, and the homeowners
| will guarantee the shortage.
|
| So in all honesty, I welcome institutional investors, and
| lots of them, because one their are more renters, the
| politics can be flipped. The renters, if they show up as a
| voting bloc, can finally open up the zoning to allow more
| housing.
|
| Resident homeowners and institutional investors are no
| different here, they are both greedy investors, except the
| homeowners are even more greedy (they don't want new people
| in their city), and rhe homeowners have far more political
| control.
| wayoutthere wrote:
| Agreed about individual homeowners; which is why the use
| of homes as an investment vehicle is intimately tied with
| institutionalized racism and redlining. You could not
| "invest" in redlined areas as banks would not issue
| mortgages on those properties. So those houses never
| appreciated in value the same as houses in non-redlined
| areas, and the generational wealth created by owning your
| own home was only available to those homeowners in non-
| redlined areas.
|
| The history of redlining is incredibly recent (it was in
| full force well into the 1990s), so it's not something we
| can pretend is a historical artifact. Highly recommend
| _The Color of Law_ for more on this subject, it really
| opened my eyes on how laws used to encourage
| homeownership were also used to marginalize black people.
| jeffbee wrote:
| Real-dollar home prices plunged continuously from 1950 to
| 1970 while the US population increased by one third. Home
| price inflation is a policy choice, not a law of physics.
| epistasis wrote:
| Exactly, and in that era the federal government financed
| massive amounts of new housing (for white people), with the
| intent of homeownership for nearly all white people.
|
| And once homeownership became the norm, those same people
| started massive downzoning projects to prevent new homes
| from being built. And shortly after that, funding for
| public housing was gutted.
|
| Which leaves us with the massive shortage we have now. We
| have plenty of money that is allowed to chase a smaller
| supply, as long as you can leverage your existing housing
| asset for a larger down payment. But all those people who
| didn't buy in the 1980s or earlier are at a massive
| disadvantage.
| woah wrote:
| We're on the tail end of 50 years of policy to make single
| family homes into a perpetually growing investment vehicle to
| finance baby boomer's retirements.
| hncurious wrote:
| I hope you're right, but what signs do you see that it's at
| the tail end? Home ownership rate is at 65%. They want their
| home value to keep increasing and I don't see evidence of
| millennials being any less self interested when the rubber
| meets the road.
|
| https://www.statista.com/statistics/184902/homeownership-
| rat...
| JohnWhigham wrote:
| Yup, milliennials are just doing what their parents did.
| Just shows how egregious boomers have been in fucking up
| this country with their own greed.
| [deleted]
| woeirua wrote:
| I think Zillow is facing a big potential loss on these
| properties. The homes that I've seen on the market in my area
| through Zillow/OpenDoor have been exceptionally poor quality and
| grossly overpriced. They've been steadily marking them down week
| after week and they're still not selling. Some are now more than
| $100k below what Zillow paid for them back in Aug/Sept (on a
| $600-700k home). Even with their fees, Zillow has to be taking a
| big hit on these properties.
|
| The end of this cycle is definitely going to scare a lot of
| companies and investors out of real estate for quite a long time.
| If you're looking to buy a house right now, make sure you're
| somewhere you want to live for a while. You're probably buying
| close to (if not at) the top.
| strikelaserclaw wrote:
| AT the end of the day even if a home is an asset, it is
| fundamentally a place to live for a lot of people, a lot of
| people would much rather rent than put all their savings into
| an over priced dump.
| tibiahurried wrote:
| Homes like stocks are way overvalued. Homes are fueled by the
| frenzy of ownership at all costs, and stocks keep pumping at
| absurd levels.
|
| Everything is extremely overpriced. Eventually, it will come down
| to common sense.
|
| My friend has put all his savings and stocks to buy a 2b
| apartment. Myself, on the other hand, did not sell any stock and
| have invested all my savings. I rent a much bigger place, my rent
| is way lower than his mortgage and at least for me it will be
| more convenient to rent at least for the next 10y. After that, I
| will retire and move to a cheaper area.
|
| Keep saying people have gone mad. Many fail and underestimate
| cost of ownership. Remember that a good chunk of your mortgage
| are taxes and interests, factor that when you compare rent vs
| buy.
|
| That said, I do own properties that I rent out. But I bought them
| at sane prices. And they generate cash flow that I use to pay for
| my rent and other expenses.
| anonymousab wrote:
| > Eventually, it will come down to common sense
|
| People have been saying this for a long time in Canada, but
| there is no indication that things will change. People who
| waited and saved have simply seen that the price increases have
| far outpaced their saving rate.
|
| When it's in a government's interests to keep prices rising,
| then they're going to do things that keep those prices rising.
|
| Another outcome could simply be that actual ownership of a
| house in some areas becomes so expensive as to be the exclusive
| domain of the wealthy, and everyone else just rents. More
| middlemen raising the costs, more renting and less ownership
| per capita, as is the trend of more and more industries these
| days.
| tibiahurried wrote:
| > ownership of a house in some areas becomes so expensive as
| to be the exclusive domain of the wealthy
|
| I agree. In fact, I live in an expensive area, but planning
| on moving in few years when I will be retired. Then I will
| buy a mansion for little money. And still gonna have plenty
| of savings and investments to pass onto my kids.
|
| I don't understand the ownership at all cost. You need to run
| some numbers and understand if buy is financially more
| convenient than renting. If not, it is ok to rent. But some
| people are just obsessed with ownership. Even if is not
| financially sound.
| noahtallen wrote:
| I don't think people are obsessed with ownership for the
| sake of ownership. There are a large number of benefits to
| owning which the individual might find valuable enough to
| pay for:
|
| - more space
|
| - individual outdoor space
|
| - control over your own area. Can paint or remodel however
| you like.
|
| - Dealing with terrible neighbors isn't nearly as bad.
|
| - location might be quieter and more desirable
|
| If we compare renting a house to buying a house, the cost
| just doesn't make sense for rent. It's much higher than
| renting an apartment in cities
| tibiahurried wrote:
| > more space
|
| That's hardly the case. Buy a big place, usually costs
| more than renting one. Or at least that's my experience.
| If I had to buy the place I rent it will cost me easily
| $3M to 4M. My rent will only pay for a 2b/1ba. I am
| talking about major city. Perhaps is different in
| suburbs, don't know.
|
| >Dealing with terrible neighbors isn't nearly as bad.
|
| It is way easier to just rent a different place than
| having to sell your house because of that noise neighbor
| that likes to throw party every week end.
| t-writescode wrote:
| Also, stable monthly costs.
|
| I rent, but am looking to buy. Rent is about 2200 / mo
| for me; and buying would be 2700/mo for me... but in 4
| years, rent will probably be 2700/mo for me and then
| buying will begin to make me money.
| jmrm wrote:
| This happened in some European cities, and now, a mortage or a
| rent are equally expensive even to high wage people, like
| engineers and surgeons.
| tibiahurried wrote:
| It is a seller market, and it is probably gonna stay that way
| for some time. The only properties I am considering buy are
| those located in vacation places. You can still find good
| deals, and you can easily repay by renting them out for few
| months a year.
|
| I will only consider buying a property in a major urban city
| only if I had to live there basically for ever. Otherwise I
| will keep renting. Prices in major EU cities, like the rest
| of the world are insane compared to the level of income, even
| for wealthy engineers.
| WORMS_EAT_WORMS wrote:
| Comments like this make it seem like it's all figured out.
|
| Everyone's situation is different based on income (sounds like
| you are high income too - which makes choosing where to deposit
| cash easier), location, family/living requirements, current net
| worth, job stability, partner income, etc...
|
| It is very possible too your friend made the better decision.
| There was a time where stocks and house prices going up was
| different and the world was not in a 10 year plus aggressive
| bull market.
|
| Ultimately, you do what's right for you.
| tibiahurried wrote:
| Absolutely, it all depends. But I keep seeing close friends
| who are now home poor. They own their place, but that's it.
| They are done. They don't have any significant money for
| rainy days, they can't afford anything else because all their
| money go into their properties.
|
| For me, that's not how I want to live my life. But as you
| said, everyone is different. So for them, perhaps that's ok.
| Not judging.
| WORMS_EAT_WORMS wrote:
| Don't think you are judging. Comment definitely just came
| from position of what I infer as having privilege:
|
| - 10 year retirement (no idea your age but assuming this
| earlier retirement/semi-retirement)
|
| - Rental properties that are cash flow positive (require in
| most circumstances a bigger down payment)
|
| - Assuming others have enough income left over to put into
| the stock market after rent. Don't consider madness for
| families to balance their lifestyle and savings
|
| Either way, I believe the majority of these homes Zillow
| bought are more towards the lower-middle class budgets.
| Which is kind of my point on frustration with the inflated
| cost. It's a much bigger impact than a lot of tech
| bros/girls probably feel personally.
| munificent wrote:
| _> After that, I will retire and move to a cheaper area._
|
| Some people don't treat their social network as fungible and
| want to grow old next to their friends and family.
| tibiahurried wrote:
| >want to grow old next to their friends and family.
|
| That's exactly what I am gonna do.
| cheeze wrote:
| Sometimes buying makes sense as well. The NY Times has a good
| calculator for this. In my case, rent is so expensive in my
| city that buying and building equity was higher EV than
| keeping my cash in investments.
|
| YMMV.
| SN76477 wrote:
| I hope this bubble bursts.
|
| In less than 3 years the rent in our working class city went up
| 45%.
|
| Not to mention the absurd qualifications one needs to rent.
|
| 4 times the income to rent, very good credit and background
| checks.
|
| This is not sustainable for working class people.
| _fat_santa wrote:
| It's worse in some areas. I was trying to rent a place in
| Denver, it was a 1bd going for $1,300 but the landlord wanted
| someone with 5X net earnings. I told the landlord he was
| delusional. 5X net earnings to qualify for that place would be
| close to $160k pre-tax and anyone earning that much isn't
| looking at a place like this.
| xyzelement wrote:
| > In less than 3 years the rent in our working class city went
| up 45%.
|
| I sympathize with that but I want to make sure people
| understand the dynamics. Prices are driven by supply and
| demand. If there's only one empty apartment in the city and
| you're willing to pay $2000/month, I am gonna have to pay $2100
| month if I want to live there instead of you. That's sort of
| separate (though related to) prices of houses.
|
| What will make rents go down? Only two things: demand goes
| down, meaning people aren't looking to move into / are moving
| out of the city. This happened in NYC rents in early covid as
| everyone bailed out. So one way to drive prices in your city
| down is to have some even that renders it undesirable (COVID,
| defund the police, rising crime, suburbs more attractive with
| work from home, etc.) The other way is to increase supply -
| that is to build more housing. Counterintuitively, this happens
| more _when prices are high_ because it compels builders to
| create more housing stock.
|
| People in NYC love to complain about all the new construction
| going on (or at least that was going on in the last few
| decades) but imagine what rents would have been without that.
| noahtallen wrote:
| > COVID, defund the police, rising crime, suburbs more
| attractive with work from home, etc.
|
| If there are any cities for which this is true, it's cities
| like Seattle and Portland. Theoretically, they are not
| desirable to live in because of COVID, very high crime rates,
| not idea for working from home, huge public safety problems,
| etc.
|
| But rent is higher than it has ever been.
| meetups323 wrote:
| Yes, they are very not desirable, so much crime, poor
| working from home experience, poor public safety,
| everything else the MSM wants you to believe, etc.
| Definitely don't come here....
|
| Or maybe your sources are more interested in selling fear
| than accuracy.
| xyzelement wrote:
| Again, that's supply and demand. In NYC there was a demand
| hit when COVID started and there were great deals on rent.
| That's gone away because people have sort of come back.
|
| My point is purely logical - the way to get rent down is to
| either increase supply or decrease demand. If crime, etc
| gets bad enough, demand will drop and rent with it. The
| argument you're making (implicitly) is that things haven't
| yet gotten bad enough for people to move out.
| pvarangot wrote:
| San Francisco, Seattle and Portland are great cities.
| Austin is a great city. Don't believe what the conservative
| media wants you to believe about SF or what the liberal
| media wants to make you believe about Austin. Those cities
| are used as an "example" of what the democrats/republicans
| "will do with the country" if they win national elections.
| It's been going on for like 30 years and if like 1% of what
| they said was true San Francisco would now be a pile of
| shit and homeless people and to live in Austin you would
| need to have your own army to defend against the evil
| corporations that are coming for your land.
|
| The main problem with all those cities is public
| transportation sucks.
| mercutio2 wrote:
| I generally agree with your points!
|
| Except the reason people in my social circle would never
| move to Austin isn't about guns, it's about women's
| access to quality reproductive care, including abortion.
|
| And I don't think the democrats are exaggerating the
| extent to which that is not an option in Texas.
| nsv wrote:
| This is true, but it's important to consider also things
| which might artificially constrain supply, such as laws that
| make it harder to build housing or policy which incentivizes
| buying homes as an investment. A commonly repeated statistic,
| there are more empty homes than there are homeless persons in
| the US (around 17 million empty homes vs. around 600,000
| homeless).
| zemo wrote:
| > one way to drive prices in your city down is to have some
| even that renders it undesirable (..., defund the police ...)
|
| there are so many problems with your post but the assumption
| that defunding the police is necessarily going to cause
| prices to collapse is probably the most obviously biased one.
|
| the idea that you should view housing as simply a matter of
| supply and demand and not consider any externalities is an
| abominable position. All people need shelter, it's not
| something that people opt into for the enjoyment of it alone.
| By the logic you have presented, the top 1% of people banding
| together and buying up all of the housing and squeezing
| everyone else is perfectly fine if it makes the numbers look
| nice, regardless of how it affects people's lives. The way
| you have framed the problem is inhumane.
|
| Another way to make rent more affordable is to raise the tax
| rate on income generated from residential rentals to the
| point that people are not buying up all of the housing stock
| for the sake of investment alone. Income from residential
| rentals is taxed at the same rate as ordinary income, the
| kind you get from actually _doing something_. Why would
| anyone work if they can just own someone else 's house
| instead?
| seoaeu wrote:
| You can't solve a housing shortage by charging landlords
| more taxes any more than you can solve a famine by charging
| farmers more taxes. If there aren't enough homes for
| everyone who wants to live in a city, then part of the
| solution has to be _building more homes._
| UncleEntity wrote:
| > Another way to make rent more affordable is to raise the
| tax rate on income generated from residential rentals to
| the point that people are not buying up all of the housing
| stock for the sake of investment alone.
|
| Wouldn't that just mean there would _less_ rental
| opportunities because people wouldn't rent out properties
| due to the increased tax burden?
|
| Not really seeing how such a plan would work out since it
| would increase rents across the board from lack of supply
| and the higher taxes being passed along to renters.
| zemo wrote:
| sure, jack up property taxes instead of rental income
| taxes. The point is not the specific mechanic, the point
| is the desired outcome should be to reduce the number of
| residential properties purchased for investment and
| speculation. Zillow owning 7k houses doesn't actually do
| anything good for society; that's 7k houses that people
| aren't living in. People buying houses shouldn't be
| forced to compete with the search engine that they're
| using to buy houses.
| xyzelement wrote:
| > the idea that you should view housing as simply a matter
| of supply and demand and not consider any externalities is
| an abominable position
|
| Comrade, I am speaking about "how it works" not "what would
| be really nice if..."
|
| > Income from residential rentals is taxed at the same rate
| as ordinary income, the kind you get from actually doing
| something.
|
| I can tell you have never owned an apartment or a house.
| The amount of money and time that goes into maintaining a
| property, managing risk of bad tenants, etc is really high.
| Not to mention property taxes which is likely something
| you've not heard about (or, at least you don't mention that
| in your post when talking about the tax burden.)
| zemo wrote:
| > I can tell you have never owned an apartment or a
| house.
|
| I own my home and I pay property taxes, nice try though.
|
| > Comrade, I am speaking about "how it works" not "what
| would be really nice if..."
|
| faced with "the rent going up is a problem for working
| class people" you're instantly taking the side of
| investors and positioning it through this lens:
|
| > I want to make sure people understand the dynamics.
|
| the problem is not that people don't UnDeRsTaNd ThE
| dYnAmIcS, the problem is that the dynamics actively
| incentivize the creation of an investor and speculator
| class that owns a substantial portion of the housing
| stock and drives price up based on speculation and not
| based on any actual need to use the product. The supply
| is artificially held low by the investor and speculator
| class, my argument is that this is actively harmful and
| that the idea that the only way to raise supply is to
| build more houses is wrong, because your framing assumes
| a vacancy rate of zero, which no major city has.
| judge2020 wrote:
| They're specifically framing it as understanding the
| dynamics and answering the question "What will make rents
| go down? Only two things". There's very little sympathy
| or opinion in their post.
| qaq wrote:
| All people need shelter but people are not entitled to
| shelter in any place of their choosing. Your proposed
| solution will increase rent prices for people who can't
| afford to buy a house while pushing the housing prices down
| and making them more affordable to middle class. So
| essentially you are making house purchasing more affordable
| to middle class at the expense of the poor and investors.
| zemo wrote:
| > people are not entitled to shelter in any place of
| their choosing
|
| I don't think that's a useful framing, because it's again
| putting the framing in terms of market dynamics in a
| vacuum. People don't pick where they're born, they don't
| pick who their parents are, and they don't pick the
| socioeconomic status that they're born into or have as
| children. The majority of people are born somewhere and
| cannot really afford to leave. For example, 72% of
| Americans live in or near the city where they were raised
| (https://www.northamerican.com/infographics/where-they-
| grew-u...). Most people don't have the agency to pick
| where they live based on price alone, because other non-
| market factors become comparatively larger when you have
| less money. If you can pick where you live based on price
| and how interesting it sounds, congratulations, that is
| privileged position. That's not to shame that position or
| anything, I'm just saying that the problem has to be
| viewed from the standpoint that most people aren't in
| that position. People are interdependent with their
| relatives, their friends, and their neighbors. Moving
| costs more than simply the price sticker of your new home
| minus the price sticker of your old home: the social
| costs are enormous. I think that a basic right of modern
| societies should be that people should not be priced out
| of their homes because of the whims of investors. So
| again, I think the idea that these things should be
| viewed through the lens of market dynamics alone is
| inhumane.
|
| > Your proposed solution will increase rent prices for
| people who can't afford to buy a house while pushing the
| housing prices down and making them more affordable to
| middle class.
|
| ok maybe. My point isn't that I have the perfect
| solution, my point is that there are far more levers to
| pull than what was being suggested, and that I do not
| want to live in a society that considers the problem by
| only looking at markets and pricing.
| qaq wrote:
| I hold the opposite view it should be purely viewed
| through market dynamics in terms of solutions to societal
| problems we are trying to solve. As soon as you try to
| come up with the solution that ignores them you
| immediately get 2nd order effects that might be directly
| undermining your original goals. If there is lack of
| housing any solution that does not meaningfully increase
| the supply of houses will fail. (I am an immigrant so
| have pretty decent grasp on sacrifices one makes to move
| to get access to better opportunities).
| humanistbot wrote:
| You're omitting a major component of the demand side:
| investors and speculators. If the market was just made up of
| the people who are looking to live in those homes, the market
| would be reasonable for those people. But we have a massive
| amount of investment funds looking for returns in an
| uncertain market, plus near zero interest rates for the near
| future. The number of investors who are buying houses they
| have no intention to live in is skyrocketing, either to rent
| out, to flip, or just to hold vacant in the hope values keep
| rising.
| xyzelement wrote:
| The parent was talking about the rental market so I am
| talking about that. I agree your point applies to
| ownership.
| afsafsaf wrote:
| The market for home ownership affects the market for
| renting. The boundaries between renters and owners are
| not fixed.
| munificent wrote:
| Good point.
|
| One way to look at this is that a house on a piece of
| property can be treated as a fungible product for two
| different markets: it can be an investment vehicle for
| investors, or a place to live for homeowners.
|
| As its value to one of those markets increases, buyers on
| that side suck supply out of the other market. You can get
| a sense of how much this is happening by looking at the
| vacancy rate: higher vacancy rates implies that houses are
| worth relatively more to investors than homeowners.
| Panzer04 wrote:
| Investors and speculators don't live in houses, renters do.
| If there isn't renting demand, than it doesn't matter how
| much speculation there is, prices will fall. Blaming
| investors is directing the anger at the wrong place. Blame
| regulations and building restrictions that prevent housing
| supply being built where people want it.
| JohnWhigham wrote:
| For areas where stable jobs/people are moving to (much of the
| South/SW), I don't see it ending any time soon.
| driverdan wrote:
| It's mostly driven by real demand. I just bought a house and
| the market was absolutely insane. It seems like everyone is
| trying to buy right now. Every house I looked at had multiple
| offers the day of the listing. I'm sure speculators have an
| impact in some markets but that's not what I saw here.
|
| Until supply increases or demand drops these prices aren't
| going anywhere but up.
| jdhn wrote:
| >Not to mention the absurd qualifications one needs to rent.
|
| This was probably prompted by the Covid rent restrictions.
| Landlords (especially smaller ones) don't want to rent to
| someone who can avoid paying rent due to government decrees.
| seanmcdirmid wrote:
| Ya, you can't restrict the market and still keep it
| capitalist. In Seattle, new regulations on price increases
| along with an indeterminate moratorium on evictions is
| definitely going to make landlords really careful on credit
| checks. I also wouldn't be surprised if the low end rental
| markets disappear completely as they become too risky to
| operate in as landlords.
| nradov wrote:
| At the very low end there will still be a market for
| Section 8 housing.
| seanmcdirmid wrote:
| Ya, but it is going to suck for those who don't qualify
| for section 8 yet can't afford high end rents. Probably
| the government will come in fill those gaps long term.
| fish_phrenology wrote:
| Having rented in Seattle for 6+ years at essentially the
| lowest non-subsidized price point, these existed before,
| along with a variety of other problems.
| thesausageking wrote:
| It's not a bubble. New housing construction fell by ~30% when
| the pandemic hit and still hasn't yet recovered to fill the
| deficit. At the same time, the US has been printing money like
| crazy and keeping interest rates at zero, which makes housing
| prices rise. This is why Blackrock and other PE funds have
| starting buying housing. They know that, in this market, it's a
| great bet to make. It unfortunately means your rent isn't going
| to come down or even stop going up anytime soon.
| 999900000999 wrote:
| Where ?
|
| A big part of why Los Angeles is a living hell for most people
| is due to rapid recent increases in rent.
|
| LA is this disgusting place where a very very small number of
| people are doing exceptionally well, and almost everyone is
| either homeless or half a paycheck away from that.
|
| The only saving grace is these obscene rent increases appear to
| be isolated to a few select markets. In most of America you
| haven't seen anything like the rent inflation normal in Los
| Angeles. If possible, consider moving. These issues have come
| about over the last 30 years, they won't be fixed in the next
| three.
|
| I moved out of LA my cost of living dropped by about 30%
| overnight, and it was much easier to meet nice people. I've
| long considered writing a book about just how much moving to a
| different city can fix your life. Most behavior is ultimately
| economic, if you and no one you know can get their lives
| together and move out, none well.
|
| In LA this spirals into a nasty entitlement complex, leading to
| various yucky situations better avoided.
| neonate wrote:
| https://archive.md/gND5q
| game_the0ry wrote:
| Former real estate finance professional, here.
|
| If you were hoping this was a sign of the real estate market
| falling and perhaps its your chance to get a bargain, think
| again.
|
| > The company is seeking roughly $2.8 billion for the houses,
| which are being pitched to institutional investors, according to
| people familiar with the matter.
|
| Institutional investors (Blackstone, Blackrock, Colony, et al)
| will be being in bulk, in cash, and at a steep discount before
| they even hit the market. Zillow's loss will be the institutional
| investor's gain. Of course, they will happily rent to you since
| that is the the plan all along - own _all_ the assets, and every
| generation after X gets to rent [1].
|
| I wish this would anger people more, but enough home owners will
| benefit from this dynamic - it will likely keep home prices
| elevated for longer, and set up an ugly conflict between those
| who do not have (and aspire to have) homes and those who
| currently own homes.
|
| [1] https://www.ocregister.com/2021/09/30/in-a-hot-market-
| compan...
| DarkmSparks wrote:
| I think you are mistakenly assuming they will be successful
| selling 7000 houses for $400,000 each.
|
| In a world where the likes of blackrock are up to their
| eyeballs in bad Chinese real estate deals already that seems
| unlikely.
| subsubzero wrote:
| 100% agree. Institutional investors are setting themselves up
| to be landed barons that will seek perpetual rent from working
| people who can no longer afford housing as the supply has
| shrunk and housing prices skyrocket. Oh and if these
| institutions fail they get bailed out by govt(they are too big
| to fail!). Imagine if these 7000 houses were offered to buyers,
| this would allow so many families opportunities to
| homeownership, this whole scenario makes me mad as hell and I
| hope this practice will be banned in the future.
| MrKristopher wrote:
| What would you ban?
| rozap wrote:
| No ban, just huge property taxes for non-primary
| residences.
| nkozyra wrote:
| Doesn't this just trickle down to the renter, who has few
| alternative housing options?
| thow-01187 wrote:
| No. Landlords do not "produce" rooms by taking raw
| materials and transforming them into goods. In the
| current market, the rent is determined by how much the
| marginal renter is able to pay. Increasing the cost to
| the landlord doesn't magically increase the renter's
| ability to pay
| donkeyd wrote:
| This guy gets it.
| caterama wrote:
| Costs trickle-down... Profits don't.
| nkozyra wrote:
| > Costs trickle-down... Profits don't.
|
| Well, we're talking about costs. That's why I asked.
| djrogers wrote:
| Since institutional owners like this make up a tiny
| percentage of ownership, your solution would have a huge
| impact on small landlords, which would be passed along to
| the tenants.
|
| Basically you're asking renters to pay for this
| behavior...
| mistermann wrote:
| "A" government[1] could telegraph that major (as major as
| is necessary) policy changes are coming that will affect
| SFH investors in a detrimental way, and that it would be
| in their best interests to prepare accordingly.
|
| If this does not happen, I suspect Mother Nature will
| eventually intervene, and that usually doesn't go well
| for anyone.
|
| [1] I do not presume that any arbitrary Western
| government is actually capable of this in the real world
| as it relies on many prerequisites, some of them policy,
| some of them psychological/ethical.
| [deleted]
| mikysco wrote:
| Aren't all these homes required to be listed on the MLS before
| being sold? My understanding is a home (at least in California)
| can't be sold unless publicly listed for X days on the MLS.
| topkai22 wrote:
| I don't think that is true. I know of intra-family sales
| where that definitely didn't happen and a quick search found
| nothing. There may be some internal rules among Realtors (who
| own the MLS- it isn't a public service) that require that,
| but a law declaring that would be dictating paying for a
| given private organizations product, which sounds
| problematic.
| jiveturkey wrote:
| Curious to know how and where you got that impression. There
| is no such requirement.
|
| There are similar private requirements for the cartel known
| as NAR. What this means in practice is that pocket listings
| actually make to to the MLS for one day before apparently
| being sold "in 1 day".
|
| Zillow as property owner is not part of NAR. Zillow as broker
| is also not part of NAR, although if they were, they'd do
| exactly as individuals using pocket listings do. Arrange a
| sale privately with an institution, place the listing on MLS,
| then sell it "on the open market" in 1 day.
| JKCalhoun wrote:
| I think MLS would like to give you that impression. They
| seem to function as a cartel of some sort. (At least I have
| never understood their purpose.)
| rgbrgb wrote:
| There are over 900 MLS organizations in the US. Their
| purpose is aggregating the RE listings in a region. This
| was super important 100 years ago, still pretty important
| 25 years ago, and now has little utility for consumers
| now that listings are aggregated online and searchable
| without an agent across regions with better-than-mls-
| portal consumer-grade shopping tools.
|
| Today they essentially function as data brokers and
| unofficial labor organizers, collecting membership dues
| from agents in exchange for ensuring that the agent's
| name is on their listing wherever it's shown online and
| (along with NAR) pushing agents to keep "standard"
| commissions on their listings (5-6%).
| rubyn00bie wrote:
| I worked in real estate tech for like five years...
|
| An MLS is nothing but an local organization. There are zero
| laws requiring a property to be posted on an MLS. I know of
| zero states with any regulations like what you propose.
| There's also confusion around the term "Realtor" because
| "Realtor" isn't actually a thing. It's a brand, a "real
| estate agent" on the other hand is an actual job.
|
| The real estate industry is *truly* and exceptionally fucked
| up. The confusion around MLS, "Realtor," and probably loads
| of other things I'm forgetting are intentional.
| muttantt wrote:
| Not true. I sold a condo to Opendoor recently and it was
| unlisted, just a private transaction. They overpaid very
| generously too.
| foogazi wrote:
| > They overpaid very generously too.
|
| How do you know without getting bids from the open market ?
| vrykoul wrote:
| Not op, but a house in my neighborhood was sold to
| OpenDoor for $397k. It sat unsold for 3 months in an area
| where other homes are sold over asking on the day that
| they're listed. They finally have it under contract for
| $386k for a net loss of $11k.
|
| You can see the transaction history here:
|
| https://www.zillow.com/homedetails/125-Mays-Blf-
| Fayetteville...
|
| Add in whatever fees go along with the sale, and they're
| out a fair bit more than that.
| muttantt wrote:
| I sold another condo in this same complex 2 months ago
| through a real estate agent. Far more painful process and
| got much less. Also see here:
| https://news.ycombinator.com/item?id=29087989
|
| Opendoor still holds it, Zillow is already marking down a
| similar one by 14%.
| game_the0ry wrote:
| Not necessarily true, and certainly not true if you are
| selling the entity (usually LLC) that owns the portfolio of
| properties.
| PaulDavisThe1st wrote:
| Absolutely untrue elsewhere. I sold two houses in PA without
| them ever appearing on the MLS, which is a privately run,
| privately owned database. It might also be untrue in CA, but
| I can't comment on that.
| tiffanyh wrote:
| "Pocket listing".
|
| https://en.wikipedia.org/wiki/Pocket_listing
| ramesh31 wrote:
| Sure, but they aren't required to accept any offers. And the
| odds of a private buyer making a better all cash zero
| contingency offer than an institutional investor is pretty
| slim.
| kyleblarson wrote:
| I bought a condo in Seattle from a friend with zero MLS
| involvement. We agreed on a price, found a purchase and sale
| agreement online, hired a title company. Took about a week.
| frankfrankfrank wrote:
| I agree. I wish people understood more of what these
| "institutional investors" are doing. The Fed has essentially
| trapped us in a system where the likes of blackrock get access
| to essentially free Fed printing press money right of the
| rollers that they then use to buy up real assets at inflated
| prices, which only drives up the inflation that thereby also
| drives up the value of previous purchases at near zero rate
| interest.
|
| If you follow that logic to the final conclusion, you will find
| that these "institutional investors" only have incentive to not
| only buy up all the assets they can at near zero interest, but
| that doing so is a kind of self-perpetuating profit machine as
| inflation creates profits for them.
|
| Yes, this is IMMENSELY dangerous.
|
| Oh, and I did not mention that if it's not in collusion, the
| Fed has the tiger by the tail and is paralyzed with fear to
| such a degree that it simply cannot let go so as to at least
| have a chance of getting away in time, rather than the
| guaranteed demise of holding on to the tail and then eventually
| only getting ever more tired and the chance of survival
| crashing exponentially.
| ok123456 wrote:
| Mao was right.
| wolverine876 wrote:
| > The Fed has essentially trapped us in a system where the
| likes of blackrock get access to essentially free Fed
| printing press money right of the rollers that they then use
| to buy up real assets at inflated prices, which only drives
| up the inflation that thereby also drives up the value of
| previous purchases at near zero rate interest.
|
| It's a trendy thing to say, especially in certain political
| circles, but could you substantiate it with something from a
| serious, non-partisan economist? AFAIK, for example,
| inflation isn't much related to it - rates have been very low
| for a long time, sans inflation.
|
| > the Fed has the tiger by the tail and is paralyzed with
| fear
|
| Again, anything substantive to support this? They are
| 'paralyzed with fear'?
| pdonis wrote:
| _> could you substantiate it with something from a serious,
| non-partisan economist?_
|
| The fact that printed money is fueling the housing market
| does not require an economist to see; it is obvious from
| comparing two simple observations:
|
| (1) Americans expect to be able to get 30 year mortgages at
| rates around 3%.
|
| (2) Americans expect to be able to invest their retirement
| savings in stocks and bonds with a long term rate of return
| of 8% or more.
|
| This state of affairs would be impossible in a free market
| with a money supply that was not being manipulated; in a
| free market, nobody would be crazy enough to lend money for
| mortgages at 3% when they could invest the same money in
| stocks and bonds and make an 8% return over the same time
| horizon. The only reason #1 above exists at all is that
| mortgages are made with printed money from the Fed.
|
| _> rates have been very low for a long time_
|
| That's because interest rates are not determined by a free
| market; the Fed has its thumb on the scales (see above),
| and has for decades.
| wolverine876 wrote:
| > does not require an economist to see
|
| IME, people have lots of theories that look good to
| amateurs. Look at physics, as a striking example of how
| wrong amateurs can be for thousands of years.
|
| Anyway, you aren't required to do research for me, but
| some person on the Internet writing economic theory is
| not persuasive to me. Oh well.
| Kkoala wrote:
| #1 is less risky, since mortgages have to be
| collateralized. #1 is also less volatile
| SpicyLemonZest wrote:
| "Inflation" isn't the right technical term, and I'm
| skeptical of the more conspiratorial implications, but the
| Federal Reserve is pretty open about the fact that it buys
| a lot of mortgage debt and mortgage rates are low because
| of it. See for example
| https://www.dallasfed.org/research/economics/2021/0826.
| delfinom wrote:
| This is the end game of the baby boomers and economy really.
| Collectively everyone is hoarding onto property for their
| nest egg, investment funds get piles of their money from
| 401ks and pensions as well to invest into areas like real
| estate. A large chunk of retirement is now predicated on
| maintaining or increasing property values.
|
| The fed is now so fucked it can't even raise rates without
| immediately causing property value declines as mortgages
| decrease. There really is no solution and we are in for
| horrific pain eventually. It's simply a question of how long
| they can stall it.
| adam_arthur wrote:
| The solution is simple. Raise rates and let asset prices
| normalize, regardless of the consequences.
|
| There will be pain in the short term, but you're creating
| opportunity for future generations.
|
| Policy right now is all about pulling prosperity from the
| future into the present. IE higher valuation multiples
| today enrich current asset holders, but leave little growth
| for future asset holders
|
| It used to be that the Fed was not too focused on asset
| valuations, and actually drove policy on the basis of their
| mandates. Unfortunately they're too cowardly to do that
| anymore.
|
| It may be partly due to the short term focused political
| system in the US. China actually is explicitly acting to
| reduce property values to make homes more affordable for
| its people. Of course this triggered all sorts of second
| order effects like the evergrande situation. We will see if
| they follow through all the way, but so far they aren't
| backing down, despite what looks like an imminent systemic
| implosion of the property sector.
|
| Sometimes people lose when they invest. That's how it's
| supposed to work. Removing that element creates mass
| amounts of moral hazard, which will end badly on its own at
| some point.
| throwaway34241 wrote:
| > It used to be that the Fed was not too focused on asset
| valuations, and actually drove policy on the basis of
| their mandates. Unfortunately they're too cowardly to do
| that anymore.
|
| From the financial crisis to COVID low interest rates
| (and inflating asset prices) seemed almost a consequence
| of their inflation+unemployment mandate: even with the
| interest rate around zero unemployment was slow to come
| down and inflation was mostly in financial assets and not
| the consumer price level.
|
| Post-COVID seems to be a different story though. I guess
| we'll see in the next year or so how they react if the
| inflation pressure turns out to be persistent -
| personally I wouldn't be surprised if they _do_ raise
| rates, even though that would obviously lower most asset
| prices.
| adam_arthur wrote:
| Well, it's true that inflation was largely in check over
| the past decade.
|
| But keep in mind that in the 1970's, home prices were
| actually included in the CPI. If this were still the case
| today, we would actually see inflation levels similar to
| what we saw in the 70s.
|
| The CPI formula has been changed many times over the
| years, to suppress inflation numbers. There are strong
| incentives to do this, as Social Security and many other
| things are tied to the CPI.
|
| There are logical arguments for these changes though.
| Homes are financed goods, and consumption can be
| considered the monthly carrying cost and not the value of
| the asset. However, ignoring "asset inflation" has led to
| much worse wealth inequality IMO. It would be better to
| continue to include national average home prices.
| Nowadays, there's a measure called Owners Equivalent
| Rents that partially gauge this. But there are tons of
| methodological flaws in how rent equivalent data is
| collected for CPI that lead to both underreporting, and a
| lag of ~12 months. e.g. Rents are up about 20% nationally
| since the pandemic started, but CPI has shown roughly
| 3.5% so far. The next few months should start to show the
| full extent of rental increases.
|
| Now that car prices are causing a large increase in CPI,
| don't be surprised when they alter the measurement of
| these factors next year. They'll use some measure like
| average monthly car payment.
|
| Also keep in mind that unemployment was around 10% post
| GFC, and took about 10 years to get close to full
| employment. That was quite a large shock that took a long
| while to recover from.
|
| The market did fall something like 20% in 2018 as the Fed
| raised rates to preempt inflation, but they chickened out
| and reversed course and market immediately rallied back
| all gains.
|
| And as you said, it's pretty clear right now they are
| dragging their feet on doing anything post COVID. I'm
| pretty sure Powell is really optimizing for retaining his
| job, since his term ends very soon... otherwise they
| really shouldn't care about market movements to such an
| extent.
|
| They will almost certainly announce the taper tomorrow,
| but expect it to be wrapped in all kinds of dovish
| language to juice assets/speculation further.
|
| Regardless of short term interest rate peg, they should
| absolutely not be buying bonds to suppress long term
| rates. They have been continuing an "emergency" bond
| buying program for a full year beyond what was reasonable
| to most people. I mean, why are they buying 120B worth of
| bonds every month, as housing prices have gone up
| something like 30% nationally? They are terminally afraid
| that if they can't manipulate long term rates lower
| through QE, that rates will rise and market or housing
| will tank. Well, we'll find out soon enough
| r00fus wrote:
| > It used to be that the Fed was not too focused on asset
| valuations, and actually drove policy on the basis of
| their mandates. Unfortunately they're too cowardly to do
| that anymore.
|
| Could it be that they're essentially captured by the
| likes of Blackrock, etc. I mean, it's been this way for a
| while, but it's getting to where government is openly a
| tool for the corporations without voter involvement.
| mywittyname wrote:
| I don't think institutionally-owned SFH rentals are viable in
| the long term.
|
| Apartment complexes make sense as rentals because there's a
| great deal of efficiencies vis-a-vis property maintenance &
| management. Plus the added benefit of _greatly_ reduced
| property taxes per unit. The downside is that they don 't
| appreciate as quickly as other real estate can.
|
| SFHs make a lot of sense for small-time landlords because
| they can be bought up in increments. But even small-time
| landlords pretty quickly realize the value in multi-tenant
| rentals and move to acquire more of them.
|
| Blackrock, et al, will hold onto these so long as they
| continue to appreciate at double-digit rates. But after a few
| years of inflation-level appreciation, they will begin to
| dump these as their profits tumble due to the inherent
| inefficiencies of SFHs.
| treeman79 wrote:
| Places like Invitation Homes do everything as cheap as
| possible.
|
| Cheap as possible paint minimal repairs no inspections.
| Shady things like intentionally covering up gas leaks.
| Source: Family nearly died in multiple different ways. Had
| an HVAC fall on kids bed In the night, just missed. Massive
| gas leak they lied about. Walls that were so hot they
| burned the skin.
|
| Many things a home inspection would have uncovered.
| donkeyd wrote:
| > I wish this would anger people more
|
| It is... But what are you going to do about it? Especially in
| the US, big business owns the politicians who can do something
| about it. And prop 22 shows that even if the public gets to
| decide, big business manages to control public opinion to their
| benefit.
|
| I believe this is only going to get worse for the next couple
| of decades. Something major would have to happen for this to
| change.
| pc86 wrote:
| So wait. Either big business owns the politicians and so
| nothing gets done, or people vote but they're too stupid to
| do it in their own interests because of big business? This
| sounds like the typical "the election was fair as long as I
| won" trope. Have you considered that maybe your opinion is
| just in the minority?
| Supermancho wrote:
| > Either big business owns the politicians and so nothing
| gets done, or people vote but they're too stupid to do it
| in their own interests because of big business.
|
| > This sounds like the typical "the election was fair as
| long as I won" trope.
|
| How's that? It does not sound like anything but modern
| American politics. Not to say it's 100% true, but it's
| largely true on the West Coast USA for the last 40
| years...as I can only speak to what I've seen. It's a
| legitimate surprise when grassroots efforts are not coopted
| with riders/judicial nullification or drowned by
| propaganda.
| dionidium wrote:
| I'll be the YIMBY broken record here. These institutional
| investors are suddenly interested in housing because decades of
| _artificial constraints_ on new construction have created a
| situation where prices are rising quickly as demand outpaces
| supply. Don 't believe me? Here's the SEC filing from one such
| investor:
|
| > _We have selected locations with strong demand drivers, high
| barriers to entry and high rent-growth potential._
|
| Understand that "high barriers to entry" is referring to legal
| regimes that limit new housing.
|
| Later, they say:
|
| > _We have selected markets that we believe will experience
| strong population, household formation and employment growth
| and exhibit constrained levels of new home construction._
|
| These companies aren't driving up prices. They're _reacting_ to
| high prices. That 's what's making these markets attractive.
|
| Source:
| https://www.sec.gov/Archives/edgar/data/1687229/000119312517...
| commandlinefan wrote:
| > home owners will benefit
|
| It's going to hurt home owners, too - when the valuation of the
| house goes up, so do the taxes. It won't be long before the tax
| burden is so high, the only option homeowners will have is to
| sell (and then pay even more taxes on the gains on the house
| sale) and rent it back from Blackrock.
| scrumbledober wrote:
| Not in California. See Prop 13
| fossuser wrote:
| This framing feels backwards to me - I thought the reason
| institutional investors see it as a valuable asset is because
| of NIMBYs constraining supply for them via local policy and
| obstruction. The institutional investors are a symptom of that
| policy, but the NIMBYs (and incentives that exist for existing
| owners like prop13) are the cause.
|
| Real Estate scaling supply to meet demand is in direct conflict
| with old properties increasing in value forever. You can't
| really have both and we're stuck a valley of bad incentives
| that favor existing owners.
|
| If we let people build housing to meet demand it would fix it,
| but existing owners are motivated to leverage enormous amounts
| of equity (and local political power) to stop any new building
| in order to keep property scarcity high. Their explanations
| beyond that are all just motivated reasoning rationalizations.
| Hopefully stuff like RHNA will force local municipalities to
| act.
|
| I can empathize somewhat with someone who spent $3M on a crappy
| house being afraid of being under water from increased supply,
| but I have no empathy for someone who bought a $300k house
| 30yrs ago that's now worth millions acting to obstruct new
| construction.
| dionidium wrote:
| The investors themselves agree with you. Here's one such
| company's SEC filing:
|
| > _We have selected markets that we believe will experience
| strong population, household formation and employment growth
| and exhibit constrained levels of new home construction._
|
| Source: https://www.sec.gov/Archives/edgar/data/1687229/00011
| 9312517...
| fossuser wrote:
| Yeah I can't fault the investors really, they're just
| observing the world and making a bet because of the reality
| that is - they're not the ones creating it.
|
| Meanwhile the NIMBYs that _are_ creating it blame everyone
| else and play victim.
| ultraluminous wrote:
| I've seen this argument touted frequently in housing related
| threads and it always confuses me. Housing prices have soared
| over the majority of the developed world - dozens of
| countries[1]. Is NYMBYism and prop13 driving the housing
| crisis in Luxembourg? Chile? Estonia? Do you think the entire
| world property market, taxation and legislation is structured
| exactly like in the California bay area? The whole "just zone
| more high rises" argument is so obviously reductive, I can't
| help but think it's pushed primarily by property developers
| and speculators.
|
| Housing prices continuously rising to slurp up any marginal
| income has been studied by economists for a couple of
| centuries (rent extraction), and taxation solutions such as a
| Land Value Tax were suggested by Adam Smith himself.
|
| https://blogs.imf.org/2021/10/18/housing-prices-continue-
| to-...
| Panzer04 wrote:
| What do you mean "obviously reductive"? Why wouldn't it
| work?
| fleddr wrote:
| I agree. Here in the Netherlands, NIMBYism isn't really a
| thing. If you don't own the land, you as existing resident
| have very little say in new developments around you,
| exceptions aside.
|
| Even in this situation where almost every development is
| approved, it doesn't lower prices at all. The reality is
| that when demand is continuously high, you can never keep
| up with supply. It just keeps coming.
|
| Which is what happened to my town. A small, quiet, rural
| town. That was 20 years ago. Now it's packed. Every inch
| used. Traffic jams just to get to the center. Agricultural
| and nature areas transformed into concrete.
|
| Quality of life is down whilst prices just keep rising
| regardless. Do these people have a right to live here? YES.
| Do I have a right to forever preserve my old town? NO. I'm
| just saying NIMBYism isn't some roadblock standing in the
| way of an actual solution.
| onlyrealcuzzo wrote:
| OP's comment makes sense if you assume BlackRock is going to
| continue gobbling up properties at current prices & rates -
| but is there any evidence to support that?
|
| If BlackRock doesn't continue to gobble up homes at current
| prices & rates - then his argument falls apart.
|
| Does anyone have evidence that BlackRock is STILL buying
| properties en masse?
| davidw wrote:
| This is exactly right. You show up to a local planning
| commission meeting or city council and it is not Blackrock
| there ranting about new homes being built. It's your
| neighbors.
|
| Fight back: https://yimbyaction.org/2021/ - and have fun and
| meet cool people while doing so!
| the-pigeon wrote:
| This would be easy to fix with legislative that makes property
| taxes much higher for investment home properties.
|
| I don't think I've ever heard of a politician even talking
| about that though.
| game_the0ry wrote:
| > I don't think I've ever heard of a politician even talking
| about that though
|
| You have to consider that legislative members tend to own
| property and tend to be baby boomers. They are far removed
| form the experiences that younger generations have to deal
| with - from their perspective, their home value can go up 20%
| in 2 years and that will be rationalized as a normal market.
| They are not talking about it because they are benefiting
| financially, and talking about may make them hurt
| financially. This will change, baby boomers cannot live
| forever even though they behave as though no future
| generations exist.
| ajsnigrutin wrote:
| Most baby boomers (the ones getting all the blame) usually
| own one house, that they live in... even if the value goes
| up, they need a place to live in, and the high prices are
| pretty much everywhere, people actually want to live. The
| only ones profiting from baby boomers are their kids when
| they inherit the houses.
|
| Politicians are probably getting paid of by companies
| investing in housing and buying up hundreds or thousands of
| houses, because the price increases make it more profitable
| than many other investments, and (unless there's some
| legislative action) makes the investment safer than most
| other high-profit ones (eg. cryptocurrencies).
|
| And the little guy gets fucked in the end.
| acdha wrote:
| > even if the value goes up, they need a place to live
| in, and the high prices are pretty much everywhere,
| people actually want to live. The only ones profiting
| from baby boomers are their kids when they inherit the
| houses.
|
| This leaves out one major factor: they need somewhere to
| live but that doesn't mean it needs to be the same real-
| estate market or size. Someone who sells a house large
| enough to have a family in a major market and retires to
| a cheaper market can see a very comfortable return.
| Probably nowhere near enough to make up for the other
| impacts of the policies people voted for to drive up
| their home value but it's harder to get people to give
| equal weight to different factors when one of them will
| show up directly in their personal bank account.
| ajsnigrutin wrote:
| This would be true, if someone old sold a house in san
| francisco and bought a house in bumfuck alabama...
|
| But considering that people tend to move to a few urban
| locations, the house prices in eg. florida got very
| expensive too... yes, they earn a bit more, but I don't
| believe that single house owners, moving from SF to FL
| (or wherever) are causing the housing crisis.
| acdha wrote:
| It's also true if you sell a house in San Francisco and
| move to South Florida, or North Carolina, or all of the
| other places millions of people do exactly what I
| described. Retirees don't need massive houses, to
| minimize commutes to downtown, or being in the best
| school district, which opens up many options which other
| people might pass up. If your goal is "on the beach in
| South Beach", yes, it'll cost a fortune but if your goal
| is "near the beach, any beach" you have plenty of options
| for well under $100k.
|
| I don't disagree that this isn't driving the housing
| crisis -- my point was simply that it's not like many
| older people aren't strongly in favor of the housing
| market staying high until they can cash out, because for
| many people their home equity is the largest component of
| their retirement plan and they aren't interested in
| continuing to need to deal with the maintenance required
| by a single-family house.
| fleddr wrote:
| It won't change. After the boomers come the millennials,
| and I believe there's still a generation in between
| (generation Y?).
|
| Many of them may have been just in time to snatch a house
| from the market, and they see their home value go up. None
| of them are going to advocate for super high taxes on their
| "unjust" gains nor will they give a discount to future
| buyers. They will maximize the return just like everybody
| else would.
|
| It's not boomer behavior, it's human behavior. Boomers were
| just lucky to get in earlier. The only annoying thing about
| some boomers is that they don't acknowledge their luck, and
| insist it was all due to their hard work or brilliance.
|
| The school going generation always wants a revolution, a
| redesign of society. To fix its flaws, to make it more
| fair. It's easy to want to change everything if you have no
| responsibility or anything to lose. But then they grow up
| and have skin in the game, and they'll be just like
| everybody else, protecting whatever wealth they have.
|
| Consider that many boomers were hippies when they were
| young, rejecting even the notion of personal property. Now
| they own almost all property. The 21st century version of
| hippies are even better at managing progressive optics
| whilst taking in top 1% salaries.
| refurb wrote:
| So you want to increase rent across the board?
| webinvest wrote:
| Yes, they could double or triple the current homestead
| exemption.
| donkeyd wrote:
| > This would be easy to fix with legislative
|
| Whenever people say anything complex can be fixed easily with
| legislation, I'm pretty sure they don't have a clue.
|
| These types of issues are never easy to fix, because they're
| cause by many factors that have taken years to form. There
| are no easy legislative fixes in practice. They only exist in
| theory.
| dionidium wrote:
| Thereby driving up rents.
| ep103 wrote:
| They are generally called non-primary residency taxes, and
| they're definitely a thing, and definitely getting more
| publicity, and most definitely need to become much stronger
| and more widespread.
| crate_barre wrote:
| It seems like on the most pressing matters, we are always a
| generation behind.
|
| Entire lifetimes wasted before our eyes. Anyways, maybe we
| can solve free school lunch finally, seems like that's what
| we're up to.
| outericky wrote:
| Non primary is one thing - but perhaps the thing that needs
| to be gone after is commercial residential (as in, if you
| have more than x properties). Or commercial ownership of
| single family homes. There is a difference between owning a
| 10 unit apartment and owning 10 single family homes.
| munk-a wrote:
| We have these in BC - they were adopted in response to
| overseas real estate investment (and other factors) driving
| the Vancouver housing market insane. Canada also has a
| number of programs that make property purchase for new
| homeowners more affordable by waving some taxes and
| allowing interest free borrowing from your retirement fund.
| So the fight to keep housing affordable for everyone is a
| difficult one.
|
| One of the issues is that when these sorts of policies
| initially roll out you tend to see a contradictory effect
| of sudden spiking in prices as a lot of people who were on
| the fence suddenly decide to add to the housing market
| demand - but over time these policies tend to settle in a
| place where thing are more affordable.
|
| The other issue is that the renewal period for first time
| home owner benefits is quite long, so if you are exiting a
| long term relationship or trying to pick yourself up after
| bankruptcy you can be forced to enter the market as if you
| were a well established asset holder.
| kennywinker wrote:
| > Canada also has a number of programs that make property
| purchase for new homeowners more affordable by waving
| some taxes and allowing interest free borrowing from your
| retirement fund
|
| Some further flaws in the system: I was shocked to find
| out that the new home buyers tax credit only applies to
| homes under $500k - which in vancouver means it only
| applies to a handful of small condos. It's also not
| poolable, so two first-time buyers going in on a $501k
| condo are disqualified.
| azinman2 wrote:
| I thought Cambridge, MA has a great system -- the first
| $250k of any property value is tax free (or at least it
| was 10 years ago), and property taxes then only go above
| that. It had the effect of making property taxes cheap
| for small home, allowing lower income people to have more
| affordable housing over the long term.
| dublinben wrote:
| Homestead exemptions like that are common in most
| states.[0] Cambridge does have a lower than average
| residential property tax rate, mostly due to how much
| commercial development they have. I still wouldn't point
| to Cambridge as a particular success in terms of
| affordable housing though.
|
| [0] https://smartasset.com/taxes/what-is-a-homestead-tax-
| exempti...
| preinheimer wrote:
| > but over time these policies tend to settle in a place
| where thing are more affordable.
|
| Could you point me at some more reading that talks about
| this? The increase in prices makes perfect sense to me,
| but I don't really have a good handle on why things would
| come back down.
| fleddr wrote:
| "but over time these policies tend to settle in a place
| where thing are more affordable."
|
| I seriously doubt that to be true in a low supply
| situation. In the Netherlands, the government reduced
| real estate transfer tax from 8% to 2%, and sometimes
| even 0%. This should make houses more affordable to
| newcomers.
|
| Another well intended measure was for older people to
| share their wealth to their children via early
| inheritance, tax free.
|
| The market simply adds this discount and extra start
| capital to the price "room". In a situation of perpetual
| scarcity, the price will rise to the maximum people can
| afford/borrow.
|
| And with "people", I mean only the buyers. It doesn't
| matter if 90% of the population is priced out of the
| market if the richest 10% is still enough people to buy
| up all supply.
|
| This last bit is most worrisome, because it means that
| even the nuclear instrument of increasing interest rates
| is unlikely to resolve the issue. The interest cannot be
| jacked up much because that would bankrupt the middle
| class. A minor tweak will be no issue at all for the
| richest 10%, so the price will not come down.
|
| Increasing supply in a dense and popular area isn't a
| structural solution. Not only does it meet a lot of
| resistance, new demand will forever continue to outpace
| the constraint of delivering new supply.
|
| Which is why I believe in reorganizing demand. These
| dense areas are dense because it gives people access to
| jobs and education. If we reorganize that into a more
| sane distributed way, we truly address the problem.
| sokoloff wrote:
| Many places have a (small) rebate for owner-occupied real
| estate. Cambridge, MA is one; I get a break for living in my
| house as a primary residence.
|
| Edit to add: I looked up the exemption calculation. It
| excludes up to $432,666 from the assessed value. Multiply
| that exclusion by the rate of 0.00585 ($5.85 per $1K per
| year) and the exclusion reduces a homeowner's taxes by
| $2,531.10/yr.
| ajsnigrutin wrote:
| I mentioned the idea in another thread... but yeah... 0%
| property tax on your first property and primary residence, 1%
| on the second, 2% on the third...
|
| Still makes it possible to own several houses/apartments (eg.
| summer home), but makes it impossible to do at a scale that
| those companies do.
| mywittyname wrote:
| Own a bunch of shell companies that own a single property
| each.
|
| Real estate ownership is a mess. It can be nearly
| impossible for people to figure out who actually owns
| property if the entity buying wishes to remain secret.
| rozap wrote:
| Could you get around this by requiring the residence be
| owned by a natural person to qualify for a primary
| residency tax rate?
| mywittyname wrote:
| Maybe, but a lot of people have legitimate reasons for
| holding their home in a trust.
|
| If the savings are great enough, it would make sense to
| pay someone to "own" the house, with a contract saying
| that they must act at your direction. This isn't some
| crazy idea either, that's basically the approach that's
| already taken by these same people that hide their
| identities through shell companies. The "owner" of the
| shell company is some random B'zean who is paid to be a
| rubber stamp.
| Scoundreller wrote:
| Then charge the full tax rate when the ownership is a
| non-natural ???.
| pwned1 wrote:
| We have that in Michigan. Non-homestead property taxes. All
| it does is make apartments more expensive for renters. The
| cost is just passed on to the renter.
| dgfitz wrote:
| This, this will be actual result. "Just add more taxes" ===
| the renters pay that delta.
|
| Scale it per property === take the average of taxes /
| homes, pass it along to the renter.
|
| About the only way I can the cost not getting passed to the
| renter is for a "the government" to set the rental prices
| as if the home was under a rolling 30-year mortgage, taking
| into account PITI. Adding a property tax on top of that
| ONLY to the property owner, maybe exponentially per
| property owned, could curb companies like Blackrock.
|
| That being said, I have very faith that a "the government"
| could do this efficiently/correctly/at all. Trying to trace
| down umbrella corps and whatnot would be cat and mouse. The
| US government can't even figure out who is cheating on
| their taxes as it stands.
| mywittyname wrote:
| Well, up until renters can't afford it.
|
| Raising property taxes on SFH rentals, but not apartments
| will make apartments more attractive. Sure, renting a
| house has advantages, but those advantages have a price,
| and how many renters are going to be willing to pay 40%
| more per square foot for a SFH over an apartment.
|
| At some point, even an expensive mortgage is a better
| deal.
|
| Apartments are great, we should incentivize apartments.
| They are high density and can be built in a variety of
| sizes.
| pc86 wrote:
| Apartments are great, unless you want a yard, a large
| family, to let your parents[-in-law] move in so you can
| take care of them, a large dog, more than two cats, more
| pets than the property owner has arbitrarily decided to
| allow, equity, a barbecue, frequent parties, or the
| ability to not have to pay rent or a mortgage someday.
| Buying apartments is not the norm, nor are ones large
| enough for a family with more than 1 or 2 kids.
| pkulak wrote:
| It'll drive up rents, but you could pair it with a renters'
| tax credit.
| snapetom wrote:
| Then you'll be subsidizing your own tax.
| mattnewton wrote:
| Then renters can afford the larger rents, and after the
| dust settles all you've done is take money from one of the
| state's pockets and put it in another, no?
| pkulak wrote:
| Yes. Seems like I typed before I really thought about it.
| :/
|
| I guess what you'd want is to tax the hell out of rental
| properties, then put that money to first-time mortgage
| assistance.
| theduder99 wrote:
| another thing you can do is raise the interest rate on the
| mortgage for investment properties. This is already done
| somewhat but they could increase it quite a bit. Can't really
| pass the cost onto the renter either because the market
| supply/demand dynamics sets the rental rates, not the owner.
| vasilipupkin wrote:
| Blackstone, Blackrock - just buy their stock then, they are
| publicly traded
| mwambua wrote:
| ... And hope that whatever gains I get make me feel better
| about not being able to afford a home?
| nojito wrote:
| >at a steep discount before they even hit the market
|
| This isn't really true. They are paying above market rates and
| have been for the past 18 months or so.
| t-writescode wrote:
| Isn't the easiest way to make market rates higher is to, en
| masse, over-pay to force everyone into thinking that the
| house is worth more, Thinking Fast and Slow style?
| nojito wrote:
| They aren't in the market to flip in the short term though.
|
| They genuinely believe that these assets will appreciate in
| the coming years.
| t-writescode wrote:
| Well, if they believe that, then they're almost certainly
| right there, too. * New construction
| isn't going up fast enough, so the housing supply will
| decrease and * the number of people that want to
| buy a home increases as long as the total population of
| an area increase. Bundle that with * fewer people
| getting married, and you need more houses per person than
| before, and that further reduces the housing supply; AND,
| further that with the reality that * houses are
| seen as an investment vehicle, so anything that reduces
| the value of a house rather than increases it causes
| people to recoil back because that's literally their
| retirement in there (see Australia's housing situation,
| for example)
|
| Housing prices can only go up without the entire
| financial system changing.
|
| It's a very, very good bet as long as major things don't
| change.
| rconti wrote:
| Home ownership is not necessarily the unalloyed good that the
| American Dream (and tax policy) make it out to be.
|
| That said, I'm not arguing for _this_ specific rental model,
| either.
| _3u10 wrote:
| The people could always fix this by removing zoning bylaws, or
| moving somewhere with less restrictive bylaws, but it's much
| easier to blame billionaires than their own voting preferences.
| shmatt wrote:
| This article may not be a sign, but a different[1] article is a
| pretty decent sign
|
| Zillow is also selling individual homes, not just this package.
| In their main algorithmic buying market of Phoenix they're
| selling individual homes, 93% of whom they payed more for than
| the new current listing price (and they usually do renovations
| before listing)
|
| So Zillow VCs are essentially paying people to take a discount
| on houses in those markets. pretty sweet
|
| [1] https://www.businessinsider.com/zillow-offers-ibuyer-sell-
| ph...
| crate_barre wrote:
| Losing money is pretty sweet?
| ganeshkrishnan wrote:
| Yes. You make up for it in volumes.
| gretch wrote:
| Not for Zillow but for everyone else, yeah it's value
| transfer from VCs to the he average person.
|
| Same thing with Uber/Lyft/dash/movie pass. For years the
| general population received rich VC subsidized services.
| Pretty sweet
| cwkoss wrote:
| Every person or corporation that owns more than one residential
| dwelling should pay increased property taxes based on the
| number of residential dwellings they own.
|
| This is an easy problem to legislate away, our politicians are
| just too cowardly to decommodify housing.
| itsoktocry wrote:
| > _our politicians are just too cowardly to decommodify
| housing_
|
| I'll be 90% or more own multiple houses.
| adrianmonk wrote:
| Make it 5 houses per person (10 for married couples), then.
|
| Plenty of families out there own rental houses as an
| investment, which I think is a good thing. It allows people
| an alternative to investments like the stock market if they
| aren't into that, and it gives a path to turn labor into
| wealth through DIY maintenance, repairs, and improvements.
|
| Plus it allows individuals to better manage situations like
| parents dying and leaving them a house that they may not
| want to sell immediately.
| JeremyNT wrote:
| That's a good stick, yep.
|
| They could also add in a carrot, to reduce capital gains on
| sale of non-primary residences.
|
| There are too many incentives currently to hoard properties
| like the damn monopoly man, so you need to start clawing away
| at them. Taxing the eventual sale just encourages people to
| not ever sell, so tax them for hoarding directly.
| shiohime wrote:
| There are probably easy loopholes to get around your
| suggestion. Just form another LLC and purchase the property
| under that LLC instead of you as an individual, then each
| entity owns only one property, so they get the standard tax
| rate instead of what you are proposing.
|
| Of course this would be a giant pain of a workaround to
| scale, but for the non-mega corporations it'd probably work.
| I'm sure that the huge corporations owning large swaths of
| residential properties would figure out scaleable loopholes.
| lostapathy wrote:
| Just tie the "first home" tax exemption back to a person by
| making business entities a pass-through to the registered
| agent (or some other single officer). i.e., an LLC can't
| claim the exemption, but the agent can pass their exemption
| through the LLC to a property.
| dgfitz wrote:
| You don't think that cost would just get passed along to the
| renter?
| gifnamething wrote:
| No, there's competition from landlords who own fewer
| properties
| MrKristopher wrote:
| In California this would be framed as a repeal of Prop 13.
| Not sure why you think that is easy to legislate away.
| sethammons wrote:
| This is an interesting idea! Some graduated tax rate for the
| number of dwellings + properties that way a second home or
| small time landlord can own say a dozen properties before the
| marginal taxes take too much of the marginal profits. What
| efficiencies are we giving up in this model?
| mistermann wrote:
| This has a dependency on the government actually enforcing
| the law though, in Canada when it comes to real estate, it
| has been well demonstrated that they will not. Hopefully
| for the US it is different.
| BuckRogers wrote:
| I'm a 39 year renter flush with cash from 15 years of a
| professional job while living in austerity for the entire time.
| Soliciting free advice.
|
| You sound bullish so I wanted to share five risks in the short
| term that have been on my mind lately:
|
| 1) Evictions now allowed in 43 states after a pandemic
| moratorium on them. My state allowed them October 3rd. Supply.
|
| 2) A China conflict at any point. Disruption.
|
| 3) Taxes going up on the wealthy. Disruption.
|
| 4) Rates going up to counter inflation. I want this one since I
| have cash and don't care if rates are 2% or 20%. While I do
| want the free loan (2%), I prefer the market to crash.
| Disruption.
|
| 5) Vaccine mandate job losses. Supply.
|
| Given this, I've been extremely hesitant lately. So I've been
| trying to hold off until January for my purchase to see how
| correct I am, or not, on these risks impacting the market. I
| don't see the point in waiting years as rent drains about
| $18,000 a year and you have to balance that with home ownership
| costs. Even with repairs, I don't mind slightly overpaying if
| it means getting out of rent slavery. I'm also buying a home
| that I can nearly buy outright. I'm determined to never lose a
| home due to job loss, tired of working for someone else, so a
| 30-year mortgage isn't happening under any circumstance.
| 15-year only.
|
| The one way I've been trying to protect myself is at least
| seeking a 15% discount off market rate for any home that I do
| purchase. I see that happening in my city enough that I'm
| confident. Eats into the 40% buffer from 2019, so I'm still at
| significant risk but does take some bite off in the event of a
| market catastrophe.
|
| Any thoughts are welcome. Definitely would appreciate it.
| Whether the answer is: buy now, or, buy in 15 years. I'll try
| to integrate them into my view and choices.
| mullingitover wrote:
| > 4) Rates going up to counter inflation. I want this one
| since I have cash and don't care if rates are 2% or 20%.
|
| You're likely making a bad bet by holding on to cash. The
| inflation and low rates are doing their job for the most part
| by driving investment and spending, and you're swimming
| against the current by doing exactly what you're not supposed
| to be doing: hoarding cash.
|
| > 5) Vaccine mandate job losses. Supply.
|
| We're already back to full employment. These threats of en
| masse departures haven't really materialized, the few who
| haven't caved are just helping newer employment market
| entrants by offering up some nice safe jobs.
| BuckRogers wrote:
| That's what this is about, getting rid of my cash. As I
| mentioned to someone else, before inflation kicks in
| bigtime, and timed around these risk factors. I've hoarded
| cash up until this point almost accidentally, I've just
| been too busy working to spend. I do like a cushion, but
| not the cushion I have now.
|
| On the mandate job losses, I think a lot remains to be
| seen. We have the airline issue going on right now, and I
| think that's directly related. Not sure there's any in-
| person "nice safe job" honestly. This is so far from being
| over in regards to variants, there's just no sense in all
| this. The only mandate people need is a mandate on
| employers that any job that can be done at home, shall be
| done at home. Then mandating hazard pay for those that must
| do their jobs in-person. Those are the only mandates that
| make sense to me, and I would hope that by Jove, even our
| most brainwashed vaccine-loving brethren could get onboard
| with.
| mullingitover wrote:
| It's really easy to get your cash into a real estate ETF,
| giving you exposure to that market without any of the
| fuss or commitment of tying everything up with one
| property.
|
| > Those are the only mandates that make sense to me, and
| I would hope that by Jove, even our most brainwashed
| vaccine-loving brethren could get onboard with.
|
| I'm afraid that on a planet with 8ish billion meat-based
| life forms of extremely similar cellular makeup, vaccine
| mandates are going to be the norm going forward. Covid
| won't be the last pandemic, and vaccines are the best
| defense we have against them. It's not brainwashing to
| accept vaccination as a countermeasure, it's very clear-
| eyed realism.
| tata71 wrote:
| > We're already back to full employment. These threats of
| en masse departures haven't really materialized
|
| This is not universally true.
| hnbalsamicw wrote:
| same situ as you almost exactly :)
| bcrosby95 wrote:
| I bought back in 2014. Ultimately the question I asked myself
| was: would I rather have a house in a place I wanted to live
| but overpaid for, or would I rather wait and get priced out
| of the place I wanted to live?
|
| Ultimately I chose the former. Because at the end of the day,
| a house represents shelter to me. And roughly speaking,
| shelter is fungible. If the value of my shelter goes up by
| 50%, the value of the other shelter around me goes up 50%. If
| it goes down by 50%, so does the shelter around me. So buying
| into the market gives me a foot in the door to, roughly
| speaking, be able to move to similarly desirable dwellings
| regardless of where they are.
|
| This is obviously a bit simplistic, but I think its a fair
| way to look at it.
| TheMagicHorsey wrote:
| I'm 45 and in the same boat as you ... except I've been
| waiting for a crash since 2016. I also made the mistake of
| keeping my cash in very cautious investments (and out of the
| SP500) ... thus missing the most historic bull run of my
| lifetime.
|
| Regardless though, as a result of working at a successful
| unicorn and selling a lot of my equity on the secondary
| market, I ended up benefitting from the Fed's insane money
| printing anyway (the prices offered for my equity doubled and
| doubled again in 24 months).
|
| I'm now sitting on a pile of cash. I invested a small amount
| (about 25%) into stocks (mostly REITs and dividend yielding
| stocks), but the rest I left in cash with the hopes of buying
| a home without debt (I can always take out a mortgage later
| to invest).
|
| But the homes just keep increasing in value. The homes I
| looked at in 2016 in the Bay Area that were 600K are now 1.5M
| and up. I took my family out of the Bay Area into the
| Sacramento area, and even here houses have gone up 30% in the
| last year. Houses that were 800K are now going for about
| 1.2M.
|
| But I'm still being patient. Now we're looking to leave the
| state entirely. I could buy a home here, but I'm looking at
| the economics for someone who is entry level or working a
| blue collar job (or being a teacher or caretaker), and I
| realize I don't want to live here. Apart from housing, I also
| have to think about what kind of teachers my kids will have,
| what kind of chefs will be at resteraunts, etc. A California
| that is unaffordable for everyone but me is a lame place to
| live.
|
| After checking out Texas, Colorado, and Florida, we've
| decided we'll get way better value for our money, in terms of
| lifestyle for the family if we leave. California is bad and
| only getting worse.
| BuckRogers wrote:
| You likely have a lot more money than I do, from what you
| said. I did live in a couple of major cities in Texas over
| the course of 5 years. I'd recommend the Dallas area.
| Easily one of my favorite areas in the country, especially
| for someone starting off. Doing it all over again, knowing
| what I know now, I might have moved there long ago and
| stayed. It has also exploded though, but probably nothing
| near CA proportions. I also like Washington State but have
| only visited once. I took multiple trips to Oregon in
| consideration of moving there, but declined in the end. CA
| is where I'd live if money is no object.
|
| I share your holistic view, I don't want everyone around me
| suffering and acting tense. Its been that way in most of
| the country for a couple of decades now. A lot of people
| must really enjoy that, but I don't really see a true
| benefit to holding everyone down in such a way. To get a
| fairer society means less profits for employers so there's
| a lot of effort to contain those costs. My spouse is a
| teacher so I know what you mean, though teachers are fairly
| compensated where I live for sure. She makes more than I do
| with better benefits by a longshot. Most public school
| teachers in big cities are bad because the
| families/students are bad, and they have no authority to
| discipline them. Most teachers that care don't last and go
| teach for less money in the suburbs.
|
| I'm in Chicago and while dangerous in 80% of the city, if
| you lived in the suburbs and don't mind winter, I've never
| known anyone that doesn't like it here. It's my favorite
| city in the country, it's the only city that the times I've
| driven out to move or visit elsewhere that I felt
| heartbroken. The only other place I've lived where I felt
| that way was France. I've lived all over and multiple
| countries on top of it. Crime and undesirable weather for
| most people keeps costs down here. I like Florida but it's
| such a diverse state that each area needs examined by
| itself. Just some thoughts.
|
| My thoughts on buying for you are the same for me: at least
| wait until January. There's just too many near-term risks.
| My conclusion has been if things are still the exact same
| as today in Q1 2022, then go ahead and buy, my crystal ball
| is broken. That said, I'm deal hunting so if I can get
| anything for 15% off going rate or more, I'll probably just
| do it. I'm looking at homes that are in blue collar
| neighborhoods.
| TheMagicHorsey wrote:
| I agree with most of what you've said, but I think the
| core issue of affordability is not dependent on private
| enterprise profits. I think the core issue in California
| is that its so difficult to build homes in high density,
| and NIMBYs prevent new development everywhere, creating
| more and more sprawl as people move ever out of the range
| of existing NIMBYs to form new towns, where they in turn
| become NIMBYs.
|
| If California would allow anyone to build an apartment
| complex nearly anywhere (as Minneapolis does in many
| neighborhoods) then there would automatically be more
| housing, and more affordable housing for blue collar
| workers and entry level workers. Instead, we have so many
| neighborhoods where each house is forced to be on .25
| acres, or .15 acre, with forced single family occupancy.
| Affordability is a construction, zoning, and permission
| problem in California.
|
| And that high expense for housing then trickles up and
| makes everything more expensive from child care to
| healthcare to services ... as everyone has to pay workers
| ever more just so they can get a roof over their heads.
| People are making $25/hour with no college degree and
| feel poor.
| traceddd wrote:
| Personally I went through a lot of the same considerations
| and the indecision and flip flopping got quite tiring.
|
| Eventually I just simplified things. Living in a property you
| own gives so much more for your money compared to what one
| could afford at the same level renting. And on a long enough
| timeline crashes have had minimal impact. Many of those
| disruptions would affect the financial markets too so unless
| you're extremely conservative leaving the money in stocks is
| not very safe either. I'm not renting for another 5 to 15
| years with a small place and a nosey landlord jacking up rent
| regularly. So I bought.
| aeternum wrote:
| >Living in a property you own gives so much more for your
| money
|
| This isn't true everywhere. Prop13 in California for
| example means that a long-time owner can rent out a
| property at below market and still make money since they're
| paying near-zero property tax. Both the renter and landlord
| come out ahead.
| ineedasername wrote:
| Are you investing or looking to move? If it's the later, none
| of the issues mentioned matter as much because it's all paper
| money once you buy. You haven't lost or gained anything
| unless you anticipate the need to resell the home in the near
| future (in which case, yes, be a little more careful). That
| said, my advice is not "buy now". I don't know your
| specifics, those of your area, etc. Home ownership &
| maintaining a home is also very different than renting. So,
| what follows are response to your individual points, not
| justifications for why you _should_ buy now:
|
| 1) This will impact rentals much more than home sales, and
| evicted renters aren't going to increase demand in the home
| sales market. It's also a positive factor if you're buying:
| Don't be in a hurry, wait 2-3 months to see how the end of
| the moratorium impacts supply. If supply increases, sticker
| price should go down-- you win.
|
| 2) This seems too vague of a threat to factor in. Neither
| side wants an all out trade war (though idiot meaningless
| wars have been waged before) If you mean military? Well,
| anything significant enough to trickle into the housing
| market may not spare you as a renter either. Outcomes in that
| scenario are beyond the event horizon. If you really think
| that's a significant enough threat to factor into home buying
| decisions then you _should_ be buying a home way outside of
| urban circle-- one with solar power, well water &
| purification, and two levels of basement for all of your
| prepper material.
|
| 3) Easy enough: factor that possibility in to what you're
| willing to spend. Let's say a worst case is a 10% increase to
| _your_ marginal rate. Unless you 're over $400k/year that is
| very unlikely anyway from the (still too few) details I've
| seen out of congress.
|
| 4) Okay, just don't crash the market on purpose. The rest of
| us have to live here too
|
| 5) From areas (NYC) that have implemented these mandates,
| non-compliance has been very small. And I'm willing to bet
| that extremely few hold outs are from people who would lose
| their home & suffer economic ruin over a refusal. Anyway,
| there's a simple solution here too: wait 2-3 months to see
| how they shake out.
| theflork wrote:
| I'm a mid 30s renter also flush with cash, living in a high
| COL area.
|
| I have found a happy (to me) medium - I invest all of it
| diversified across low to high risk assets (muni bonds, i
| bonds, tips, mREITs, dividend stocks, stablecoins, growth
| stocks), and at this point just the interest/dividends (NOT
| counting unrealized gains!) almost cover even my crazy rent
| (3500/month, for the house we are renting which is valued at
| about 1.5m). I just don't have the time or the energy for a
| house. Also a house doesn't MAKE anything other than provide
| shelter. Psychologically it doesn't make much sense to me to
| "invest" in a single house, tied to one area, such a large %
| of my networth. My friends bought houses recently, and even
| the "flips" turned out to be fixer/uppers. The supply is so
| bad right now you can really get burned.
|
| Once the supply improves - and really this means most of the
| government distortions disappear, I would reconsider. By
| government distortions i mean specifically 0) stimulus checks
| 1) extra unemployment (bonus monthly $, extra time, and
| expanding benefits to people that would not have otherwise
| been covered) 2) mortgage forbearance programs 3) student
| loan forbearance 4) super low rates. i agree at one point
| these distortions were necessary when we were all hunkered
| down and hospitals were being overrun, but we are far from
| that these days.
| randomopining wrote:
| What's your dilemma? If you're gonna live there for 10 years,
| get a large utility out of the house in general and also
| owning your own place, then just go for it.
|
| If you're buying just to buy, then hold off.
| BuckRogers wrote:
| My dilemma is balancing inflation risks through all this
| increased government spending, with short-term market
| timing. I think that these risks are more likely than ever,
| and imminent.
|
| On the inflation risks. I really wish the Democrats would
| cancel all their ideas about child care and what not, and
| just shift the tax burden from the working class that punch
| a clock, to the investment class that live off of IRS-
| defined unearned income. So much easier, simpler, doesn't
| engage in designing society, rewards working, helps the
| economy more than anything else you could do through
| increased spending, and would be far more popular. But
| that's an aside.
| [deleted]
| fragmede wrote:
| The specifics of your aside aren't especially interesting
| here, but they are _quite_ important to you before making
| such a large investment. My time machine 's just as good
| as yours, and anyone that claims their's is any better is
| trying to sell you something. Risks is inherent in
| everything. If I were trying to sell anything "rock
| solid" in Feb 2020; it's possible time would have proven
| that to be a total lie.
|
| If you have a great mistrust of the future, then there's
| never going to be a good time to buy a house. If you
| think politicians are going to mess things up yet again,
| buying a house is foolish. Hanging off every word the
| next three or four presidents make is going to make your
| heart sink and your blood pressure rise on bad news, and
| curse the name of whomever convinced you to buy an
| millstone of a house to hang around your neck.
|
| If, however, you're convinced that buying a house (for
| you to live in, not as part of a basically-liquid REIT)
| is your path to financial freedom, then when the
| refrigerator or other large appliance breaks, that's just
| part of owning a home, and you'll relish in picking the
| one _you_ want.
|
| How do you want to live for the next few years? (One
| thing to keep in mind is that houses can be sold before
| the full 15-30 years is up, which may be advantageous,
| depending on your finances.)
| mediaman wrote:
| A note on the mortgage: I understand your aversion to debt,
| but choosing a shorter duration mortgage can increase the
| probability of default, even if it shortens the time to the
| point that you are debt free, because for any given amount of
| cash reserves you have it shortens the runway you have if you
| lose your income.
|
| As long as mortgage money is cheap, the most profitable
| course of action is to use the 30 year mortgage, but keep a
| large chunk of money in reserve and invest the rest in the
| market for the long term. And never allow yourself to not be
| well-cushioned.
|
| Debt gets people in trouble when they use it to get things
| that put them on the edge, where losing a job causes them to
| miss a payment. For people who stay far away from the edge,
| and are good with money, it's very profitable.
| BuckRogers wrote:
| I haven't done it for a while but when I last compared 15
| to 30 year rates the interest was outrageous, pure usury,
| for the 30 year. But that isn't my main motivation to
| sticking to a 15 year, it's just a mechanism to limit how
| much I can borrow and spend. It caps me at a reasonable
| amount without me having to think about it, while granting
| a lower interest rate. It just nicely lines up with an
| amount that my spouse or I can afford with even one job, or
| a very basic low paying job. I'm definitely doing what
| you're suggesting and staying away from the edge.
| mediaman wrote:
| True, with a 30 year it looks like you're paying a lot of
| interest, and in nominal terms (i.e., the total amount
| during the loan), you are.
|
| But consider a thought experiment where you could borrow
| $1m at a low rate of interest, suppose 3%, from a
| generous lender who requires no collateral and requires
| an amortizing repayment. You take the $1m and reserve,
| say, $100k in "no-touch" cash (your cushion) and invest
| the remainder in the market, and suppose that the market
| returns an average of 7% over the long run.
|
| In this scenario, you obviously pay much more interest
| than not taking the loan. The interest you pay is nearly
| $500k, which sounds like a lot - almost half the loan!
| Yet you make a tidy profit over 30 years: after paying
| back the loan, you have a portfolio worth over $4
| million, plus the $100k reserve you still have.
|
| While that's just a thought experiment, the math works
| fairly similarly for a mortgage. So long as the market
| returns more (over the long term - it'll be bumpy short
| term) than the cost of money, you will be paid handsomely
| for assuming lots of long-term, fixed low-interest debt
| and investing the proceeds.
|
| And this leads to a second surprising conclusion: you
| should not pay off your mortgage. Once you've built
| equity, releverage the house and borrow more, so long as
| you take the proceeds and invest it in an instrument that
| will pay more than the cost of money over the long run.
| If interest rates rise, the math might not work.
|
| This is bad advice for some people, because a pile of
| savings and investments can be a tempting target to use
| for luxury vehicles, or boats or whatever, and that can
| upset the math, although eventually you make enough with
| it that might be OK. But for people who can live as if
| those investments were illiquid, it's quite a rewarding
| path.
|
| And for some people, the psychological value of living in
| a house with no mortgage exceeds whatever financial gains
| come from continuing to pay for a mortgage. And while
| there's nothing wrong with that, it does come at a stiff
| financial cost.
| VBprogrammer wrote:
| Compound interest means that you will be paying a lot more
| money for the same house if you buy over 30 rather than 15
| years.
|
| However, for someone disciplined, taking a 30 year mortgage
| and paying it off like a 15 year mortgage with significant
| over payments is a good strategy. It means if you need to
| tighten your belt you can always drop down to the normal
| payment for a spell without so much as having to speak to
| the bank.
|
| The worst option is to take the 30 year mortgage and then
| buy the larger house that the longer period allows you to
| afford.
| mediaman wrote:
| A better strategy is to use the 30 year, and then invest
| the monthly difference in the market. Why pay down long-
| term funding of 3.25% cost of money and lose out from a
| long-term market return of 7%?
|
| You're right about the compound interest, but compound
| interest can work for you as well.
| ncallaway wrote:
| This was the approach that made the most sense to me.
|
| Purchase a house where you can afford the 15-year fixed
| mortgage, but take out the 30-year fixed mortgage. Pay it
| off as if it were the 15-year fixed (ensure that your
| loan has no penalties for prepayment or extra payments,
| and that 100% of extra payments go toward the principal).
|
| If things go smoothly for you, you'll pay a marginal
| amount of additional interest (because your % will be
| higher as a 30-year than a 15-year). However, if you run
| into cash flow issues, you have a good amount of
| reduction in mortgage payments that you can make while
| keeping the bank completely satisfied.
| avidiax wrote:
| No reason to make principal-only payments with interest
| rates so far below the avg. stock market return.
|
| Obviously if a bond paying 3% would be interesting to
| you, pay the mortgage off first before buying the bond.
| ncallaway wrote:
| I agree that produces a better expected return, however
| the downside-risk from a bad outcome is worse for me than
| the expected upside gain.
|
| Essentially, I don't expect my overall happiness and
| satisfaction to be linearly correlated with my finances,
| and I expect that non-linearity to be such that I'd
| rather be more risk-averse in such a way that I have to
| give up some of the potential gain.
|
| If there were a world where I could _guarantee_ the avg.
| stock market return, then I'd of course take that offer,
| but sadly such guaranteed returns only exist in the form
| of scams and ponzi schemes.
| grey-area wrote:
| You're not allowing for leverage, inflation and
| incredibly low interest rates.
|
| In real terms cash is losing significant money every year
| while assets are gaining money. Debt makes sense as long
| as you have a margin of safety and can multiply the
| impact with leverage.
|
| IF you believe inflation will be significant over 30
| years say, and can lock in a low rate, it is better to go
| with a longer term.
| VBprogrammer wrote:
| People use all kinds of accounting tricks to convince
| themselves that some purchase or other makes financial
| sense. Trading in their perfectly good 2 year old car for
| a brand new one, buying on finance when they could buy a
| cheaper one outright. I'm sceptical that it ever pays off
| that way.
| bdxn wrote:
| It's not an accounting trick; it's historically low
| rates. At the beginning of 2021 would you rather have
| paid 350k cash for a house or taken a 30 year mortgage
| and invested the remaining 80% (after a 20% down payment)
| into the sp500? Your house might be up around 10-25%
| depending on the market making your 20% stake worth more.
| and your 280k cost-basis that you invested would be worth
| 350k. You'd have already earned your down payment back
| before the end of the year.
|
| If you think the return of your investments will >= 3%
| mortgage rates then you're losing money by not taking on
| debt (albeit with a bit of risk).
| VBprogrammer wrote:
| If instead of buying the house cash I put it all into
| bitcoin at the begining of the year I'd now have enough
| to pay off the mortgage, the early repayment fee and have
| change to spare.
|
| This being the utter fucking fallacy of hypothesising
| with the benefit of perfect information.
| [deleted]
| mywittyname wrote:
| > for someone disciplined, taking a 30 year mortgage and
| paying it off like a 15 year mortgage with significant
| over payments is a good strategy.
|
| This is the worst of both worlds. You pay the interest
| penalty of a 30 year, with the payment of a 15 year
| (well, slightly more). The interest difference between a
| 30 and 15 year mortgage is about 30% (2.x% v 3.x% APR).
|
| I did a 15 year mortgage, then refinanced it every 12m or
| so ($250 each time), resetting the payments back to 180
| months each time. That way, I get the interest savings of
| a 15 year, which is significant, and each refinance makes
| your payment quite a bit lower because a 15 year loan
| actually pays back principal. After six years, my
| mortgage will be the same as it would have been if I
| originally got a 30 year, but it will be paid off in 21
| years instead of 30.
|
| There's a risk interest rates rise, or I lose my job and
| can't refinance. But so far, so good. And honestly, my
| mortgage now is so close to what it would have been with
| an original 30 year loan that it doesn't even matter if I
| can never refinance. The hardest part was the first two
| years.
| ajb wrote:
| The answer to this dilemma is to have an offset mortgage.
| Your savings offset the amount borrowed, and you only pay
| interest on the difference. Once you've saved enough to
| cover it, you pay no interest.
| ineedasername wrote:
| Though something to keep in mind is that offset mortgages
| are not an option in all locales. The US for example
| doesn't have them.
| qorrect wrote:
| Why wouldn't you just buy the house outright at that
| point ?
| lostcolony wrote:
| Fiscal cushion. If an emergency comes up, rather than
| having no money to pay for it, you instead can cover it,
| and just pay a little extra each month going forward
| until you recover.
|
| That said, I don't think they exist in the US.
| ineedasername wrote:
| >Compound interest
|
| Depends on how much better the same amount of money would
| perform if invested in an index fund. It could be more
| profitable to throw the difference in monthly payments
| into a vanguard account instead of a higher 15yr monthly
| payment.
|
| Personally my view is exactly your second point: Buy
| small enough that you can consistently put $x extra each
| month against the principle + one full extra payment each
| year. It's a good middle ground to maintain flexibility
|
| And absolutely-- buying the biggest you can fit into
| monthly expenses may even seem responsible: _" I'm not
| living beyond my means!"_ but is a razors edge of risk
| for unanticipated expenses or more significant life
| disruptions.
| dboreham wrote:
| Just a note to say that the term for a mortgage in the USA is
| really up to the borrower. This is because you are permitted
| to pay back more than the specified loan repayment, any time
| you like. So you can make a 30-year loan into a 20 year loan
| if you want, or any term shorter than 30 years. The main
| benefit to a 15-year loan is that it (usually) has a lower
| interest rate than the equivalent 30-year loan.
| pempem wrote:
| There is often a penalty for balloon payments. Please do
| check that out.
| jartelt wrote:
| 1) A large increase in evictions will mostly affect the
| rental market. There would be some single family home rentals
| affected, but mostly it would affect apartments.
|
| A lot of homeowners who needed help during the start of the
| pandemic were able to get a forbearance on their mortgage.
| Thus, there was not a huge increase in foreclosures and
| instead people just had extra payments tacked onto the end of
| their mortgage.
|
| 3) If anything, wealthy homeowners are getting a tax break.
| Congress is considering a repeal of the SALT deduction limit,
| which helps homeowners.
|
| 5) The number of people who were fired or quit due to
| mandates has been very small.
| lordnacho wrote:
| I'd say number 2 is a long shot. Political risk is not
| terribly simple. Eg I worked for a firm that thought the Iraq
| war would mean oil would rocket and markets crater, didn't go
| down that way. Point is even if the thing you think will
| happen happens, the effect is not as obvious as you think.
| More examples are the monthly NFP figures, you might naively
| think job losses means economy is doing badly, thus market
| goes down. But it's rarely that clear.
|
| 4 you have to ask yourself about real rates, not nominal
| rates. Yes you want to get paid interest, but you also have a
| loss on inflation. Also, you pay tax on nominal but you don't
| get a credit on inflation.
|
| What you really want to think about is whether rates will get
| so high that people can't afford to refinance, and are thus
| forced to sell.
|
| As sad as it sounds, you may want to look into that forced
| seller thing. When someone hits hard times, it gets even
| harder due to them having to sell at a loss compared to the
| market, which for you as a buyer is straight up money in your
| pocket. See about your local foreclosure markets, I think a
| lot of them might still be done in an old fashioned show-up-
| in-real-life and shout way. Depends on where you live.
|
| Finally, it's good to list risks as you do. The big question
| though, is always whether the market already reflects your
| thoughts.
| ineedasername wrote:
| >forced seller
|
| This takes a bit more patience though. They can drag on for
| a while as the bank & "owner" possibly reconcile or the
| owner fights things tooth & nail. These deals tend to fall
| through a bit more than traditional sales. Given patience
| though, you can get a good deal: Banks don't want to be in
| the business of actually owning houses & their carrying
| costs, so they generally sell at a market-clearing rate
| instead of waiting for the best possible offer.
| bink wrote:
| 2 is not only a long shot but it's also not like if there
| were a third world war there would be some asset classes
| that escaped unscathed. If China went to war and that
| somehow crashed real estate prices, it's not like stocks
| would be soaring.
| BuckRogers wrote:
| My scenario isn't meant to be WW3. It's just a conflict
| over Taiwan, presuming that it doesn't spiral into WW3.
| WW3 changes everything in such ways, my home ownership
| doesn't matter. Good chance my city is bombed and I die.
| What I'm focused on is the chance of a temporary dip in
| the market as I'm interested in buying in the short term
| (12-24 months).
|
| How into the geopolitics of China-US relations are you? I
| ask because my reason that we're at high risk for a
| conflict and now low over Taiwan is that China just
| upgraded their navy, while we have a refresh going on
| right now. Once that investment is complete China will
| have essentially the window closed on any hope of winning
| the conflict. They have to move relatively quickly to
| have a realistic chance at taking over Taiwan, if US
| determination is resolute in stopping them at least. It
| could happen at any time.
| trident5000 wrote:
| Thats not how you look at this. If this were a strong market
| signal they would be selling to Blackrock at a profit and not a
| loss. The exchange value is down not up. There were equal
| buyers matched to sellers in 2008 as well when the market was
| cratering (not that we are in 2008).
| k3oni wrote:
| They paid above market for these houses in cash in order to
| get them and we don't know how much above market, only they
| and their AI know, that's what's causing them all the fuss
| now.
| trident5000 wrote:
| Right so even with AI technology and directly owning much
| of the housing data in the US, they still couldnt make a
| profit. Any time you buy a house to flip it you are paying
| a premium in hopes to make a greater premium. Instead they
| are making a loss. Thats not a good market signal.
| k3oni wrote:
| From what i've read about all their investment regarding
| this issue, many of the homes they purchased also needed
| extra investment/rehab. I think they tried their hand at
| automation/ai purchasing as they had a lot of data but
| something fell really short of expectations. What Z did
| is a bit outside of the current market norms so i
| wouldn't really use it as a market signal, i'm looking at
| it more as their idea/system just fell short. But at the
| same time i was expecting the housing market to go lower
| into the start of this year, boy was i wrong as the
| market dynamics changed fast.
| trident5000 wrote:
| Sure that makes sense, they thought they could power
| through not putting in the sweat equity and they were
| wrong. Thats definitely a reality.
| game_the0ry wrote:
| When an institutional investor like Blackstone or Blackrock
| or Colony Capital calls your phone to express interest in an
| asset you own, I can all but guarantee you that you are in a
| distressed position and looking to sell.
|
| They have enough experience, data, and skill to time the
| market cycle. Companies like Zillow do not.
| Cd00d wrote:
| Zillow doesn't have experience or data in the real estate
| market? But, investors traditionally tied to securities do?
|
| One seems like an entrenched data-hoarder. The other seems
| like a "we're smart enough to pivot into this" group.
| noahtallen wrote:
| Sure, but that doesn't mean that the average person can
| acquire a house for cheaper today. And that's really the only
| part of the story that matters
| trident5000 wrote:
| Never suggested that. Just that there being buyers matched
| with sellers (there always are as that is a requirement of
| a market to exist regardless of its direction in price)
| doesnt mean the market is bolstered.
|
| However, to me it makes sense that theres some softness in
| what Zillow tried to do because rates are likely to rise in
| the next year or so and most people know that. Thats going
| to put pressure on lending which effects housing demand.
| Their AI might be top notch but they probably just timed
| the whole market poorly.
| JKCalhoun wrote:
| Does imply the market is cooling though or Zillow would not
| be unloading this hot turd (ha ha, sorry).
|
| To be sure, none of us will be buying one of _their_
| distressed properties though.
| lvs wrote:
| I'd like to see an analysis of how much institutional
| speculation is contributing to the market pricing exuberance in
| housing...
| ineedasername wrote:
| At least a little of it institution-driven:
| https://www.marketplace.org/2021/04/13/institutional-
| investo...
| gruez wrote:
| https://www.vox.com/22524829/wall-street-housing-market-
| blac...
| amznthrwaway wrote:
| Institutional Investors make up less than a percent of the
| single family home buying market.
|
| It's ridiculous to believe that they'll monopolize housing and
| we'll all be forced to rent.
|
| I know that's a very very stupid conspiracy theory though,
| mostly based on a single essay where somebody was postulating
| possible futures, and they considered a future where people
| preferred renting.
| itsoktocry wrote:
| > _they will happily rent to you since that is the the plan all
| along - own all the assets, and every generation after X gets
| to rent_
|
| Maybe if there wasn't the NA obsession with "home ownership"
| none of this would matter. Part of what is driving home prices
| are people with FOMO paying any price. Why?
| tata71 wrote:
| Lack of understanding of markets.
| JKCalhoun wrote:
| Interesting, calling an investment strategy "FOMO".
|
| More likely, people flush with cash see inflation eroding it,
| think the stock market is already too high.
| citilife wrote:
| I'm a bit more optimistic. Only something like 2% of the U.S.
| is urban.
|
| https://www.visualcapitalist.com/america-land-use/
|
| If it became problematic that people didn't own homes, but
| wanted to, they could easily just open land for building.
|
| They may own all the land around cities and all the
| corporations move there. There by making "corporate cities",
| but at the end of the day, people can create their own thing
| like they did in the past.
| djmips wrote:
| That's way optimistic. There's lots of other reasons to be in
| cities besides jobs.
| JKCalhoun wrote:
| I don't know. Living in a "bedroom community" often has all
| the benefits of the city without the downsides. Usually
| cheaper, less traffic, can still pop into the city for
| restaurants, shopping, entertainment when it suits you.
| rossdavidh wrote:
| I have nothing of substance to add to the comments others have
| made, but would like to compliment whoever thought of the phrase
| "flipping flop" to describe Zillow's misstep here; Bloomberg
| should be kicking themselves for not using that as their
| headline.
| cletus wrote:
| This is a good example of the fallacy of youth: buying too far
| into hype and being all "the sky is falling" with negative news.
|
| It wasn't long ago that we were reading how Zillow et al were
| going to buy up all the housing stock and keep millenials and
| Zoomers homeless forever.
|
| The people saying this have obviously never gone through a "bust"
| cycle. This is unsurprising as we've now been in the longest bull
| market in modern history. It's not always like this. It won't
| always be like this.
|
| History is littered with the corpses of those who tried and
| failed to corner a market. Real estate is no different. That's
| not to say we can't make the system better. We can and we need
| to. But serfdom isn't imminent either.
|
| Zillow shouldn't be taking real estate positions as it's going to
| end badly and will likely hurt their core business (ie
| transactions). I'd love to know who signed off on this idea. They
| need to be fired.
| drnonsense42 wrote:
| I disagree strongly with this sentiment. Clearly Zillow is not
| going to buy all the houses in America and turn us into serfs
| overnight - that is an absurd strawman. What? Zillow is far
| from the only actor here trying to enter this space. It's quite
| ridiculous to claim, as you are, that industrial-scale home
| speculation is doomed to fail since there are boom and bust
| cycles and therefore we don't need to worry. That's ridiculous.
| We really don't have any direct, past precedent for this type
| of situation. It is rational to be concerned here. The fact
| that Zillow failed on their initial attempt does not imply that
| this can't work - it just means they're one of the first making
| a serious attempt and, unsurprisingly, they got overzealous and
| it didn't work on the first try! Quant firms for the stock
| market in the early 90s did not work overnight even though the
| market was much more inefficient than it is now. It takes time
| for groups of highly qualified and very smart people to figure
| this stuff out - but, they will.
| cletus wrote:
| > We really don't have any direct, past precedent for this
| type of situation
|
| Yeah, we do. Massive housing speculation in the mid-2000s.
|
| > The fact that Zillow failed on their initial attempt does
| not imply that this can't work
|
| I'm reminded of Gamestop here. Around the time $GME first
| spiked and then fell you saw lots of people trying to
| encourage everyone to hold. What this ignored is that someone
| would be left holding the bag and the long interest holders
| knew it so it was a question of not being left holding the
| bag.
|
| This is classic Prisoner's Dilemma, basic human nature (ie to
| act in self interest) and exactly why markets work long term.
|
| The boom and bust cycle reflects basic human psychology of
| fear and greed.
|
| Asset bubbles aren't new. Attempting to corner or even just
| manipulating markets isn't new. Ultimately these things
| always revert to mean. Sometimes you can predict the reason.
| Often you can't.
|
| I personally favour fairly radical and progressive real
| estate reform. This includes (much) higher property taxes for
| non-resident owners, treating owners as tax residents and
| thus taxing their income, ending special treatment for real
| estate assets in asset reporting and withholding taxes at
| source on real estate income.
|
| Cities should be for those that live in them, first and
| foremost. Having landlords is fine as long as those landlords
| themselves are residents of the same city. Residential
| property shouldn't be for investment funds or oligarchs
| hiding money from governments.
|
| Concentrating on the likes of Zillow however is largely
| unnecessary and a diversion. The focus should be on the game
| not the players.
|
| But I also firmly believe that the prisoner's dilemma and
| human psychology will limit the impact of institutional real
| estate buying just as in any other market.
| unethical_ban wrote:
| Like the other responder, I don't think the 00s and this
| cycle have much to do with each other. 00s was lots of
| people who couldn't afford a home being provided mortgages
| by banks, and it falling.
|
| This is presumably a number of well-financed institutions
| buying up property to hold or rent.
|
| Now, perhaps you're correct that it isn't as bad as it
| seemed, since Zillow is selling the homes rather than
| getting into the rental business, but even the header of
| the article says they are seeking "institutional
| investors".
|
| I also agree that cities should be for those who live in
| them, and that land is a different type of asset from most
| others (again, like another responder mentioned).
|
| The more I type the more I think we're on the same page,
| but you seem to think everyone is focused "just on Zillow"
| while I am thinking more about the long-term opportunities
| for trillion-dollar megafunds to gain a monopoly on living
| space and destroying the ability of families to own
| property in America's cities.
| refurb wrote:
| Exactly! It's different this time. Fundamentals are
| strong. Old rules don't apply.
|
| Just like the last bubble.
| unethical_ban wrote:
| To say there are different causes for concern is not the
| same as saying there is no concern.
| PaulDavisThe1st wrote:
| Nobody is saying (I think!) that the fundamentals are
| strong, or that old rules don't apply.
|
| What's being suggested is that the influx of large scale
| corporate purchasing in the residential real estate
| market is different, and that because of the old rules,
| this could be a problem.
| drnonsense42 wrote:
| Real estate speculation has likely been around for
| thousands of years; it's certainly not new. But, do you see
| any difference between A. individuals in the mid-2000s
| speculating on real estate based on individual whims and
| taking out mortgages they should not and B. large
| corporations with access to massive datasets previously
| unavailable, teams of PhDs trained to work on this,
| equipped with game-changing modeling capabilities that were
| computationally infeasible until the past decade, along
| with access to massive amounts of capital? In my opinion,
| the former case seems less of a concern than the latter.
|
| Also, maybe I'm dense but I'm not able to see any relevancy
| to GME at all.
| cudgy wrote:
| Scenario B and A are more similar than you acknowledge.
| Both are fueled by low cost capital driving prices to
| unsustainable levels. Scenario B will be a problem too
| if/when interest rates rise and companies have
| insufficient cash flow from rents to pay the new debt
| service. In fact, scenario B may result in a deeper
| crash, since selling will be swift and by many actors at
| the same time since they are using similar valuation
| models. Scenario A was predominately driven by actual
| homeowners whom are more reluctant to sell in a down
| market.
| PaulDavisThe1st wrote:
| > companies have insufficient cash flow from rents to pay
| the new debt service.
|
| If they are pouring their own capital into purchases, why
| would there be any debt? Are the entities (companies) in
| scenario B actually borrowing money?
| brewdad wrote:
| Given the current interest rate market, I think it's safe
| to assume they are borrowing money to purchase homes.
| They aren't taking out individual mortgages but I would
| be shocked to learn that they aren't borrowing millions
| through other forms of financing and then paying "cash"
| for homes.
| PaulDavisThe1st wrote:
| I had the impression that this was happening because they
| had excess cash and nowhere particularly interesting to
| put it. Why would you borrow if you have cash sitting
| around and expectations of a good-to-crazy rate of
| return?
| dlp211 wrote:
| Why use your own money when you can use other people's
| money? Apple, MSFT, Google, etc. All these companies have
| massive piles of cash on hand yet continue to finance
| operations.
|
| Irrespective of that, I agree that even if Zillow fails
| here, it doesn't bode well for the future of the RE
| market.
| lotsofpulp wrote:
| A sounds like it would lead to increased chances of
| people overpaying and overextending themselves, and B
| sounds like it would lead to more accurate pricing.
| long_time_gone wrote:
| You are right that the pricing is more accurate. But it
| is more accurate for a company trying to increase their
| own revenue, not someone trying to own and occupy a house
| (most Americans, based on home ownership rates). The
| calculations used are entirely different and so is the
| capital available. In the world without this type of
| behavior, that pricing difference could be captured by an
| actual homeowner over the life of their mortgage.
|
| It's another thing we are seeing "optimized" right in
| front of us. Meanwhile, housing, education, and
| healthcare get more expensive for actual humans.
| lotsofpulp wrote:
| > But it is more accurate for a company trying to
| increase their own revenue, not someone trying to own and
| occupy a house (most Americans, based on home ownership
| rates).
|
| Also for the house seller (prior to the company), who is
| getting paid a more accurate, higher price.
|
| And a price is accurate all the same for buyer and
| seller, since there exists a range with the minimum price
| the seller wants to receive and a maximum price the buyer
| wants to pay. The smaller this range, the more accurate
| the price.
|
| With more data and more accurate projections, it may be
| possible for current owners to capture more of the gain
| that may have happened down the road.
| toolz wrote:
| I agree B) isn't being employed by only malicious
| companies. We're talking about a huge market and tons of
| competition. It would take a lot of effort to keep honest
| companies from making money also bringing prices down if
| there was artificial price inflation.
|
| I've definitely not studied the market extensively, but
| it seems rather intuitive to me that if you artificially
| give everyone access to the best loans in any market,
| you'll see prices continue to inflate until everyone in
| the housing market is educated and capable on benefiting
| from the subsidized loans.
| drnonsense42 wrote:
| That's one of the talking points parroted by HFT firm
| representatives defending their business. There's a lot
| of research on it as well. I bet successful real estate
| firms will use that same argument. I personally have a
| hard time believing this will benefit the average
| consumer buying a home.
| VRay wrote:
| those hedge funds don't have access to enough money to
| move the market that much
|
| $2.6 billion is chump change to a medium-sized city with
| a few hundred thousand residents, much less the US at
| large
|
| We just need to remove zoning restrictions so that market
| forces can bring houses back down to being an affordable,
| depreciating asset.
|
| https://www.worksinprogress.co/issue/the-housing-theory-
| of-e...
| PaulDavisThe1st wrote:
| Someone in a related thread here on HN yesterday said
| that at some recent point in time, US$200M would have
| bought every piece of residential real estate for sale in
| Boston (proper). Didn't try to verify if that was true.
| drnonsense42 wrote:
| I agree that 2.6b is chump change relative to the US
| housing market. In fact, it's not a large hedge fund,
| regardless of what they're trading. I think the real
| concern here is if this model proves to be profitable and
| that 3b increases by several orders of magnitude across a
| much larger set of firms and funds. I'm not saying that
| will happen, but that is an alarming potentiality.
| KaiserPro wrote:
| > $2.6 billion is chump change
|
| For the entire US yes. For new york city, that's just
| under ~3% of total sales. Given how fundamentally
| illiquid residential housing market is, thats more than
| enough to push prices up/down as the player sees fit.
| thebean11 wrote:
| I bet it's even an even bigger part of the pie if you
| exclude $10m+ homes. My hunch is that the middle and low
| end of the market is more attractive because they are
| easier to rent.
| long_time_gone wrote:
| > But I also firmly believe that the prisoner's dilemma and
| human psychology will limit the impact of institutional
| real estate buying just as in any other market.
|
| Possibly. Real estate is different than most other markets
| for a few reasons. Favorable tax treatment, sheer market
| size, high barriers to entry, and being at the bottom of
| the hierarchy of needs.
|
| I'm worried if this isn't the inevitable path of
| concentrated wealth accumulation. Stocks have grown too
| over-valued? Move to housing, a gigantic market that people
| require to survive.
| bcrosby95 wrote:
| > Stocks have grown too over-valued? Move to housing, a
| gigantic market that people require to survive.
|
| This is kinda what happened in the 00's housing bubble.
| Tech crashed and people looked at housing as the next big
| investment. It feels like we just have groups of people
| going from bubble to bubble.
| qorrect wrote:
| > Ultimately these things always revert to mean.
|
| Yeah, until they don't...
| mschuster91 wrote:
| > Around the time $GME first spiked and then fell you saw
| lots of people trying to encourage everyone to hold.
|
| Everyone who got into $GME after the first spike knows that
| the value will tank some time, they are in it simply for
| the lulz - to this day, short sellers are accumulating
| losses, and given how long the price has stood up way over
| anything supported by fundamentals there must have been
| dozens of billions of dollars in value lost for them.
|
| Obviously some are in $GME in the vain-ish hope of a second
| short squeeze event... but that's just gambling.
| alasdair_ wrote:
| > Having landlords is fine as long as those landlords
| themselves are residents of the same city.
|
| I suspect this would simply lead to property owners having
| a nominal "registered agent" in the city as the "owner" but
| all control and profit flows to the real owners.
|
| Moreover, think about blighted cities. If a company is
| willing to come in to such a city and build some really
| nice affordable apartments that would improve the city for
| everyone, it seems like an undue burden to force them to
| live in that city as well. Your proposal could lead to
| shitty places to live staying shitty for a long time.
| gmadsen wrote:
| This is radically different than the 2000s bubble.
|
| also GME is over $200 currently, when it was $10 a year ago
| freeflight wrote:
| _> also GME is over $200 currently, when it was $10 a
| year ago_
|
| And they got there by running a sustainable and
| profitable business? No, they got there because Reddit
| decided to play their own little game of pump&dump.
|
| Which is yet another blatant example of how decoupled the
| stock market is from the actual real world economy.
| qorrect wrote:
| > little game of pump&dump
|
| Actually the game was buy and hold ( _diamond hands_ ),
| and only because they saw an enormous amount of shorts
| outstanding, so much so that a squeeze was all but
| guaranteed.
| 8ytecoder wrote:
| https://www.wsj.com/articles/if-you-sell-a-house-these-
| days-...
|
| Zillow is far from they only one. PE emerged as one of the
| largest buyers of foreclosed houses and distressed sales.
| TomMckenny wrote:
| > We really don't have any direct, past precedent for this
| type of situation.
|
| Unfortunately we do have precedent. Through all of history
| almost no one owed their own home. It was by extraordinary
| government intervention in the 20th century through loan
| programs, incentives and building, and impediments to
| speculation, that made it uniquely happen in our era.
|
| As the government steps back from continuous intervention
| favoring individual home ownership and low to nonprofit
| housing, the more profitable rental economy will re assert
| itself: it is always more profitable to own a property to
| rent out then to live in it and the market will reflect that
| if left to itself.
|
| Price fluctuations (eg 2008) do not change the fact that land
| price increases have far outpaced wages for decades. So yes,
| it is rational to be very concerned.
|
| And note that Zillow is not selling these 7k properties to
| would be homeowners but to investors.
| Aunche wrote:
| You can't squeeze more money than the market is willing to
| pay. If private equity tries to corner the housing market,
| more people would decide to live with their roommates and
| family while developers will happily sell them overpriced
| homes and they pay property taxes.
| HarryHirsch wrote:
| _more people would decide to live with their roommates and
| family_
|
| And we made fun of Soviet Russia, where people would live
| with roommates and family because their government was so
| dysfunctional that it couldn't even arrange shelter for its
| citizens, a basic necessity for life.
| rsj_hn wrote:
| U.S. has a 65% home ownership rate.
|
| Not everyone can afford a Bentley or a condo in
| Manhattan. That is not some terrible injustice that needs
| to be fixed. Living within your means and buying a place
| where you can afford to live is also an alternate
| approach. Or you can moan about capitalism and how unfair
| life is.
| HarryHirsch wrote:
| The price for housing has gone up substantially in the
| last 20 years, housing takes up a greater share of
| peoples incomes than it did in the past, and there is no
| reason for it.
|
| We wouldn't tolerate the price of food going up by the
| same percentage.
| PaulDavisThe1st wrote:
| We tolerate it in housing because the asset appreciates.
|
| If food costs went up substantially, but you could eat
| the food and then resell it for more than you paid for it
| (and sometimes a lot more than just inflation-linked
| increases), I suspect we'd tolerate that too.
| HarryHirsch wrote:
| Now we are getting somewhere. The owner class tolerates
| housing price increases because they think they are
| getting a good deal (but it's just inflation, if the
| price of necessary goods goes up, that's inflation), and
| the renter class gets fleeced. It's not a recipe for
| long-term stability when 2/3 of the population band
| together to oppress the remaining 1/3, all this with
| government support.
|
| It's also concerning that housing is a government-
| supported investment, it's an unproductive asset. That's
| not how you encourage progress and development. Even if
| you just have a field you can grow crops but no such luck
| with housing.
|
| (Maybe there's change on the horizon, a collegue who
| lives somewhere in the Rust Belt complained that her
| 25-year old daughter can't move out. She has a regular
| job, but the rents have become so high that she cannot
| afford an apartment on her salary. So there's hope that
| civil unrest will be averted.)
| rsj_hn wrote:
| > The price for housing has gone up substantially in the
| last 20 years
|
| This is the result of supply and demand. How does demand
| for housing increase? Falling mortgage, downpayment
| assistance programs, government guaranteed loans. That
| increases demand.
|
| And housing is also larger than 20 years ago.
|
| > We wouldn't tolerate the price of food going up by the
| same percentage.
|
| This is just silly. It is not something you "tolerate"
| it's something you _cause_.
|
| Food prices also rise when demand increases.
|
| The public has 100% control over demand as they are the
| ones bidding up the house prices! Now they do not have
| 100% control over supply. But house prices have not risen
| because of a decline in supply.
| HarryHirsch wrote:
| _How does demand for housing increase? Falling mortgage,
| downpayment assistance programs, government guaranteed
| loans._
|
| Also growing population and people moving to areas where
| the jobs are. Most recently: pandemic refugees from NYC
| and California settling in adjacent areas. When demand
| changes for a good with inelastic supply you see large
| excursions in price.
|
| _And housing is also larger than 20 years ago._
|
| That's a problem right there. Everyone _needs_ a roof
| over the head. Some people _would like_ a palace. There
| is not enough entry-level housing being built to keep up
| with demand, meanwhile the existing stock has reached the
| end of its serviceable life. There 's a good chunk of
| 70's construction which has deteriorated to a point that
| it needs rebuilding. The shortage at the low end causes
| high rents for those who can least afford it.
|
| _Food prices also rise when demand increases._
|
| Food prices mostly rise in response to missing supply,
| either because the harvest fails and the government can't
| secure imports or because of political upheavals. Either
| way, it's a political problem, food riots are what starts
| revolutions. and food price instability is a hallmark of
| banana republics.
| xibalba wrote:
| > Quant firms for the stock market in the early 90s
|
| False equivalence. The real estate business which Zillow
| failed is massively capital intensive, whereas figuring out a
| quant strategy is not necessarily so. In other words, it is
| very possible to go out of business before a business model
| is worked out (assuming there is an undiscovered, workable
| business model).
|
| Investors will not endlessly fund money losers, and Zillow is
| a huge money loser from both a income and cash flow
| perspective-a trend that predated their entry into the iBuyer
| space. Now you might say, the investor appetite for money
| losing Zillow is bottomless, just look at asset class X,
| which is totally unproven and yet has insane valuations. To
| which I would reply, "That is true until it isn't." One
| common characteristic of all financial bubbles is that its
| participants claim "this time is different."
|
| Supposing iBuyers do become a significant force in the SFH
| market, so what? Large companies already participate directly
| in housing in a massive way. Who do you think built all of
| these apartments? Also, don't YIMBY's want to eliminate SFH
| anyway?
| davidw wrote:
| > Also, don't YIMBY's want to eliminate SFH anyway?
|
| No, only the zoning designation, meaning that if you want,
| you can build a SFH. Or a 4-plex. Or maybe a corner store.
| seanmcdirmid wrote:
| Like they have in Houston. So you get scenes like the
| ones in this article: https://www.chron.com/news/houston-
| texas/houston/article/Wei...
| davidw wrote:
| Yes, and housing is massively more affordable than
| elsewhere. And there's less homelessness, because people
| can more easily afford homes.
|
| Not to say that it's necessarily a model to follow:
| there's a _lot_ of sprawl involved. Just saying that
| "abundant housing has some real benefits".
| seanmcdirmid wrote:
| > and housing is massively more affordable than
| elsewhere.
|
| Compared to NYC and SF? Sure. Compared to everywhere
| else, no:
|
| https://kinder.rice.edu/urbanedge/2020/06/23/rents-and-
| home-...
|
| https://www.houstonchronicle.com/news/houston-
| texas/houston/...
|
| But then that's just saying you'll find more affordable
| housing in cities that people don't want to live in,
| which would then go along with your point.
|
| > Not to say that it's necessarily a model to follow:
| there's a lot of sprawl involved. Just saying that
| "abundant housing has some real benefits".
|
| I've heard it isn't a nice place, but I've never been
| before so can't judge.
| davidw wrote:
| Everywhere is struggling with housing right now, because
| nowhere has built enough since the great recession - and
| some places like California have probably been
| underbuilding for decades.
|
| Median prices are still pretty low there, though:
| https://www.realtor.com/realestateandhomes-
| search/Houston_TX...
|
| It does not strike me as a particularly attractive place
| to live - but I'm not a big city person, and prefer more
| mountains/nature. Its population has sure been growing,
| though, indicating that _someone_ wants to live there.
| seanmcdirmid wrote:
| > Everywhere is struggling with housing right now,
| because nowhere has built enough since the great
| recession
|
| That was my original point in another thread (under
| building during the great recession + an exodus of
| building talent).
|
| > It does not strike me as a particularly attractive
| place to live - but I'm not a big city person, and prefer
| more mountains/nature. Its population has sure been
| growing, though, indicating that someone wants to live
| there.
|
| Houston is growing at half the rate of Seattle, at least
| in the last 10 years (10% vs. 20% growth). Those cities
| growing the fastest seem to have the most pressure put on
| their housing markets, which makes sense.
| davidw wrote:
| Demand certainly contributes to rising prices if supply
| lags. Houston does a much better job than other places of
| adding supply, and part of that is their 'zoning-lite'
| approach.
| olalonde wrote:
| > Quant firms for the stock market in the early 90s did not
| work overnight even though the market was much more
| inefficient than it is now. It takes time for groups of
| highly qualified and very smart people to figure this stuff
| out - but, they will.
|
| This example works against you. Quant firms did succeed but
| they did not corner the stock market nor are they cause for
| concern. There is a long history of firms that failed to
| corner a market or become a monopoly. True natural monopolies
| are extremely rare and don't typically last very long.
| secondaryacct wrote:
| Let them buy overpriced useless houses, if they buy too many
| we'll vote them out or we'll take the homes back by force.
|
| Everything is a balance and the only way to make money long
| term is to be undeniably useful to a majority of people.
|
| Anything below that bar will die down in shame, infamy or
| violence.
| wonderwonder wrote:
| "we'll take the ... back by force" Why are so many people
| so quick to suggest that a nationwide situation will be
| resolved by force. No one is going to take back hundreds of
| homes by force. That amount of force would be absolutely
| crushed by state sanctioned violence. Even if you could,
| what are you going to do with the thousands of homes you
| have now claimed? Who decides who gets to live there? What
| about the renters already living there? America is in an
| awkward position right now and the constant larping of
| using force to resolve issues is not helping.
| sokoloff wrote:
| What does "vote them out" mean in this context?
| tablespoon wrote:
| > What does "vote them out" mean in this context?
|
| I suppose it could mean voting in people to write a law
| that makes it exceedingly unattractive for institutional
| investors to buy single family homes. You could probably
| even do such a thing "neutrally" since people really only
| need one home and if you own more than two you're almost
| certainly investing in some way. Apply some onerous tax
| on each unit owned above 100, and all these investors
| will flee the market.
|
| Edit: IIRC, the companies that buy up all these single
| family homes are large corporations. I'm pretty sure you
| could write a law like I described that they wouldn't try
| to use some cheeky corporate shell game to try to bypass
| (e.g. in their tax filings require them to declare how
| many single family homes they're the beneficiary owner
| of, regardless of any intermediary shell
| companies/special purpose entities, and tax them for
| that). Require the auditors to sign off of on the number.
| If they lie, everyone's subject to even more onerous
| civil and criminal penalties (e.g. blow them up like
| Enron). Large corporations will stretch the law as far as
| they can, but it's rare for them to deliberately venture
| into fraud and other kinds of illegality (for the pedants
| out there, note I said _rare_ not never). The systemic
| issues can be solved if they 're made to comply, even if
| some relatively small fish still don't
| darig wrote:
| I suppose all the billionaire investors would just retire
| and not start 70 shell companies to own 100 units each.
| /s
| varelse wrote:
| They just need to hold all that inventory long enough for it to
| go black. But of course the market can remain irrational longer
| than they can remain solvent so that's not how it will play
| out.
|
| Also good luck convincing the sociopaths of VC to get rich slow
| here: they want their capital back so they can throw it at more
| promising get-rich-quick schemes.
| hinkley wrote:
| > the market can remain irrational longer than [you] can
| remain solvent
|
| This deserves to be stated on its own.
| tablespoon wrote:
| > It wasn't long ago that we were reading how Zillow et al were
| going to buy up all the housing stock and keep millenials and
| Zoomers homeless forever.
|
| I think you're making a significant error there: the narrative
| you're criticizing wasn't focused exclusively on Zillow, but
| rather "big investors" buying up single family homes and
| pushing actual single families out of that market. This news
| does nothing to repudiate that narrative, from the OP:
|
| > The company is seeking roughly $2.8 billion for the houses,
| which are being pitched to institutional investors, according
| to people familiar with the matter. Zillow will likely sell the
| properties to a multitude of buyers rather than packaging them
| in a single transaction, said the people, who asked not to be
| named because the matter is private.
| HWR_14 wrote:
| > History is littered with the corpses of those who tried and
| failed to corner a market.
|
| History is also filled with the bloated corpses of those who
| did successfully corner a market. Or, in modern times, those
| who participated in a synergistic duopoly to skirt anti-trust
| laws.
| valeness wrote:
| But didn't they sell the houses to investors and/or established
| landlords?
|
| I'm not sure how this helps the youth or those otherwise
| disillusioned with the current housing market as that housing
| is still unavailable to them.
| r3trohack3r wrote:
| I think the ops point is that it will end, not that it has
| ended.
| valeness wrote:
| Yes, but this is not evidence of "it will end" to me.
| r3trohack3r wrote:
| I think the evidence presented was "history"
|
| > The people saying this have obviously never gone
| through a "bust" cycle. This is unsurprising as we've now
| been in the longest bull market in modern history. It's
| not always like this. It won't always be like this.
|
| I once heard someone who ran an investment floor say,
| paraphrased: During a bull market, I want my floor
| staffed with people too young to have lived the last bull
| market.
|
| They didn't want the risk aversion - drilled into people
| by the last bust cycle - on their trading floor.
|
| The cycle will repeat itself, folks will go from being
| unbelievably wealthy to bankrupt overnight (overnight as
| a figure of speech speaking, the crash will come but
| might drag out). Folks who bet it all will have their
| lives ruined. We will have another generation of market
| participants who are risk averse from hard earned
| lessons.
|
| The flip side of this is that _everything will go on
| sale_ for those who had stable investments and those who
| are income rich.
|
| If everything doesn't go on sale soon (soon might mean
| many years) it'll be the first time in history we broke
| out of the boom/bust cycle.
|
| For me, personally, I track my net worth and check in
| monthly. For the past year I've excluded my home's
| valuation from my net worth, it's monopoly money; by the
| time I'm willing to liquidate my house we will be on the
| other side of a bust cycle. I'm mentally prepared for my
| home to lose 50% of its value "overnight."
| adam_arthur wrote:
| You're right, but the difference these days is the Fed putting
| the pedal to the metal even when fiscal spending and economic
| data at all time records.
|
| We haven't seen this phenomena since the 70s when inflation was
| running hot and the Fed did nothing for many years. Back then,
| prices continued to rise nominally for many years.
|
| I suspect the Fed will tighten somewhat (taper should be
| announced tomorrow), but they keep stating that inflation is
| transitory.
|
| So clearly their intention is to kick the can as far down the
| road as possible. If inflation does start to inflect downward,
| they have the perfect excuse to do nothing until it levels off
| at an elevated level many months later. Rents alone will drive
| elevated inflation for years to come. However, used car prices
| will certainly tank at some point which will mask the effect.
|
| By moving so slowly, they seem to be facilitating the
| development of a new epic bubble, except it's a bubble in most
| asset classes. Stocks generally aren't too over valued, but
| hypergrowth is for sure. E.g. NET at 100x sales.
|
| Compare to Cisco in the dotcom bubble, which peaked at
| something like 200 PE and much smaller sales multiple. The PEs
| back then are now the PSs. Kind of insane, even accounting for
| the greater legitimacy of the businesses today.
|
| In the past the Fed used to preempt excesses and inflation.
| Anytime they haven't, has been a disaster in the long run,
| historically.
|
| Unfortunately I think a lot of their action is motivated by
| Powell trying to retain his seat. They really need to either
| renominate him or put somebody else up for vote so he stops
| optimizing for the job. His term ends in Feb 22.
| SilasX wrote:
| >I suspect the Fed will tighten somewhat (taper should be
| announced tomorrow), but they keep stating that inflation is
| transitory.
|
| I hope so, but keep in mind, the Fed has lacked the will to
| tighten even in the most favorable conditions -- strong
| market, no covid -- merely because banks screamed bloody
| murder about having to pay slivers of a basis point more on
| overnight loans or (heaven forbid) stay more liquid so they
| don't need to get as many loans.
|
| HN stories about "liquidity injections":
|
| https://news.ycombinator.com/item?id=22559175
|
| https://news.ycombinator.com/item?id=21731848
|
| https://news.ycombinator.com/item?id=21477855
| adam_arthur wrote:
| Yeah, I don't have my hopes up, particularly. Things are so
| good right now on pretty much every metric, they have to at
| least taper, though. I suspect they will use overly dovish
| language at the announcement though, which will spur even
| further speculation.
|
| But the unfortunate aspect of the current fed is that they
| care way too much about the markets. And they are very
| short term oriented. They're pulling the good times of the
| future into the now, at potentially major costs later.
|
| I think Powell is just too focused on being liked and
| retaining his job, at the root of it. That's the only
| explanation that makes all the pieces fit.
| medvezhenok wrote:
| Everyone looks at the FED, but there's an interesting
| counterintuitive hypothesis out there that it's not
| actually the FED that has anything to do with inflation.
| In the 1970s, it was international credit creation by
| banks that was not tracked by the FED that caused
| persistent inflation (and their attempts to control it
| were futile since they were not tracking it), and now
| it's actually the government stimulus combined with the
| supply shortages that caused the inflation (like the
| pre-1955 era) - and the inflation will not last beyond
| this spike since it's not the FED that actually controls
| it, it's the intermediaries in the financial systems and
| the banks and their propensity to lend (which is still
| low relative to pre-GFC).
|
| So the FED can do all it wants, but ultimately it's the
| other actors (banks, financial institutions and
| government in the form of transfers) that will ultimately
| decide the fate of inflation going forward - right now
| it's looking like disinflation/deflation after all of the
| stimulus and supply shortages work their way through the
| system (can be seen from the long end of the yield
| curve).
|
| The FED's actions can and will affect the markets however
| - but that effect is mainly psychological.
|
| https://alhambrapartners.com/2021/10/29/inflation-
| history-ev...
| SilasX wrote:
| Can't the Fed still be responsible for interest rates not
| compensating you for inflation? I wouldn't care nearly as
| much if not for that part.
| whimsicalism wrote:
| Sorry, youth here. The housing market remains screwed
| regardless of the actions of Zillow or Blackstone or whomever.
| harryh wrote:
| Decades of under-building due to restrictive zoning laws will
| do that.
| ashtonkem wrote:
| And continuously rising construction costs. Parking
| minimums are under-discussed here, as the apartment block I
| used to live in in Los Angeles was probably more
| underground car park than apartment if you looked at the
| balance sheet. And yet the parking lot was never more than
| 20% full.
| _huayra_ wrote:
| Is there a dearth of skilled labor for building houses?
|
| As a "youth", I don't have any insight into this as I'm a
| renter for the foreseeable future, but my parents' and
| their friends complain about how difficult it is to get
| _anybody_ to do any sort of construction / home upgrades,
| e.g. my parents putting in a heat pump.
|
| Given how much the "you're a loser if you don't go to
| college" narrative has propelled people who may have been
| happy and skilled at carpentry, plumbing, electrical work,
| etc, into soulless corporate jobs, this seems like
| something that the US could take a page out of Germany or
| Switzerland's book, i.e. much more emphasis on non-uni
| career tracks starting in high school.
| kingaillas wrote:
| >Is there a dearth of skilled labor for building houses?
|
| Yes - https://www.npr.org/2021/07/30/1022642064/planet-
| money-why-a...
|
| In summary, the US has been underbuilding ever since the
| housing crisis, and this makes people avoid construction
| trades. Fixing it will take years.
| seanmcdirmid wrote:
| Do you have numbers to back that up? If anything,
| underbuilding came from a moribund housing market after
| 2008, as many left the industry and it took way too long to
| ramp up on talent when housing began to boom again (a lack
| of people skilled in building houses is still a problem).
|
| But I doubt this is an under building problem at all. Look
| at Seattle and the area, and there isn't a shortage of new
| housing projects at all. They are mostly all luxury, which
| is the only way builders can make a profit on high land
| prices, and they sell very quickly regardless.
| dghlsakjg wrote:
| You can make a rough comparison by looking at housing
| starts in Japan[1] vs USA[2] housing starts. Housing cost
| in Japan has been flat even in major metros like Tokyo.
| They also build 2-3x as many houses over the long term
| according to the data cited.
|
| Seattle is a weird example for me (anecdotally). When I
| lived there in 2017-18 I found the rental market to be
| great. The city had incentivized building rental units
| and as a result there were great deals to be had. I was
| able to negotiate a 15% discount and dictate the length
| of my lease on Capitol Hill. I don't know what it looks
| like now, but it was great at the time.
|
| 1. https://fred.stlouisfed.org/series/WSCNDW01JPA489S
|
| 2. https://fred.stlouisfed.org/series/WSCNDW01USA470S
| seanmcdirmid wrote:
| Japan builds a lot of houses because they tear them down
| after 20 or 30 years. What is Japan's net gain (housing
| starts - housing ends) per year, not just the number of
| units started?
|
| > When I lived there in 2017-18 I found the rental market
| to be great.
|
| The market was weaker in 2017 because of all the new
| rental capacity that came online. That capacity has long
| been filled and rents are skyrocketing ATM.
| faet wrote:
| https://www.forbes.com/sites/graisondangor/2021/06/16/the
| -ho...
|
| The U.S. built on average 276,000 fewer homes per year
| between 2001 and 2020 compared to the period between 1968
| and 2000, according to the report which was covered
| earlier by the Wall Street Journal.
|
| Had building continued at the same pace, there would be
| 5.5 million more units of housing, the report estimated.
|
| To make up the shortage, the NAR report says the U.S.
| would have to build 2.1 million homes each year for a
| decade--more than it built each year during the housing
| boom of the mid-2000s.
| refurb wrote:
| What the the numbers for population growth versus number
| of housing units? Per capita?
| meragrin_ wrote:
| No connection to "under-building due to restrictive
| zoning laws".
| seanmcdirmid wrote:
| Why are you comparing a 19 year period to a 32 year
| period? Ah, I see it is a per year measure.
|
| Well, it isn't weird that land runs out for new
| subdivisions. What is left is to build more dense
| (replace single family housing with apartments or town
| homes). Still, why is it zoning per se that is the
| problem rather than just the market? They have the same
| pricing problems elsewhere in countries with building
| booms (eg China).
| sigstoat wrote:
| > Still, why is it zoning per se that is the problem
| rather than just the market?
|
| dense housing is frequently not permitted by zoning.
| sometimes housing itself isn't permitted.
|
| > What is left is to build more dense (replace single
| family housing with apartments or town homes).
|
| yeah, that's exactly the thing that's banned in very many
| places where it would be most useful.
| seanmcdirmid wrote:
| > dense housing is frequently not permitted by zoning.
| sometimes housing itself isn't permitted.
|
| But where they are permitted, housing prices are still
| high. Higher even, like NYC and much of New Jersey near
| NYC. Is there a good example where increased density has
| led to lower prices, not higher ones?
| lthornberry wrote:
| Most of the area in those places still has significant
| zoning restrictions on density--the cap is higher than
| other places, but there's still a cap. That's why there
| are still brownstones in Brooklyn.
|
| Second, the economics of building dictate that
| skyscraper-level density will only happen in places where
| housing is relatively expensive. But there are plenty of
| examples of density leading to lower prices, in the
| suburbs.
| seanmcdirmid wrote:
| > But there are plenty of examples of density leading to
| lower prices, in the suburbs.
|
| Do you have specific examples? The only places I can
| think of are economically depressed (e.g. in the midwest,
| or in Florida swampland) and aren't particularly dense.
|
| Maybe Houston? Houston is famous for having almost no
| zoning, but even Houston seems to be heating up these
| days.
| HWR_14 wrote:
| So you compared a 32-year period with a couple of
| technical recessions and one relatively brief stagflation
| period averaged over huge growth with an 18-year period
| dominated by the Great Recession?
|
| Would it be interesting to point out that the US
| population growth also was much higher in the 1968-2000
| period compared to 2001-2020 period on an annual basis?
| dvtrn wrote:
| _Do you have numbers to back that up?_
|
| https://www.cato.org/sites/cato.org/files/pubs/pdf/pa-823
| .pd...
|
| I found the section "New Evidence on the Effects of Land-
| Use Regulation" to be quite interesting in past reads
| (and discussions) and probably relevant.
| ItsMonkk wrote:
| Restrictive zoning is a consequence of scarcity seeking
| incentives.
|
| Housing can't be both Affordable and a good Investment.
| Therefore the only proper value for a home is the price
| that it costs to build it. The way to do that is a 100%
| Land Value Tax.
| wonderwonder wrote:
| Maybe I dont understand (which I am open too) but it does
| not seem to make sense unless we transition to a
| centrally managed economy. Supply and demand drive the
| price of housing. Whether a house is purchased as an
| investment or not, it will appreciate based on a variety
| of factors, including quality of schools, proximity to
| jobs, etc. If the price of housing did not fluctuate
| based on demand, and everyone could afford a house
| anywhere they wanted, who determines who gets the house?
| House A is on sale and 15 families can afford it. In the
| current situation, the highest offer takes it. If all
| offers were forced to be the same, who gets the house?
| How do you account for bias in the decision process?
| wallacoloo wrote:
| I think the way this looks in GP's proposal is "he who
| can afford to pay the most rent (taxes) gets the home",
| which is a lot like the current system you describe
| except the rent (taxes) goes toward funding the city and
| improving such public goods as the schools and roads you
| mention, instead of rewarding speculators.
| refurb wrote:
| You know what else will do that? A general sense among the
| population that certain real estate is a "cant lose"
| investment and a general shift in desirability from suburbs
| to urban housing.
| chasebank wrote:
| While I don't disagree, there have to be multiple forces at
| play here. Take a town like Boise. They have very lenient
| zoning / building req's. If it was just zoning, their
| property market wouldn't be so out of whack. In addition to
| zoning, speculative investing, low interest rates, housing
| authorities, rent control, the list goes on and on.
|
| IMO, CA prop 13 is just as guilty as restrictive zoning.
| We'll never get to see the other side of the experiment,
| the people of CA would never vote to remove it. Prop 13
| interrupts the natural cycle of housing.
| whimsicalism wrote:
| eh - I think short term housing fluctuations are
| different from long term underbuilding. My understanding
| was Boise was due to demand shocks that supply hadn't had
| a chance to respond to.
| IG_Semmelweiss wrote:
| I don't disagree that there are other factors at play.
|
| The last part about Prop 13 seems like a bit of a cheap
| shot. CA is anything but a natural market.
|
| CA government set that poison pill to ensure it must
| listen to its constituents and remain as "natural" as
| possible. Now we find they can't enact meaningful reform
| around zoning, building requirements, parking, or making
| the city more welcoming to trades, etc.
|
| Why should old taxpayers carry the water for ineffectual
| govt ?
|
| CA: "We refuse to make the changes needed to let more
| people in at a reasonable cost. We will instead take more
| money from one group, so that they leave and we can
| fleecce someone else ! "
| duped wrote:
| Not everywhere is California
| whimsicalism wrote:
| It's not just happening in California.
| nebula8804 wrote:
| Many cheap places have other problems that are reflected
| in the price of the property (ie. There is a cost to
| living in a town full of anti-vaxxers/religious
| nutjobs/etc.)
|
| If you look at California exodus data, its mainly people
| making less than 100K, population is increasing for
| people making more than 100K.
|
| Despite this, property prices are still increasing
| elsewhere. This is a worst of all worlds scenario.
| WarOnPrivacy wrote:
| It's true that all the other markets with severe housing
| shortages are not California.
| tjr225 wrote:
| Look at any moderately sized midwest cities subreddit and
| you will find countless posts about rapidly rising
| housing costs.
| duped wrote:
| I live in a moderately sized Midwestern city. We don't
| have a shortage of new construction or regressive zoning
| laws.
| pvarangot wrote:
| No it's not, but everyone selling their house for 1
| million dollars in California is indeed going everywhere
| and outbidding the locals.
| whimsicalism wrote:
| Yes, that - plus the rapid reversal of white flight to the
| suburbs among young people in the last 10-15 years (more of
| an east coast phenomena).
|
| It is both a demand and supply problem, but short of
| creating a Hukou system I don't see any solution but
| building.
| WarOnPrivacy wrote:
| > the rapid reversal of white flight to the suburbs among
| young people in the last 10-15 years
|
| The massive buy-ups in West & Central FL have led to an
| unprecedented shortage in housing. Rentals get 400
| applicants each day and people with money in the bank are
| facing homelessness. People without have little hope.
| [deleted]
| nradov wrote:
| Another solution would be encouraging economic
| development in other areas instead of cramming increasing
| numbers of people into a small number of geographically
| constrained cities.
| whimsicalism wrote:
| I think these returns to scale/density are somewhat
| intrinsic.
| throwaway0a5e wrote:
| > Decades of under-building due to failure to respect other
| people's property rights will do that.
|
| Fixed the language for you.
| jackorange wrote:
| I think this is a fallacy perpetuated by unrealistic ideals.
| I bought a house for 175K at 24. I only make 50K a year. I
| don't have a college degree.
|
| Lot of people saying buying houses is hard, unrealistic, or
| impractical want to buy mansions with a 10 second commute to
| their workplace in silicon valley but the reality is most
| people are not living like that.
|
| Wage workers are still buying houses no problem in what are
| considered "low income" areas as they have been and interest
| rates are better than ever.
| browningstreet wrote:
| Where?
|
| Three years ago, I could've bought a house at 60% of
| current market rate now in my town of 700K. I wasn't in a
| position to buy that house (under median) then, and I don't
| want to buy it now given market conditions. The other issue
| is that the median housing price in my city is now above
| the FHA limit for this area... so no 10% down mortgages.
| Again, that wasn't the case 3 years ago.
|
| I also need to replace my lease vehicle next year, so there
| are two challenging life purchase decisions pending at the
| moment, and market/global conditions are putting pressure
| on both.
| nradov wrote:
| Where? Almost everywhere except for a few high cost
| cities. Take your pick.
|
| There are currently 71 homes for sale in Nashville, TN at
| or under $175K.
| kipchak wrote:
| Are there? I'm seeing two, one of which is 1b1b 588
| square feet and not connected to water/sewer and the
| other looks rather rough.
|
| [1]https://tinyurl.com/t27bjyej
| monkmartinez wrote:
| Well, if Nashville is like Tucson... or any other
| similarly sized city, those houses are likely not in a
| great part of town. We have 203 houses and condos under
| $175k in Tucson right now. I wouldn't live in any of them
| for their location(s) alone. Suckers from out of state
| have been buying... and I am sure regret the decision
| when they have homeless, tweakers and other ne'er-do-
| well's sleeping in the back yard or stealing anything
| that isn't bolted down.
|
| Zillow has been buying in my neighborhood, and they
| overpaid... plain and simple. The offers my neighbors
| received were too good to be true. I mean, $50k to $150k
| over the z-estimate. Everyone in Tucson is laughing at
| Zillow all the way to the bank. Prices are going to crash
| here and its going to be brutal.
| browningstreet wrote:
| Ahh, you see, I have an ex-wife and a child I share
| custody with. I'm in the place that I'm in. Others are
| probably similarly constrained geographically.
|
| I do WFH -- someday, I may head away from my current
| place, but I'm not that flexible yet.
| whimsicalism wrote:
| My ideal is for real housing prices to remain somewhat
| steady - ie. I don't like that I have to pay much more than
| inflation to get a house compared to what my parents pay.
|
| It'd be nice to be able to afford a house where I grew up
| without having to tie a ridiculous amount of my net worth
| up in this one very pricey illiquid asset, even if I could
| get the mortgage.
| jackorange wrote:
| If you can accept technology changes over time (goodbye
| horse and carriage), and that society changes over time
| (hello LGBTQI rights), why is it unreasonable to accept
| the price you pay for goods will change? Naturally, its a
| given that's not the only change. The materials to build
| have changed, transporting them has changed, wages have
| changed. Prices are not going to be the same.
| UncleMeat wrote:
| This is backwards. If society gets more expensive because
| we no longer oppress certain groups in the same ways,
| then it should have been the case that people from these
| groups were the ones getting cheap housing in the past
| since they were "buying" a shitty social experience.
|
| But that's not the case. It was straight white families
| who got cheap housing while at the same time holding
| minorities back.
| jackorange wrote:
| I presented a broad example that society is changing. I
| did not associate a variation in pricing due to the
| oppression or lack thereof of certain groups.
| lthornberry wrote:
| Housing has become significantly more expensive relative
| to wages, which is where the problem lies.
| whimsicalism wrote:
| These are policy decisions being made that make it so it
| is harder to purchase housing near my job or where I grew
| up, as well as being net detrimental to economic growth
| (and the growth of wages and output which lowers prices).
| nemo44x wrote:
| What you're saying is you want interest rates to remain
| steady.
|
| The monthly cost to own a home is the same as it ever
| was, inflation adjusted. It's interest rates that have
| changed.
| refurb wrote:
| Real estate is local. Your expectations aren't reasonable
| unless housing can be built as quickly as demand rises.
| whimsicalism wrote:
| So why can't we not block building housing?
| jackorange wrote:
| I don't know where it's being blocked in your view but to
| use my earlier example of silicon valley, maybe there is
| a limitation of geographic space, resources in relation
| to population, and zoning considerations. Maybe silicon
| valley workers could sponsor the building of a floating
| land mass to add additional residential space unbound by
| traditional limitations.
| whimsicalism wrote:
| Or we could just not zone as heavily? A recent building
| near me got blocked because it would add 0.001% (I know
| it sounds like hyperbole, but I promise I'm being dead
| serious that was the number) shadow to a nearby park.
| That is absurd and to pin it on "silicon valley workers"
| is nativist and dumb.
| jackorange wrote:
| I know people who live where there is no zoning and went
| from having nothing but empty land next to their house,
| to a car mechanic, loud gym, fireworks stand, and many
| other undesirable businesses (to be living beside) in
| their backyard. You definitely will want some zoning. I
| am not familiar with zoning laws in your area and know
| you are not advocating for no zoning at all, but just
| food for thought.
| batshit_beaver wrote:
| We have 1) inflation and 2) population growth. Given the
| limited amount of resources, land, and labor, why on
| earth would house prices remain steady?
|
| You'd need at least one of these factors to be reversed,
| or demand for standalone housing to go down for cultural
| or economic reasons, before you see long term downward
| trends.
|
| In general though I agree with the poster above that the
| affordability "crisis" is really an expectations crisis.
| Everyone wants to live in a nice neighborhood with great
| schools that is close to the top employers, but there's
| simply not enough space, so this results in high
| competition and therefore prices. For some reason nobody
| wants to move to the rust belt where houses are nice and
| cheap. People don't want houses, they want the BEST
| houses.
| whimsicalism wrote:
| > We have 1) inflation
|
| Sorry, my criteria for discussing economics is that
| someone knows what the term "real" means in that context.
|
| Most local community colleges offer economic courses for
| not too much.
|
| > For some reason nobody wants to move to the rust belt
| where houses are nice and cheap. People don't want
| houses, they want the BEST houses.
|
| I would just like to live in the same neighborhood that I
| grew up in.
|
| This pricing out hasn't always been the case and it's not
| like these "best" houses became considerably better -
| it's been the last 10-15 years.
| djmips wrote:
| That's so much hogwash. You're telling me a million
| dollar rundown craptastic house in Vancouver is the BEST
| house?
| enaaem wrote:
| Houses don't go up in value. It's the land. What makes a
| piece of land valuable is it proximity to work and
| leisure. Land in growing cities and towns should go up in
| value. The only way to make housing price constant is to
| give people the ability to tear down an old building and
| built something higher. That's how cities like Tokyo have
| more stable housing prices compared to western cities.
| cletus wrote:
| That's simply not true.
|
| Houses have labour and material components. The materials
| have a labour component too. It's now more expensive to
| build a house (per square foot) than it was 30 years ago
| because of wage inflation.
|
| This is one reason why real estate is viewed as a good
| hedge against inflation.
| cletus wrote:
| I sympathize. Unironically, I do. Truly.
|
| Be very careful over-extrapolating based on known variables.
| That's my point.
|
| For decades we've have the concentration of populations in a
| few urban centers because of employment opportunities and
| other factors. Two years ago, you wouldn't have even thought
| about that trend ending anytime soon.
|
| Yet here we are with what seems to be the beginning of a
| structural change to the employment market to remote work for
| a significant number of potential jobs. We're not there yet
| of course. But this seems to have already been a boon to
| medium-sized regional cities (eg Boise).
|
| This was all possible two years ago but it didn't happen.
| Covid was a big catalyst. No one predicted that.
|
| Likewise, you see young people rejecting the 30 year
| mortgage, have kids then retire model that was the norm for
| Baby Boomers. Living remote, tiny homes, van life, etc.
|
| I fully support residential real estate not being used for
| money laundering, hiding assets from governments and an
| exchange-traded asset class, to be clear. The focus there
| should be on the governments who create the rules that allow
| this to happen and not the players however.
| djmips wrote:
| I don't have numbers but I think that remote working is
| tech-centric and not available for the majority of workers.
| Also we'll see if it sticks. In any case, I doubt it will
| have a big impact on home prices.
| ineedasername wrote:
| _being all "the sky is falling" with negative news_
|
| I don't read it that way. My guess is that they 1) didn't
| believe that prices would level off a bit, as they have in the
| last couple of months 2) didn't factor in significant delays &
| increased costs for even minor refurbs and 3) as a result
| realized that any profits would be eaten by carrying costs
| (property taxes, maintenance, opportunity cost of having
| capital stagnate).
| vb6sp6 wrote:
| zillow isn't going to release these houses to you and me. they
| are going to blackrock and other such firms
| decebalus1 wrote:
| > History is littered with the corpses of those who tried and
| failed to corner a market. Real estate is no different. That's
| not to say we can't make the system better. We can and we need
| to. But serfdom isn't imminent either.
|
| Zillow is just a piece of the puzzle. I don't want to go down
| the 'collapse-porn' hole but with Zillow (and many others)
| doing this and pushing/pricing out family buyers + my city's
| new buildings being 99% rentals owned by financial
| corporations, I don't see a bright home ownership future. I'm
| driving around and all I see are 'vibrant' cities that look
| like https://archive.curbed.com/2018/12/4/18125536/real-estate-
| mo.... I find that super depressing. Whenever I see cranes
| going up I get excited there's going to be a new condo
| building. NOPE. It's yet another 6 story matchbox owned by some
| no name shell in Delaware which ends up in 2 years under
| Berkshire Hathaway.
| jiveturkey wrote:
| Fired? Zillow has explored the market and is making an
| operating profit on these "losses". They charge exorbitant fees
| to sellers, effectively buying properties at a decent market
| discount, while publicly showing a sale price above market so
| as to inflate the price.
|
| Even though the first go at it may have failed due to whatever
| reason (stated or otherwise), whoever signed off on this should
| be promoted.
| cs702 wrote:
| _> The people saying this have obviously never gone through a
| "bust" cycle._
|
| Yes, indeed. What's more, those people have a large, receptive
| audience: _An entire generation_ that has never gone through a
| "bust" cycle. We're talking about nearly everyone in their
| early 20's to their mid-30's who joined the workforce _after_
| the global financial crisis. They have zero personal experience
| as to what it 's like to be an asset owner in a prolonged bust
| or bear market.
| jurassic wrote:
| It's ridiculous to suggest young people don't know anything
| about downturns. People who are now in their early-mid-30's
| were some of the biggest victims of the 2008 GFC because they
| bore the brunt of unemployment and delayed entry into careers
| (and other life milestones) as a result. If you're an
| employer, why would you hire a new grad when you could fill
| all your hiring needs with experienced hands? You wouldn't,
| and that was the reality in many industries back then. New
| grad unemployment reached nearly 15% in the period from
| 2008-2012, significantly higher than the overall unemployment
| rate. Then there was something like 20+% underemployment,
| with college grads working as baristas just to have some
| money coming in while they waited for the economy to thaw so
| they could start their lives.
|
| Many young people had no opportunity to pursue a real career
| after taking on four years of educational debt through no
| fault of their own. "Go to college and get a good job" was
| revealed to be a complete farce. A few years later as things
| picked up, there was a fresh crop of new grads behind them
| without any awkward employment gap or strange jobs to
| explain. Even those who managed to make their way into solid
| careers missed out on the stock market and housing asset boom
| of the last decade because they did not have the deposits and
| credit history needed to contemplate buying a home until
| fairly recently when prices went vertical.
| altacc wrote:
| I wouldn't be too quick to claim that the myth of institutional
| house buying has been dispelled. Zillow isn't the only company
| out there buying real estate, and they are planning to sell
| most of the properties to other institutions and landlords, not
| the open market of owner occupiers.
|
| It appears they made some errors in their calculations and
| temporarily bought too many houses at too high a price but the
| article says they are only pausing purchasing for the rest of
| the year and there's no mention of if they are revising their
| plan to purchase up to 5,000 homes a month by 2024.
|
| So, looks like without evidence of a market wide cessation or
| significant long term reduction, significant institutional real
| estate actors remain a factor in the market.
| shane_b wrote:
| I would guess supply chain costs and delays reduced their
| speed of renovation unexpectedly and they can't carry the
| cost of sitting on the property during that wait time. So to
| your point, it's likely temporary based on unexpected
| renovation constraints.
| gregman wrote:
| Agreed. One thing this article doesn't point out that was a
| bigger topic a couple of weeks prior is that Zillow had to
| halt purchases due to lack of workers to help flip the homes
| [1]. The iBuying revenue model depends on the ability to flip
| a home quickly so that market fluctuations do not have enough
| time to pose as a risk, which Zillow was willing to take.
|
| 1 - https://archive.md/tNaDt
| andrewmutz wrote:
| I've never seen any good data that supported the myth of
| institutional house buying being a big enough phenomenon to
| affect homeowners.
|
| It was never apparent in the homeownership rate
| (https://fred.stlouisfed.org/series/RHORUSQ156N) which has
| been broadly stable for decades, and the jumps over the last
| few years are, if anything, towards increased homeownership,
| not less.
| cudgy wrote:
| It is apparent in the rental listings for single family
| homes in decent neighborhoods though. A large percentage of
| listings are from landlords like Invitation Homes, Key
| Homes, etc.
| treeman79 wrote:
| Yet when I look to rent a home better then half the homes
| are owned by mega corps. A group I will never rent from
| again.
|
| They need to at least have a home inspection and a report
| for tenants. Would have saved us from permanent injuries.
| jdavis703 wrote:
| Look at how short the last recession was in the US. It was 2
| quarters, meeting the bare minimum definition of a recession.
| Since 2008 policy makers have shown a broad willingness to
| stimulate the economy at all costs. Barring a USA debt crisis
| or a change in the political climate, I'm skeptical the US will
| see a major recession any time soon.
| edw519 wrote:
| _I 'd love to know who signed off on this idea. They need to be
| fired._
|
| True for everywhere I've ever worked.
|
| Imagine how much better _everything_ would be if we prioritized
| this problem before all the tech orgasms.
| infecto wrote:
| I don't know about your assessment, Zillow in my opinion is
| just a third party here. Sure we can agree Zillow bought too
| much for probably too high of a price but I think there is a
| larger discussion about the significant move of institutional
| money into real estate. I have not seen that slow down and I
| have been amazed with how entire new developments are being
| bought up by institutions to be rental home communities. That I
| think is a new change that we have not seen at this volume
| before.
| short12 wrote:
| Correction, Zillow core business is crappy advertising
| nradov wrote:
| Zillow also gets a lot of revenue from referrals to mortgage
| lenders.
| scotuswroteus wrote:
| I think I agree with your ultimate conclusion, but that's not a
| fallacy it's an ageist trope, and also you're mistaking whoever
| generates oversimplified clickbait for the youth. I want to
| emphasize this: the youth do not control what the real estate
| media is urging various news outlets to say.
| FFRefresh wrote:
| Responding here given that you are calling out the 'fallacy' of
| others.
|
| You seem to be making quite declarative statements here that
| are false:
|
| -Buying real estate does _not_ always end badly
|
| -Zillow's core business is _not_ transactions
|
| Zillow's issue was not that they attempted to buy houses, it
| was that they didn't operate with enough fiscal discipline in
| doing so. They got too far out over their skis, as the saying
| goes.
|
| Given your suggestion that someone who signed off on the idea
| should be fired, is there any record of you stating publicly
| that the person should be fired for the idea when they first
| started this endeavor (or at least when you first heard of it)?
| If not, it seems like you are operating with the fallacy of
| hindsight bias.
| vmception wrote:
| This is the weirdest take on so many levels.
|
| Like, in _my_ filter bubble, I never saw any of that hype
| /doom. I saw Zillow and a few others making home buying and
| selling attractive and more efficient because it made the
| assets much more liquid. One of the most unattractive things to
| me about real estate was how long it takes to convert it back
| to cash, compared to other kinds of assets.
|
| The second is that Zillow's $2.8bn position isn't a problem
| even for Zillow or for the real estate market. There is simply
| not enough information to suggest its a bust or about the folly
| of trying to corner a market and there is more information to
| say that its just reached their corporate risk tolerance. For
| example, the article doesn't mention _anything_ about the delta
| between buying price and price they are trying to sell at. Is
| it 2% off, 5%, 20%? And secondly does it matter? Zillow issued
| $4bn in corporate bonds at like 2% interest rate to do whatever
| they want. They 've spent half of it on houses and still make
| revenue. That's _nooooooothing like_ someone overleveraged on a
| mortgage 20:1. This isn 't even 1:1 leverage, its way less.
| This is a complete nothingburger and that's before we even know
| the difference in value of their purchase price and new listing
| price.
|
| $2.8bn or 7,000 homes, is barely a dent in this several dozen
| trillion market.
|
| "The youth" is still not going to be able to afford anything,
| no matter if some institutional investors buy this bit, or if
| there was a fire sale.
| ISL wrote:
| As I understand things, Zillow's approach wasn't a corner, but
| rather an attempt at arbitrage/value-creation. They were pretty
| sure they had an edge at price-estimation and had enough
| capital to be able to simultaneously offer sellers execution
| speed and offer buyers a price they would accept. It is a
| market-making play.
|
| My impression here is that Zillow has re-evaluated some part of
| that calculus and decided to pull back. I hope that they'll be
| able to retool and revisit the approach after learning
| expensive lessons, as it is my impression that there should be
| real value here for all concerned.
| short12 wrote:
| >They were pretty sure they had an edge at price-estimation
|
| If they actually thought that they must have been high af
|
| Their tool is absolutely terrible
| ISL wrote:
| I'm pretty sure that their internal dataset is far more
| rich/detailed than the public-facing "Zestimate".
|
| Traffic-data alone, segmenting the buyers clicking on each
| listing and their expressions of intent, would give them an
| incredibly-actionable trading/training signal.
|
| Zillow might see, nationally, the nationwide (and regional)
| direction of buyer and seller sentiment 2-4 weeks ahead of
| all but the largest regional brokerages.
| ItsMonkk wrote:
| That's all everything ever is anymore.
|
| You don't need to be a good stock picker if you know that
| someone sent a buy out, and you can get there first, buy
| it and then sell it to them.
|
| You don't need to find good domain names, just wait for
| someone to search if one is available and then buy it.
|
| Or when you Google for Verizon and the first thing you
| see is an ad for verizon.com. Most people will click the
| ad instead of the first listing.
| refurb wrote:
| Yup. As someone who was in the real estate market in 2007 it's
| pretty amazing how quickly we went from "be careful with
| housing" to "housing only goes up, it's now or never". I'd say
| it took about 5 years.
|
| Human recency bias is very strong. Whatever trend has happened
| in the last 6-12 months is assumed to continue ad infinitum.
| And that's true on both sides. When the market crashed everyone
| assumed it was forever.
| ericmcer wrote:
| New monetary policy is designed to prevent any kind of bust
| from happening. It is only boom from here on out. 2009 was the
| last chance to get on the train.
| throwawayyy181 wrote:
| This comment feels a lot like Rockefeller's shoe shine
| ChrisLomont wrote:
| Zillow is selling 7000 homes into a market that moves 800,000
| homes annually, and (apparently) for a loss to Zillow. Zillow has
| approx $6B in total assets, and this anchor is big enough to tank
| them if they screw it up enough.
|
| This is not some secret cabal of market manipulators - it's a
| company trying to leverage their knowledge of the housing market
| into an investment, and they did not do well.
| rayiner wrote:
| Classic example of not understanding the gap between theory and
| application. If your home is overvalued by Zillow, you're much
| more likely to sell than if it's valued correctly or undervalued.
| E.g. Zillow overvalues my house because it's algorithm can't
| factor in our weird parking situation. I'm much more likely to
| want to sell for a high valuation than someone whose house is
| valued correctly by the algorithm.
| asperous wrote:
| This is called information asymmetry in economic theory
| neogodless wrote:
| Hard to tell because of the paywall, but I suspect this is
| related to this post from a bit over a day ago:
|
| https://news.ycombinator.com/item?id=29059785
|
| "Zillow has listed 93% of the hundreds of Phoenix homes it owns
| at a loss" (229 comments)
| josh_today wrote:
| You will own nothing and be happy
| bedhead wrote:
| The business of iBuying is destined for the trash heap, its
| future so seemingly inevitable that I'm shocked anyone alive
| considers this a viable business with a real terminal value. Did
| we not learn real fast back in 08 that the financialization of
| people's homes is basically a non-starter? Being a glorified
| payday lender with people's homes is never going anywhere. It's
| one big Catch 22, if these companies ever even figure out how to
| make money from this (and so far they can't) they will inevitably
| just get shut down by local governments, which has already begun
| in Europe.
| rel2thr wrote:
| i think it can work , but you need to expect pretty slim
| margins. You basically need to offer a very fair price on very
| safe houses and make your margins by cutting out the realtors
| fees.
| rdudek wrote:
| They seem to be flipping the houses fast and hard around my
| neighborhood. One of my favorite things to do is walk around with
| the dog and see houses go up for sale. Lately, I noticed houses
| sold only to be relisted by Zillow like 30 days later at $50k+
| the original price. And they actually seem to be able to sell
| them that high. My house is currently worth 3x what I paid for it
| back in summer of 2013.
| wil421 wrote:
| I found it the opposite. Zillow and OpenDoor bought really
| weird houses that were either unsightly or had issues and they
| were unable to sell them. They probably flipped a lot but most
| of the ones I noticed sat for almost a year unsold. I was
| shocked at how they would be able to pay mortgages for 10-12
| months and sell below what they bought it for.
| x86_64Ubuntu wrote:
| I can't help but feel this is another bubble. I'm paid very
| well, in a not well paying region. So I'm wondering where all
| these folks are getting their money from. Even those new Ryan
| Homes which are cookie cutter and made out of pure vinyl are
| going for $250K. Maybe my doom-ish outlook is because I'm a
| millenial so I'm used to everything being bad.
| amotinga wrote:
| same. even though I make good living, buying house seems
| difficult - it's a lot of money for many years. add closing
| costs and misc repairs, and owning appears to be quite
| expensive. I wouldn't know what to do if at any point within
| next 10 years I lost the job.
| overview wrote:
| Are there not any alternative employers where you live
| (including remote)? Do you have an emergency fund to cover
| living expenses if you lose your job? The reason I pry is
| 10 years is a long time to not be able to get together a
| 3-6 month emergency fund (if you don't already have one).
| strikelaserclaw wrote:
| cheap loans for some, and inflated asset prices for those who
| own assets. Most people don't think "can i afford this
| house", they think "can i pay the monthly payment". Add to
| this the frenzy of asset prices increasing and FOMO, you get
| a real situation where people who were waiting to buy, buy
| now because they think they will miss out on cheap loans and
| increasing asset prices.
| [deleted]
| nemo44x wrote:
| According to their call tonight they say they are out of that
| business permanently. I wonder if they plan on pivoting it to
| something less speculative?
|
| FWIW, I'd love a system where you could "sell" a home to a broker
| and "buy" one without the musical chairs game of contingency
| offers, etc. I think there's real value in a space that completes
| the sale of properties based on some window of expected return
| for a property. Something where I could use a broker to buy a
| place cash for me and then I arrange the loan and the bank buys
| it off of them and starts a mortgage with me. And do the same for
| my property where they buy it from me at the same time and sell
| it and I get the difference minus a fee.
| smsm42 wrote:
| I'm not sure what you look for is realistic. As a seller, I'd
| surely prefer to avoid all those contingencies, inspections,
| etc. - just give me the money, take the property and be done
| with it! As a buyer, though, I surely want something that I pay
| multiples of my annual income for to be thoroughly inspected,
| and be absolutely sure everything is ok (or at least if
| something is not OK I know it and it's priced in). Risking this
| kind of money is not something I could afford. I'm not sure
| anybody - maybe except US federal government - could afford
| risks of this magnitude without covering oneself somehow. So
| there would be a process. You could pay somebody to undergo
| this process instead of yourself, but I don't think you could
| get rid of it entirely.
|
| That said, intermediaries like you describe exist, afaik. E.g.
| Flyhomes do something like that.
| nemo44x wrote:
| I get it but I'd imagine there's an actuary table that could
| be put together to insure against issues in most cases. I
| mean the entire process today is so dated, isn't it? A bunch
| of people submit offers and then 1 gets picked and then a
| variety of inspectors come by to make sure nothing glaring is
| broken. What if the intermediary scaled the inspection part
| (pro services are hard to scale, yes) and when you buy from
| them it's "guaranteed"? Like a certified used car.
| mrcarruthers wrote:
| That reporter had a lot of fun with that headline
| ashtonkem wrote:
| There was a lot of fear a few months ago that Zillow was
| manipulating the housing market to make a profit using all their
| data and cash. Guess they had the will, but not the capability.
| ClumsyPilot wrote:
| I guess they were bad in more then one way
| johnnyApplePRNG wrote:
| How on earth did a real estate analytics company lose money
| buying and selling homes in THIS market?
| DrBazza wrote:
| Possibly because they didn't add themselves into their
| modelling?
| teraflop wrote:
| I'd like to point out that this article neither claims nor
| provides evidence that Zillow has lost money.
|
| For one thing, as discussed previously[1], Zillow earns
| commissions and fees when both buying and selling houses, so
| they may be making money even when the prices nominally show a
| loss.
|
| For another, even if the _majority_ of the houses were sold at
| a loss, that statistic by itself tells you nothing about Zillow
| 's _overall_ profit or loss. For example, they might have sold
| most of the houses for a very small loss, but earned large
| enough profits on the others to balance those losses out. There
| simply isn 't enough information to say.
|
| [1]: https://news.ycombinator.com/item?id=29060092
| monkmartinez wrote:
| They are losing money hand over fist in Tucson. I have
| several zillow signs in my neighborhood right now. Priced at
| ridiculous levels and Zillow paid an even more
| ridiculousness(fitting word play) price to "acquire" the
| home. Its laughable.
|
| Boots on the ground here telling you the market in the
| Southwest is jacked up... again. I bought my house in 2009 as
| a foreclosure and I see the same signs I saw in 2007 all over
| again. I can't speak for the rest of the country, but Phoenix
| and Tucson are going to be real estate nightmares in 2022.
| EastOfTruth wrote:
| Zillow has listed a staggering 93% of the hundreds of Phoenix
| homes it owns at a loss [1]
|
| 1. https://www.businessinsider.com/zillow-offers-ibuyer-sell-
| ph...
| refurb wrote:
| "Listed", not sold. Homes typically go for well over
| listing
| bagacrap wrote:
| it depends on the market. This is definitely true in the
| Bay Area right now, but not true in the city where I
| live.
| EastOfTruth wrote:
| > "Listed", not sold. Homes typically go for well over
| listing
|
| In a bull market, about 50% of homes sell above list
| price [1]... It can change quickly.
|
| 1. https://magazine.realtor/daily-
| news/2021/06/01/a-record-shar...
| raverbashing wrote:
| Sounds like AI-driven hubris together with executive FOMO
| HWR_14 wrote:
| The plan was to buy homes, renovate them and flip them.
| Renovations are taking longer and are more expensive than
| planned.
| IAmGraydon wrote:
| I think the simplest way to put it is they FOMOed into a very
| illiquid asset class in a very high risk market and now need to
| close the position quickly, which is going to cost them. I'm
| guessing they see a residential collapse on the near horizon.
| maxlamb wrote:
| Seriously, that is the real question. Considering almost every
| other recent buyer in the U.S. has made money (on paper) on
| their property without having done any analysis.
| munificent wrote:
| Imagine you are a top executive at said real estate company and
| are trying to decide what to do:
|
| 1. Invest heavily in real estate, prices keep going up, company
| gets rich, you get a _huge_ bonus and buy a yacht bigger than
| Cleveland.
|
| 2. Invest heavily in real estate, prices drop, company stock
| plummets, you're still rich and still have your football-field-
| sized yacht.
|
| 3. Don't invest heavily in real estate, prices keep going up,
| company misses out, you're still rich and still have your
| football-field-sized yacht.
|
| 4. Don't invest heavily in real estate, prices drop, company
| doesn't get hurt, you're still rich and still have your
| football-field-sized yacht.
|
| There's one clearly winning strategy.
| treis wrote:
| Market has slowed a bit in the last few months. Not "prices are
| dropping" but not "prices will be 10% higher in 6 months"
| anymore. The margin for error has narrowed.
|
| But selling for more than they paid isn't the idea. The goal is
| to capture the ~10% of purchase price that is paid out in fees
| for a real estate transaction.
| roflc0ptic wrote:
| Predicting the future is really hard
| bchris4 wrote:
| Particularly if your time horizon is like 3 months. Seems
| like they're making two huge mistakes now by selling. Home
| values will almost certainly rise from here over the next 10+
| years, and even the most casual market watcher/Zillow user
| knows that their "zestimates" are crap, they weren't going to
| nail it that precisely. Literally everyone intuitively knows
| that it was a bad time to buy and now an even worse time to
| sell... except for the analytics company with all of the
| data. They should just hold and rent the properties via their
| app, if they can't make the math work otherwise.
| htrp wrote:
| Zillow also getting out of the business entirely and taking a
| 200-300 million charge.
___________________________________________________________________
(page generated 2021-11-02 23:02 UTC)