Cute fact about the Zillow thing is that even if Zillow's model was more accurate than local agent valuations, local agents/property owners can still win on average because they get to choose which houses to buy/sell.
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Easy to see this with a simple, dumb model. Generate a data set of 100k houses with "true" values uniformly at random between $250k and $2.5m, and generate Zillow valuations (true value + 5% random noise) and agent valuations (true value + 10% random noise)pic.twitter.com/slVks94pWN
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Say the agent sells to Zillow if the price offered (Z's valuation) is more than 20% above what the agent thinks the house is worth, i.e. the deals that happen are the ones in yellow below.pic.twitter.com/uV5IB0egZM
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Let's be optimistic and assume that Zillow manages to sell the houses for their true value (haha). They buy 6,000 houses at an average loss of $50k/house before fees and a total loss of > $300m, all due to adverse selection. This is what their distribution of P&L looks like.pic.twitter.com/5LFvYNNuxW
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You dont need a model. Just make yourself the owner. Do you sell "below market value" if you dont have to? In this economy? LOL no, every time.
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Zillow buys like 12K houses a year, they most they every bought in a quarter was 3800. There are idk 200 million homes out there or more Zillow buying houses is a smidge on the stain left by greedy sellers and lenders. It’s crazy rates go down and all of a sudden houses are more
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This is funny because it’s all based on the fed, it doesn’t matter what Zillow buys at or any of that it’s based on appraisals and lender rates. Which base their rates of Freddy Mac . Zillow is in the game now so people care. This is a game that’s been played since 2008.
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The Zillow news will dwindle because in feb 2022-July 2022 rates are going to drop like they have for the last 8 years.. all of the selling will be for the first two quarters.
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