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.
Show this thread
-
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
Show this thread
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
-
-
Thanks. Twitter will use this to make your timeline better. UndoUndo
-
-
-
Sounds familiar: just because you’re right on average doesn’t mean you’re right when you need to be…
Thanks. Twitter will use this to make your timeline better. UndoUndo
-
-
-
Hmm, wonder what the minimum viable ratio of Zillow noise to agent noise works out to
Thanks. Twitter will use this to make your timeline better. UndoUndo
-
-
-
Why does this not hold for, say, IPOs.
-
Also, why is Zillow simply putting in bids for all houses at their internal model valuation, rather than putting in bids specifically when the list price, which is say local agent valuation + Delta + random noise is < 10% below Zillow's internal pricing.
- Show replies
New conversation -
-
-
Why not model Zillow as only buying properties where the seller agrees to a price 20% below Z's valuation?
Thanks. Twitter will use this to make your timeline better. UndoUndo
-
-
-
Cool analysis. Maybe it’s simpler than that? Zillow is like a long only market maker who can’t hedge its beta risks, and they are losing money when the market is going down. You can see that from they making 500bps last quarter and lost 700bps.
Thanks. Twitter will use this to make your timeline better. UndoUndo
-
-
-
Same should be true for OpenDoor or am I missing something?
Thanks. Twitter will use this to make your timeline better. UndoUndo
-
-
-
Thanks for offering this illustrative example. Hey could you provide more details on where >$300m total loss due to adverse selection comes from? Like with equations and stuff?
Thanks. Twitter will use this to make your timeline better. UndoUndo
-
-
-
@threadreaderapp unroll, please -
Halo! you can read it here: Cute fact about the Zillow thing is that even if Zillow's model was… https://threadreaderapp.com/thread/1455887352371597312.html … Enjoy :)
End of conversation
New conversation -
Loading seems to be taking a while.
Twitter may be over capacity or experiencing a momentary hiccup. Try again or visit Twitter Status for more information.