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.
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.
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.
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.