Other commenters on this and the previous thread pointed out, sometimes with first-hand experience, that Zillow would vastly overpay them for their home. I think this is less to do with the housing market in general and more to do with their tech.
Zillow's iBuyer program hit the scene like a bull in a china shop. The real story is that they rushed into this space, had underdeveloped algorithms, overpaid for homes, and now the chickens are coming home to roost.
The housing market may or may not take a turn. But this Zillow story is about incompetency. It smells of some non tech person pitching an AI solution. No need to inspect these homes and neighborhoods, the AI will figure it out.
That sounds like one of the AI people I work with. Like, I know the signal I just fed to our data is a negative signal, why do we need to wait 6mo for the AI to “figure it out?”
(The negative signal was equivalent to an email hard bounce for an email marketing AI. Like, if that signal is there, the customer is gone forever)
This reliance on AI magically figuring things out is pretty annoying.
Overpaying for a house is not a problem in an appreciating housing market. If you overpaid for a house, just wait for its actual market value to catch up and voila, no loss.
The reason you fire-sale that house at loss, is because you believe market value is unlikely to catch up.
> Overpaying for a house is not a problem in an appreciating housing market. If you overpaid for a house, just wait for its actual market value to catch up and voila, no loss.
The price you pay when entering the housing market is substantial. It corresponds inversely to the capital you'll have later to do other things. If you pay $900k for the same house your neighbor paid $600k for, your neighbor has an extra $300k to work with over 30 years, which is significant.
But inflation being as high as it is today...that $300k will be worth much less over time, and you aren't saving it all at once if the down payments are the same.
That isn't even to mention selling at a loss or close to it if you have a pressing need, which will hurt your chances of getting into the next house.
Nitpick but the reason you fire-sale that house at loss is because you don't believe the market will catch up in your beneficial timeline. The housing market historically has a pretty slow appreciation rate, but one that is fairly predictable. Maybe Z sees the incoming rate hikes as a high volatility event?
Holding onto inventory is death. In auto and housing sales if you’re a dealership you’re leveraged in order to hold that inventory (paying interest on it, less friendly interest than you get as a government backed mortgage borrower) and you’re paying insurance and maintenance on that inventory. Vacant houses depreciate very quickly.
Yes, you validated my observation with that assessment. But my point was more towards the private consumer. I think we see a lot of speculation in the housing market now and historically it has been a long term hold investment.
Zillow's iBuyer program hit the scene like a bull in a china shop. The real story is that they rushed into this space, had underdeveloped algorithms, overpaid for homes, and now the chickens are coming home to roost.