How Zillow's homebuying scheme lost $881M(fullstackeconomics.com)
fullstackeconomics.com
How Zillow's homebuying scheme lost $881M
https://fullstackeconomics.com/why-zillow-is-like-my-bad-fantasy-football-team/
662 comments
One can blame Airbnb, Zillow or whoever else, but the truth is that speculation in real estate and vacation towns have both been a thing for a very long time. If the population rises and we refuse to build more houses, the existing ones will get more expensive no matter what. The solution is out there in front of us but everyone prefers to dance around it.
> If the population rises and we refuse to build more houses
Building more houses is generally good too, but it's a bit of a cop-out to blame the whole situation on that. Totally independent of supply concerns, I would argue that it's not great that in so many areas the value of homes seems to be almost entirely divorced from the fact that people need homes to live in.
Imagine if a bunch of very wealthy people just decided to start collecting medicine, not to use as medicine, but to just collect and perhaps sell later at a higher price. Is that within their legal rights? Sure, it seems like it. Would producing more medicine be a good thing? Yeah, sure, more medicine is probably generally a good thing. But is it still really crappy that people's habits for collecting medicine are driving up the cost of medicine for people who want to take the darn medicine? Yeah, it's crappy.
Building more houses is generally good too, but it's a bit of a cop-out to blame the whole situation on that. Totally independent of supply concerns, I would argue that it's not great that in so many areas the value of homes seems to be almost entirely divorced from the fact that people need homes to live in.
Imagine if a bunch of very wealthy people just decided to start collecting medicine, not to use as medicine, but to just collect and perhaps sell later at a higher price. Is that within their legal rights? Sure, it seems like it. Would producing more medicine be a good thing? Yeah, sure, more medicine is probably generally a good thing. But is it still really crappy that people's habits for collecting medicine are driving up the cost of medicine for people who want to take the darn medicine? Yeah, it's crappy.
Thing is if people start hoarding medicine then new companies can pop up and fill in the gap, or existing ones can increase production, making the whole thing pointless to do. Same goes for every other "necessary to life" product. Temporary disruptions will be handled by the market in the long term, and in the worst case government can step in and regulate. Housing is probably the only sector where all the laws and regulations work the other way – to actively stop you from building more of something that everyone needs.
This is missing the point that land is a finite resource and homes aren't fungible. It doesn't help most Californians that more homes can be built in rural Arkansas.
The problem isn’t finite land. It’s finite voters and the politicians that represent them. In CA, the most crowded state, There are more acres than people! And somehow we still have a housing shortage.
You can go out into the middle of nowhere in CA and find houses huddled together 2 feet from another behind a giant wall, like some kind of nazi concentration camp for houses. And the sadest part is that there’s tons of land in every direction you look and people are forced to commute vast distances.
You can go out into the middle of nowhere in CA and find houses huddled together 2 feet from another behind a giant wall, like some kind of nazi concentration camp for houses. And the sadest part is that there’s tons of land in every direction you look and people are forced to commute vast distances.
LVT would fix that almost immediately.
> In CA, the most crowded state, There are more acres than people!
Oh, well then, we'll just assign each person an acre, problem solved.
Which one do you want? Apparently you'll be fine with one -- maybe even two -- in the middle of nowhere, as your comment seems to assume that each has equal value, independent of either natural or social geography.
Oh, well then, we'll just assign each person an acre, problem solved.
Which one do you want? Apparently you'll be fine with one -- maybe even two -- in the middle of nowhere, as your comment seems to assume that each has equal value, independent of either natural or social geography.
The problem is that land usage really calls out for the flavour of top-down planning we'd consider Bolshevik in the West.
The "nobody wants to live where no jobs are/nobody wants to build where there's no employees" deadlock can be solved by ensuring new economic engines are deliberately sited in areas that needs a boost. Sorry, Amazon, HQ2 is going in Gary, Indiana.
Eliminating private land ownership would remove many of the worst NIMBY objections. How many people are really "we don't want higher density homes near us" and not "It MiGhT hUrT oUr ReSaLe VaLuE tO bE nEaR pOoRs?!" It might also make it easier to remove some of the worst planning blights-- dead malls and abandoned facilities.
A central planning dictate also makes it that much easier to get commercial/industrial development, housing, and transit all on one page. I'm picturing a proactive model almost like the Chinese "Ghost City" phenomenon, where you're cutting ribbons on subway stations in the middle of swamps today, knowing that Phase III-k of the development plan means in five years the station will be servicing 8,000 commuters per day.
The "nobody wants to live where no jobs are/nobody wants to build where there's no employees" deadlock can be solved by ensuring new economic engines are deliberately sited in areas that needs a boost. Sorry, Amazon, HQ2 is going in Gary, Indiana.
Eliminating private land ownership would remove many of the worst NIMBY objections. How many people are really "we don't want higher density homes near us" and not "It MiGhT hUrT oUr ReSaLe VaLuE tO bE nEaR pOoRs?!" It might also make it easier to remove some of the worst planning blights-- dead malls and abandoned facilities.
A central planning dictate also makes it that much easier to get commercial/industrial development, housing, and transit all on one page. I'm picturing a proactive model almost like the Chinese "Ghost City" phenomenon, where you're cutting ribbons on subway stations in the middle of swamps today, knowing that Phase III-k of the development plan means in five years the station will be servicing 8,000 commuters per day.
Land is a finite resource but housing units are not. Once America gets over it’s love affair with single family homes, we could undercut most speculators by just building up.
In the last 2 years condo prices in the Seattle area have stayed flat while everyone is desperate to buy townhomes and single families that are becoming out of reach for most. That makes me wonder if building up will actually fix the issue.
That condo prices are staying flat is fantastic news.
Now we just need to build condos that are appropriate for all stages of life -- not just young singlehood and coupledom.
Building up will not solve the "not enough SFH/townhomes" problem, but it will fix the homeownership problem. And it may help with the former, if there are enough current SFH/townhome owners who would prefer a really nice condo close to work/downtown/parks/amenities/etc.
But one issue there is that we currently build condos but don't build the public spaces that serve to supplement them and make them comfortable for, e.g., families with kids. As a result, they're full of a certain demographic, and less appealing to others, reinforcing the issue.
Now we just need to build condos that are appropriate for all stages of life -- not just young singlehood and coupledom.
Building up will not solve the "not enough SFH/townhomes" problem, but it will fix the homeownership problem. And it may help with the former, if there are enough current SFH/townhome owners who would prefer a really nice condo close to work/downtown/parks/amenities/etc.
But one issue there is that we currently build condos but don't build the public spaces that serve to supplement them and make them comfortable for, e.g., families with kids. As a result, they're full of a certain demographic, and less appealing to others, reinforcing the issue.
> Now we just need to build condos that are appropriate for all stages of life -- not just young singlehood and coupledom.
Can you share some ideas about what this would look like?
Can you share some ideas about what this would look like?
I like what culdesac is trying: https://culdesac.com/
If we could only scale and therefore make this cheaper.
If we could only scale and therefore make this cheaper.
not the original commenter, but I think they said it
> we currently build condos but don't build the public spaces that serve to supplement them and make them comfortable for, e.g., families with kids.
you need
* several bedrooms
* some utility space (for things one would have otherwise done in the garage)
* nearby [safe] parks and playgrounds
* nearby recreation centers
* good schools
etc
> we currently build condos but don't build the public spaces that serve to supplement them and make them comfortable for, e.g., families with kids.
you need
* several bedrooms
* some utility space (for things one would have otherwise done in the garage)
* nearby [safe] parks and playgrounds
* nearby recreation centers
* good schools
etc
I think those already exist, perhaps beyond the utility space, and they don't seem to cut it. I don't think the utility room is the difference maker. I actually think the neighborhood feeling and sense of space are much more important.
You are 100% right that the neighborhood feeling matters, but to be clear, the amenities need to come first.
I grew up in an apartment building that absolutely felt like a neighborhood in itself. There were at least 10 other kids in the 400-unit building my own age. In the local neighborhood (consisting of other apartment buildings) there were easily another 30 kids my age, any of whom I could see in a 5-10 minute walk. Few people owned cars (it was NYC after all!) and the area was quite safe traffic-wise.
I spent countless evenings outside walking or biking along promenades, or just hanging out in parks, playgrounds — all literally steps from my apartment building — and as I got older, in libraries, cafes, restaurants, shops, etc. The building I lived in also had a pool and multiple community “rooms” that were several thousand sqft large, which we reserved for birthday parties and other events.
It was fantastic. There were kids there because the spaces were designed to support families, and the “must have SFH with yard before having kids” attitude among the middle and upper-middle class is pretty weak in NYC, so my neighbors could be similarly-high SES because not all parents immediately flee apartment living for the suburbs.
Today, I live in a Bay Area inner suburb. There are, again, 10 kids my preschooler’s age in the local (couple blocks) neighborhood. But they can’t bike alone (or even walk alone, really) because drivers often hit 50mph and don’t look where they’re going. Each of our back yards — though we have one! — is tiny, much smaller than the community rooms I had growing up, so for any serious physical activity we have to get in the car to drive somewhere, contributing to the “traffic is a problem” problem.
The closest public park is a 4000-square-foot grass triangle in a quiet almost-cul-de-sac that takes 10 minutes to walk to and 30 seconds to walk across. There is a library 5 minutes’ walk away, and it is a saving grace.
If I could transplant the apartment building I grew up in to my local neighborhood, which is about 2 miles square — 100 million sqft — its 16000 residents could be housed in about 16 buildings, each of which would have a 25,000 sqft footprint, totaling 400,000 sqft and leaving 99.6 million square feet for fantastic parks, promenades, playgrounds, schools, trails, open space, basically any use you could imagine. Each apartment could be owned, 2000+ sqft, with private decks/patios/balconies and wonderful views.
If that were available in the Bay Area…we could build them at 2x the density described above and house the next 20 years of newcomers…
I grew up in an apartment building that absolutely felt like a neighborhood in itself. There were at least 10 other kids in the 400-unit building my own age. In the local neighborhood (consisting of other apartment buildings) there were easily another 30 kids my age, any of whom I could see in a 5-10 minute walk. Few people owned cars (it was NYC after all!) and the area was quite safe traffic-wise.
I spent countless evenings outside walking or biking along promenades, or just hanging out in parks, playgrounds — all literally steps from my apartment building — and as I got older, in libraries, cafes, restaurants, shops, etc. The building I lived in also had a pool and multiple community “rooms” that were several thousand sqft large, which we reserved for birthday parties and other events.
It was fantastic. There were kids there because the spaces were designed to support families, and the “must have SFH with yard before having kids” attitude among the middle and upper-middle class is pretty weak in NYC, so my neighbors could be similarly-high SES because not all parents immediately flee apartment living for the suburbs.
Today, I live in a Bay Area inner suburb. There are, again, 10 kids my preschooler’s age in the local (couple blocks) neighborhood. But they can’t bike alone (or even walk alone, really) because drivers often hit 50mph and don’t look where they’re going. Each of our back yards — though we have one! — is tiny, much smaller than the community rooms I had growing up, so for any serious physical activity we have to get in the car to drive somewhere, contributing to the “traffic is a problem” problem.
The closest public park is a 4000-square-foot grass triangle in a quiet almost-cul-de-sac that takes 10 minutes to walk to and 30 seconds to walk across. There is a library 5 minutes’ walk away, and it is a saving grace.
If I could transplant the apartment building I grew up in to my local neighborhood, which is about 2 miles square — 100 million sqft — its 16000 residents could be housed in about 16 buildings, each of which would have a 25,000 sqft footprint, totaling 400,000 sqft and leaving 99.6 million square feet for fantastic parks, promenades, playgrounds, schools, trails, open space, basically any use you could imagine. Each apartment could be owned, 2000+ sqft, with private decks/patios/balconies and wonderful views.
If that were available in the Bay Area…we could build them at 2x the density described above and house the next 20 years of newcomers…
TBH, I wonder if a good concept would be the condo/apartment complex with a maker space built-in.
I have a single-family house with a garage, and things like woodworking, painting, or even having a 3-D printer are not necessarily things I want in my utility room or garage. They require special fittings or space levels not available when you're trying to fit around a car.
It would also provide a great central hub for people to meet, because projects are a natural thing to socialize about.
I have a single-family house with a garage, and things like woodworking, painting, or even having a 3-D printer are not necessarily things I want in my utility room or garage. They require special fittings or space levels not available when you're trying to fit around a car.
It would also provide a great central hub for people to meet, because projects are a natural thing to socialize about.
There are plenty of cities worldwide where building up has worked. Regardless, if buying a town home or single-family has become out of reach, it's far better to have /something/ to live in rather than be forced to fight the market for a small box in a high-rise that you still can't afford.
Yeah, most condos in Seattle are in downtown area, and downtown Seattle really went to shit over past few years. Places are closed down, crazy homeless harass you on every intersection, and trash and tents are everywhere. No wonder few want to live there, keeping pressure on prices relatively low.
Most people obviously want a family home, but it would be an improvent if they actually have an alternative.
Single Family homes have the benefit of more autonomy where as building up means you're living on-top of your neighbor, its not binary but we should acknowledge the clear QoL tradeoffs of condensed living.
Maybe its inevitable and necessary to force more people into condensed housing, maybe the societal benefits really outweigh the tradeoffs.
Maybe its inevitable and necessary to force more people into condensed housing, maybe the societal benefits really outweigh the tradeoffs.
As far as I'm concerned the quality-of-life tradeoff heavily favours higher-density housing.
I live in an apartment block and so does everybody else for miles around. Our building, like almost every other around here, tops out at seven storeys. It's very solidly constructed, so there's little to no noise from neighbours, not that they make much noise to begin with as they're a pretty considerate bunch.
The downside to this way of living is almost nonexistent, but the upside is massive. Instead of everybody having their own plot of land that's too small to do anything really interesting with, and which they have to maintain themselves, we have a communal garden. When that's not enough, there are no less than four parks within two minutes' walk.
Because this higher density of living is able to sustain more amenities, everything you could possibly ever need is, at most, a short bike ride away. And I do mean everything. Bars, restaurants, shops, medical facilities, swimming pools, a velodrome, a planetarium...
I've no need of a car because it's all on my doorstep. If I do need to travel, public transport's great.
You can keep your "autonomy", I'll be too busy reaping the benefits of living among other people to worry about that.
I live in an apartment block and so does everybody else for miles around. Our building, like almost every other around here, tops out at seven storeys. It's very solidly constructed, so there's little to no noise from neighbours, not that they make much noise to begin with as they're a pretty considerate bunch.
The downside to this way of living is almost nonexistent, but the upside is massive. Instead of everybody having their own plot of land that's too small to do anything really interesting with, and which they have to maintain themselves, we have a communal garden. When that's not enough, there are no less than four parks within two minutes' walk.
Because this higher density of living is able to sustain more amenities, everything you could possibly ever need is, at most, a short bike ride away. And I do mean everything. Bars, restaurants, shops, medical facilities, swimming pools, a velodrome, a planetarium...
I've no need of a car because it's all on my doorstep. If I do need to travel, public transport's great.
You can keep your "autonomy", I'll be too busy reaping the benefits of living among other people to worry about that.
You might as well live in the matrix, you seem to live in an artificial world with no connection to nature. I myself desire to live on the edge of "civilization" as much as I can, I know this presents a conundrum in that I'm creating a market for destroying it, but this is a human condition as old as time.
20-30 minutes on a bike and I'm out in the sticks, a bit further and there are forests and lakes aplenty. Higher-density living means less sprawl and a shorter distance from city centre to back of beyond.
Isn't this most people in rich countries? The line's pretty fuzzy, but in most rich countries you're disconnected from nature unless your job is in nature (ranger, landscaper, farmer, ag researcher) or homeless.
> It's very solidly constructed, so there's little to no noise from neighbours, not that they make much noise to begin with as they're a pretty considerate bunch.
Neither of these things have been even remotely true in any apartment I've lived in the US, even ones billed "luxury". It's always been thin-walled garbage where I can hear every word of every conversation of my neighbors, who have typically felt that listening to music 24 hours a day and slamming down their boots while walking between rooms is the right thing to do.
Neither of these things have been even remotely true in any apartment I've lived in the US, even ones billed "luxury". It's always been thin-walled garbage where I can hear every word of every conversation of my neighbors, who have typically felt that listening to music 24 hours a day and slamming down their boots while walking between rooms is the right thing to do.
>It's always been thin-walled garbage where I can hear every word of every conversation of my neighbors
I feel this is mostly a US problem.
In most of Europe, apartment blocks are solidly built, especially the older ones, even in Eastern Europe.
I feel this is mostly a US problem.
In most of Europe, apartment blocks are solidly built, especially the older ones, even in Eastern Europe.
> clear QoL tradeoffs of condensed living.
and that's why single family homes should be more expensive, because it is better. People continue to bid it up, because they still believe that the price is worth and hasn't reached a ceiling yet.
In asian hubs like hong kong or shanghai, they've reached a certain ceiling on land, and so building up is now what most people could buy and so they do that. The cities in countries like canada, australia and the west coast of the US, it hasn't reached that point due to large available land mass, and people prefer commute (or WFH now!) over living densely.
Of course, regulation plays a part - i think there's unnecessarily large amount of red tape in making taller denser buildings, as well as a lobby of existing owners who don't want it near themselves.
and that's why single family homes should be more expensive, because it is better. People continue to bid it up, because they still believe that the price is worth and hasn't reached a ceiling yet.
In asian hubs like hong kong or shanghai, they've reached a certain ceiling on land, and so building up is now what most people could buy and so they do that. The cities in countries like canada, australia and the west coast of the US, it hasn't reached that point due to large available land mass, and people prefer commute (or WFH now!) over living densely.
Of course, regulation plays a part - i think there's unnecessarily large amount of red tape in making taller denser buildings, as well as a lobby of existing owners who don't want it near themselves.
Interestingly, Hong Kong is apparently still ~40% public green space. The land they have developed is dense though.
This is a massive failure of imagination. I moved into a new 5 by 1. Don’t even know who lives above me (never heard em). Sound Insulation has come a long way.
There’s a lot that can be done to add autonomy and privacy to the condo living. And then more to make it cheaper and accessible. It’s mostly a technical problem.
There’s a lot that can be done to add autonomy and privacy to the condo living. And then more to make it cheaper and accessible. It’s mostly a technical problem.
If people can reasonably afford a (non-tiny) condo but pine after a single family home that they can't afford, there isn't a housing crisis there's economic diversity.
[deleted]
Nonesense. People are going homeless because they can’t pay 3k a month to rent a shitty studio. Low income housing cannot be produced for less. Boomers wanting to mow lawns is obviously, for clear thinking individuals, not even a factor.
Why can't the US just have less people with a higher standard of living? Why is "progress" always more. Why do we have to make everything worse by shifting the baseline (https://en.wikipedia.org/wiki/Shifting_baseline).
Because a higher standard of living requires more people to come up with the said standard of living (see: history, the shifting of innovation centers to population centers)
The degrowth movements garden variety neo-pastoralist misanthropy makes it blind to the fact that more humans (given a good system of governance and rules) is actually an amazing thing.
The degrowth movements garden variety neo-pastoralist misanthropy makes it blind to the fact that more humans (given a good system of governance and rules) is actually an amazing thing.
I hope you do accept there are physical limits to growth that there is no way get around short of colonizing other planets and that we should at least take care of our mother planet.
In the US we are nowhere near land being a concern. That’s a cop-out.
The relevant metric is land within a reasonable commute to an attractive city centre.
This is not in short supply either. In California, the capital of the American housing crisis, the overwhelming majority of new residential development in the last 50+ years is low-density single-family on greenfield land. This is certainly true within the high-demand metro areas like the Bay and Greater LA. We could multiply the housing supply of these metro areas by many times without ever building on greenfield land ever again. The land is unbelievably not scarce. It is just illegal to put a sane number of people on it.
The legal restrictions on where you can build a new home are more of a problem in California than in rural Arkansas so your response doesn't address OP's point.
> Thing is if people start hoarding medicine then new companies can pop up and fill in the gap, or existing ones can increase production, making the whole thing pointless to do.
Hoarding medicine isn't a trend and even so, this market correction doesn't happen. Look at all the medicines with insanely high prices because there won't be any competition.
Hoarding medicine isn't a trend and even so, this market correction doesn't happen. Look at all the medicines with insanely high prices because there won't be any competition.
Some medicines are high price because of market intervention by gov't (or regulatory capture) - like epi-pens. Some medicines are high priced because noone really needs it, and the few remaining bear the brunt of the cost (or society subsidize the cost via taxation).
How come aspirin or penicillin isn't expensive? They are more commonly used, and so if the hoarding method works, it would've been even more profitable!
How come aspirin or penicillin isn't expensive? They are more commonly used, and so if the hoarding method works, it would've been even more profitable!
How come insulin is expensive?
Okay, but how deep is the appetite for buying medicine as collectibles? What if doubling the production of medicine just means that now the wealthiest 2% collects all the medicine instead of the wealthiest 1%? Not to mention, how long will it take to ramp up all this medicine production?
no, no - this is a real-estate Zillow thread BUT.. search for "pharma bros" and you will see this is not a fanciful example
Yeah, but much like housing shortages, the classic cases of 'pharma bros' (Shkreli, et. al) is due in large part to the government. He, specifically, was able to jack prices because his company owned the patents (gov issued and controlled) and manufacturing license (gov issued) to rare but important drugs.
> Housing is probably the only sector where all the laws and regulations work the other way – to actively stop you from building more of something that everyone needs.
The patent system does this in medicine.
The patent system does this in medicine.
The patent system does that everywhere. That's its purpose. The FDA does it in medicine.
>Temporary disruptions will be handled by the market in the long term
This is the sort of gospel/dogma that free market absolutists like to propagate, but plainly reality proves this wrong. Markets are a tool, but not a universally useful one.
This is the sort of gospel/dogma that free market absolutists like to propagate, but plainly reality proves this wrong. Markets are a tool, but not a universally useful one.
Not so plain to the rest of us. Can you explain what makes this so evident?
"Thing is if people start hoarding medicine then new companies can pop up and fill in the gap"
That's not how the market works. That's not how patents work. That's not how medicine works. That's not how any of this works.
That's not how the market works. That's not how patents work. That's not how medicine works. That's not how any of this works.
Yes, and this would really be awful in the short term, but in the medium term medicine companies would just spin up more production until the "very wealthy people" demand has been met and medicine becomes available again at some reasonable price.
The fact that this is very likely prevents most of the speculation in the first place.
The difference with real estate is that the owners get to determine production levels, via local zoning laws.
Sure, there is some natural scarcity: Land cannot be created, but in most cases artificial scarcity is the issue.
The fact that this is very likely prevents most of the speculation in the first place.
The difference with real estate is that the owners get to determine production levels, via local zoning laws.
Sure, there is some natural scarcity: Land cannot be created, but in most cases artificial scarcity is the issue.
> The difference with real estate is that the owners get to determine production levels, via local zoning laws.
I'm part of a local YIMBY group, and show up to hearings to try and get housing built, write letters, etc...
I have never, ever seen 'investors' write in or speak at these things. It's all our neighbors who show up and scream about not building homes.
I'm part of a local YIMBY group, and show up to hearings to try and get housing built, write letters, etc...
I have never, ever seen 'investors' write in or speak at these things. It's all our neighbors who show up and scream about not building homes.
Could this be a side effect of efficiency? Much more efficient for the investors to push for the ideas that lead to local homeowners showing up to protest than to protest themselves.
Investors don't have a voice locally. They don't write letters to the editor or post on Nextdoor. Pretty much all they have to do is sit back and reap the benefits of angry neighbors doing all the dirty work of preventing homes from being built. It's a pretty sweet gig. They even say this stuff straight up in their SEC filings.
[deleted]
In areas where home prices are high, the vast majority of homes have people living in them. So the idea that home prices are inflated by people buying homes and not doing anything with them seems a bit suspect to me.
Additionally it kind of strains belief that people are buying homes, paying property tax, etc. just because they like collecting them the way a kid likes collecting pokemon cards. More likely they'd buy a home because they expect home prices to rise and they'll be able to sell the home for more in the future. It may be unintuitive, but if your market is not incredibly supply-constrained this is actually a good thing.
Here's why. Let's say there's an up-and-coming college town, and speculators think that in a few years the town will become trendy and many people will want to move there. If they're right, demand will go up and home prices will rise. That means you can buy a home now on the cheap and sell it in a couple years when houses are more expensive to make a profit. But of course, when you buy a house now, you're contributing to demand for houses, so you're making the price rise in the present in response to a change in demand you anticipate happening years from now. Since home prices are rising, it now becomes more profitable for people to build new homes. (Their costs haven't changed, but now they can sell the homes to speculators who are willing to pay a lot because they expect to sell the homes to the people who'll move in as the town becomes trendier.) So what you get is people building homes now in preparation for people wanting to move here years from now. Making homes available will cause home prices to go down, until the market is at equilibrium and homebuilders are no longer willing to build homes for the price that homebuyers are expected to be willing to pay.
So in theory it all works out quite nicely. In practice, people who own the homes hate this because they like that the home they bought for $200k in the 90s is worth $2M now, so the lobby to get local governments to ban people from building homes. If there were enough homes that everyone who wanted to live there could, the prices of housing would come crashing down and homeowners would lose the bag they worked so hard to get (not).
Additionally it kind of strains belief that people are buying homes, paying property tax, etc. just because they like collecting them the way a kid likes collecting pokemon cards. More likely they'd buy a home because they expect home prices to rise and they'll be able to sell the home for more in the future. It may be unintuitive, but if your market is not incredibly supply-constrained this is actually a good thing.
Here's why. Let's say there's an up-and-coming college town, and speculators think that in a few years the town will become trendy and many people will want to move there. If they're right, demand will go up and home prices will rise. That means you can buy a home now on the cheap and sell it in a couple years when houses are more expensive to make a profit. But of course, when you buy a house now, you're contributing to demand for houses, so you're making the price rise in the present in response to a change in demand you anticipate happening years from now. Since home prices are rising, it now becomes more profitable for people to build new homes. (Their costs haven't changed, but now they can sell the homes to speculators who are willing to pay a lot because they expect to sell the homes to the people who'll move in as the town becomes trendier.) So what you get is people building homes now in preparation for people wanting to move here years from now. Making homes available will cause home prices to go down, until the market is at equilibrium and homebuilders are no longer willing to build homes for the price that homebuyers are expected to be willing to pay.
So in theory it all works out quite nicely. In practice, people who own the homes hate this because they like that the home they bought for $200k in the 90s is worth $2M now, so the lobby to get local governments to ban people from building homes. If there were enough homes that everyone who wanted to live there could, the prices of housing would come crashing down and homeowners would lose the bag they worked so hard to get (not).
> In areas where home prices are high, the vast majority of homes have people living in them.
When the very rich park wealth in real estate, it is precisely in the ares where prices are highest. Not much point in parking wealth in a cheap house in the midwest.
https://nypost.com/2021/08/05/nearly-half-of-luxury-units-em...
When the very rich park wealth in real estate, it is precisely in the ares where prices are highest. Not much point in parking wealth in a cheap house in the midwest.
https://nypost.com/2021/08/05/nearly-half-of-luxury-units-em...
Right. NYC is a bad example of "international rich buying units not to live in and making it more expensive for everyone else." It does happen, and it is a hedge for international investors, but it's not always cost-effective - unlike London, and I can explain why.
Of the NYC housing stock, close to 63% are rentals. Of the rentals, more than half are regulated (stabilized mostly). Of the owned homes, you have houses, condos and co-ops. Co-ops predominate in Manhattan (where you'd expect the rich to want to live), but condos only make up the smallest fraction of the for-sale home types (115K according to 2017 statistics).
Of the condos, if you're an international rich you want low carry and maintenance costs. So typically they buy the "tax abated" new luxury condos, and sure they accept to eat the maintenance costs. But if they want to eat the taxes, those can be ginormous, a quick streeteasy search will confirm.
NYC is just a pain to do that in unless you want to be there part of the time. Paris is like that - you buy for your trips every few months to go shopping, or whatever rich people do.
London is better, the carry costs are lower, being instead of property taxes they rely on council taxes, which first of all are WAY lower than anything property tax in the U.S. (not the least of which NY State), but secondly they capture more tax from the exchange (stamp duty).
As always it's fine to explore injustice and sources of inequality, but we have to be nuanced and analytical before we repeat the slogans.
P.S. - the link above is from 2021. Yes, in summer of 2021 the luxury units were empty because NYC was a shitty place to live in 2021, not the least of which because of how much had closed up, how much was still not opening, and how unpleasant the sidewalks were. So if you're a luxury rich person, you're going to spend the summer where there are mountains or beaches.
Sources: https://rentguidelinesboard.cityofnewyork.us/wp-content/uplo...
Of the NYC housing stock, close to 63% are rentals. Of the rentals, more than half are regulated (stabilized mostly). Of the owned homes, you have houses, condos and co-ops. Co-ops predominate in Manhattan (where you'd expect the rich to want to live), but condos only make up the smallest fraction of the for-sale home types (115K according to 2017 statistics).
Of the condos, if you're an international rich you want low carry and maintenance costs. So typically they buy the "tax abated" new luxury condos, and sure they accept to eat the maintenance costs. But if they want to eat the taxes, those can be ginormous, a quick streeteasy search will confirm.
NYC is just a pain to do that in unless you want to be there part of the time. Paris is like that - you buy for your trips every few months to go shopping, or whatever rich people do.
London is better, the carry costs are lower, being instead of property taxes they rely on council taxes, which first of all are WAY lower than anything property tax in the U.S. (not the least of which NY State), but secondly they capture more tax from the exchange (stamp duty).
As always it's fine to explore injustice and sources of inequality, but we have to be nuanced and analytical before we repeat the slogans.
P.S. - the link above is from 2021. Yes, in summer of 2021 the luxury units were empty because NYC was a shitty place to live in 2021, not the least of which because of how much had closed up, how much was still not opening, and how unpleasant the sidewalks were. So if you're a luxury rich person, you're going to spend the summer where there are mountains or beaches.
Sources: https://rentguidelinesboard.cityofnewyork.us/wp-content/uplo...
The problem here is that there are something like 3.5 million housing units in New York City and Billionaires' Row is like 5 buildings. It just simply doesn't matter if every single one of those units is empty. We're not talking about enough units to matter.
Billionaires row is hardly the only home sitting empty as an investment. Further they represent an outsized share of housing space even if the total number of apartments isn’t that high.
So even if 5 buildings out of 300 skyscrapers are at 50% occupancy on their own don’t matter much they still impact the market when combined with similar investments. Worse they prime the bubble by convincing more people to invest without putting them up for rent.
So even if 5 buildings out of 300 skyscrapers are at 50% occupancy on their own don’t matter much they still impact the market when combined with similar investments. Worse they prime the bubble by convincing more people to invest without putting them up for rent.
There's no evidence for this claim. It's a popular thing to say, so I think it must feel true for a lot of people, but there's no evidence for it and simple arithmetic suggests that it's a red herring. The fact is that vacancies in NYC are historically very low and reached new all-time lows in Manhattan at the end of last year.
People love the "investors and billionaires are buying up the market" story because it suggests a convenient villain, when the truth is that the millions of ordinary Americans who oppose new housing in their neighborhoods are a much bigger factor. Of course, that's not as satisfying as blaming a Disney villain.
We've been under-building for decades. We have a massive shortfall of new units, far beyond the number of empty luxury apartments. Frankly, at this point I'd support a meaningless vacancy tax just so we could put this objection to bed and focus on things that matter.
https://www.cnbc.com/2021/12/09/new-york-city-rents-jump-22p...
People love the "investors and billionaires are buying up the market" story because it suggests a convenient villain, when the truth is that the millions of ordinary Americans who oppose new housing in their neighborhoods are a much bigger factor. Of course, that's not as satisfying as blaming a Disney villain.
We've been under-building for decades. We have a massive shortfall of new units, far beyond the number of empty luxury apartments. Frankly, at this point I'd support a meaningless vacancy tax just so we could put this objection to bed and focus on things that matter.
https://www.cnbc.com/2021/12/09/new-york-city-rents-jump-22p...
That’s an odd takeaway from an article speaking of a 22+ rent from increase due to COVID bounce-back. Ultra short term trends aren’t particularly relevant compared to long term trends.
One clear the example of the outsized impact is these buildings bought up air rights from multiple properties. So, they reduced the legally available space. When the city makes space for ~100,000 apartments and actually gets less than 1/10th that it’s a problem.
Another is the extreme cost of the associated tax breaks for affordable housing for minimal gain. The city set the tax break based on price while the number of affordable houses was based on the number of apartments. A seemingly obvious problem looking back, but still a problem for city residents.
One clear the example of the outsized impact is these buildings bought up air rights from multiple properties. So, they reduced the legally available space. When the city makes space for ~100,000 apartments and actually gets less than 1/10th that it’s a problem.
Another is the extreme cost of the associated tax breaks for affordable housing for minimal gain. The city set the tax break based on price while the number of affordable houses was based on the number of apartments. A seemingly obvious problem looking back, but still a problem for city residents.
What we're seeing is a return to the long-term trend. Vacancies in Manhattan have hovered around 2% for a long time.
See: https://www.millersamuel.com/files/2022/02/Feb22QNSrent-nyVA...
See: https://www.millersamuel.com/files/2022/02/Feb22QNSrent-nyVA...
Which shows how important a seemingly small number of long term unoccupied apartments are.
Another way of looking at 2% vacancy is over 20 years an apartment is vacant less than 5 months. People move, die, go to prison etc, so there is some inherent friction represented in a 98% occupancy rate. Dropping to 1% long term takes more than just higher demand it would require increases in transaction efficiency.
Another way of looking at 2% vacancy is over 20 years an apartment is vacant less than 5 months. People move, die, go to prison etc, so there is some inherent friction represented in a 98% occupancy rate. Dropping to 1% long term takes more than just higher demand it would require increases in transaction efficiency.
the air rights are a bit of a red herring, because if the people in the city chooses to, they can easily abolish air rights, and allow buildings that previously sold their air rights to build it again!
And a couple of tall buildings in manhattan isn't gonna be making any difference. The difference would come from building denser everywhere.
And a couple of tall buildings in manhattan isn't gonna be making any difference. The difference would come from building denser everywhere.
That's not how property rights in America work.
If the rich are parking their wealth in real estate, you can take their wealth via property taxes. Many of the places with this problem choose to have low taxes on real estate, which is part of what makes it such a good investment and drives the price up.
Yes, real estate is a tax haven in many locations.
My point isn't that people don't use their collectible homes to live in. There are undoubtedly some vacant homes used as collectibles, but that's not the whole problem. The point is that the value of the homes are largely divorced from the fact that people need homes to live in. The fact that home prices have skyrocketed recently (and certainly not simply due to population growth or a reduction in supply) ought to make this fairly clear.
> Additionally it kind of strains belief that people are buying homes, paying property tax, etc. just because they like collecting them the way a kid likes collecting pokemon cards. More likely they'd buy a home because they expect home prices to rise and they'll be able to sell the home for more in the future.
That second sentence is, of course, precisely what I'm talking about. Although that is also the same motivation, at least in my experience, of a lot of Pokemon card collecting. When I was in middle school, you could buy a Charizard for $100, and it wasn't because you could win back that $100 by playing that Charizard in a tournament, and it wasn't because you got $100 of value admiring the aesthetics of the card. Also of note, those Charizards now sell for tens of thousands of dollars, and it's still not being of their value in competitive play or their aesthetic value.
> Additionally it kind of strains belief that people are buying homes, paying property tax, etc. just because they like collecting them the way a kid likes collecting pokemon cards. More likely they'd buy a home because they expect home prices to rise and they'll be able to sell the home for more in the future.
That second sentence is, of course, precisely what I'm talking about. Although that is also the same motivation, at least in my experience, of a lot of Pokemon card collecting. When I was in middle school, you could buy a Charizard for $100, and it wasn't because you could win back that $100 by playing that Charizard in a tournament, and it wasn't because you got $100 of value admiring the aesthetics of the card. Also of note, those Charizards now sell for tens of thousands of dollars, and it's still not being of their value in competitive play or their aesthetic value.
I mean, the US missed on building ~15m housing units in the last decade, we can bitch about airbnb all day, that doesn't make 15m housing unit appear.
This happens all the time every day. Those rich people are pharmacies like CVS and Walgreens. They buy the medicine, stock it in smaller doses at an elevated price. It's really not that different from investors buying a property and offering it for short term rental so that people can enjoy it in small doses.
We need to make primary residences extremely more advantageous tax-wise, and punish investment properties.
The problem is that you can charge rent on a house but not on medicine.
The problem in the market is that buying real estate is the economically rational thing to do, because you get great returns on that capital, just like owning some amount of stock.
The problem is primarily the structure of the market, and not the actions of individuals within it. We need a land value tax, and we need to make it easy to build new homes.
The problem in the market is that buying real estate is the economically rational thing to do, because you get great returns on that capital, just like owning some amount of stock.
The problem is primarily the structure of the market, and not the actions of individuals within it. We need a land value tax, and we need to make it easy to build new homes.
This comment and analogy fundamentally misunderstands the problem here, though:
> the value of homes seems to be almost entirely divorced from the fact that people need homes to live in.
The value of homes is so high precisely because people need somewhere to live, desperately. The price is not disconnected from need, it's entirely because of need.
And it's not that wealthy people are buying and hoarding homes. There's not some magic supply of 20-30% vacant unoccupied housing, there's desperately low vacancies, absolutely criminally low amounts of vacancies.
But refusing to acknowledge the panacea of building new homes does serve the purpose of wealthy people who currently own home. Because they are not hoarding homes, they are hoarding land. They are hoarding access to the ability to build more homes, the homes that are desperately needed. And in high demand areas, every person that goes and opposes new homes, that opposes upzoning, is directly responsible for displacing however many people those new homes would have built.
There is only one solution to high home prices, and that's building more. (Well, we could also institute strict border controls and price controls and completely destroy freedom of movement and access to jobs.)
Downplaying the primacy and necessity of building enough homes for people that want to live in an area only fuels higher prices, more hoarding of land, and more exclusion. There's zero upside to saying "we don't need to build" except to enable further financialization of housing and concentration of wealth in homeowners.
> the value of homes seems to be almost entirely divorced from the fact that people need homes to live in.
The value of homes is so high precisely because people need somewhere to live, desperately. The price is not disconnected from need, it's entirely because of need.
And it's not that wealthy people are buying and hoarding homes. There's not some magic supply of 20-30% vacant unoccupied housing, there's desperately low vacancies, absolutely criminally low amounts of vacancies.
But refusing to acknowledge the panacea of building new homes does serve the purpose of wealthy people who currently own home. Because they are not hoarding homes, they are hoarding land. They are hoarding access to the ability to build more homes, the homes that are desperately needed. And in high demand areas, every person that goes and opposes new homes, that opposes upzoning, is directly responsible for displacing however many people those new homes would have built.
There is only one solution to high home prices, and that's building more. (Well, we could also institute strict border controls and price controls and completely destroy freedom of movement and access to jobs.)
Downplaying the primacy and necessity of building enough homes for people that want to live in an area only fuels higher prices, more hoarding of land, and more exclusion. There's zero upside to saying "we don't need to build" except to enable further financialization of housing and concentration of wealth in homeowners.
> And it's not that wealthy people are buying and hoarding homes.
This is exactly what buy to let landlords are doing.
This is exactly what buy to let landlords are doing.
If they are renting them out, the homes are not being hoarded, they are being lived in.
The real problem isn't a problem of vacant units, it's a problem of unbuilt units.
The real problem isn't a problem of vacant units, it's a problem of unbuilt units.
This results in a transient population and concentration of wealth, and reduced overall housing security. A mortgage doesn't go up by 10% every year, but my rent sure does.
Why do landlords have the power to raise rents 10% per year? Because there's not enough housing being built. Every unbuilt unit leads to displacement and rising prices.
When you say "This results in a transient population," I'm not sure exactly what you mean by "this" but perhaps it's renting at all? If so, the only reason renting leads to "transient" population is the rising rents and displacement caused by lack of building.
When you say "This results in a transient population," I'm not sure exactly what you mean by "this" but perhaps it's renting at all? If so, the only reason renting leads to "transient" population is the rising rents and displacement caused by lack of building.
There is no lack of building. There's an insane amount of single-family and multi-family construction going on where I live, far in excess of natural population growth. But corporate landlords are buying up entire neighborhoods and replacing for-sale signs with for-rent signs. Corporate landlords will squeeze every penny of rent increase they can out of existing tenants, because moving is hard and they've blocked all the alternatives.
Corporate landlords, or really any landlord for that matter, can't squeeze anybody if they have other options. And in my personal experience, mom and pop landlords are just as greedy as corporate ones, but are less rational and obey the law less frequently.
> There is no lack of building
Putting something in italics doesn't make it true. In the vast majority of high demand areas, there's a smal smattering of new construction, far far less than comes close to meeting population demand, and locals freak out about the construction and vastly overestimate the amount. If your particular location is building 3%-5% more units per year, great, but most of the country is not and that means that every other place that's under building is displacing it's residents to where you live, easily swamping whatever you call "more than natural population growth"
> There is no lack of building
Putting something in italics doesn't make it true. In the vast majority of high demand areas, there's a smal smattering of new construction, far far less than comes close to meeting population demand, and locals freak out about the construction and vastly overestimate the amount. If your particular location is building 3%-5% more units per year, great, but most of the country is not and that means that every other place that's under building is displacing it's residents to where you live, easily swamping whatever you call "more than natural population growth"
US housing inventory is 860k which is at historic lows compared to 1.5m pre-pandemic. It's a housing supply issue. Salt Lake City and Missoula are up 45% YOY with inventories down 40-50%.
This analogy is quite lacking.
You should also mention that this medicine rich people are collecting also has dozens of other alternative medicines with hundreds of thousands in volume because other cities exist.
Also you should mention that some of these rich people are not rich people at all, but working class people who's lived in a location for decades which has become a desirable location in recent years thanks to some other people who generated wealth in the area.
Also you forgot to bring up the local government ran by some of these rich people who are blocking any measure to increase the supply of the medicine in the area. This certainly can crash the entrenched medicine cartel in the city, but some of these cities are North Korean style de facto one party system where no other opposition may challenge the status quo.
You should also mention that this medicine rich people are collecting also has dozens of other alternative medicines with hundreds of thousands in volume because other cities exist.
Also you should mention that some of these rich people are not rich people at all, but working class people who's lived in a location for decades which has become a desirable location in recent years thanks to some other people who generated wealth in the area.
Also you forgot to bring up the local government ran by some of these rich people who are blocking any measure to increase the supply of the medicine in the area. This certainly can crash the entrenched medicine cartel in the city, but some of these cities are North Korean style de facto one party system where no other opposition may challenge the status quo.
Cites are not fungible, I hate that this always comes up. I have relationships here going back to my childhood, I sometimes visit the grave of the person I am named for, I spend every sunday afternoon cooking and eating with the 97-year-old who took me in and nursed me back to health decades ago. If I move to another city these things aren't coming with.
Now you can dismiss these things as inherently less meaningful than, and therefore rightly subjected to, the economic desires of asset holders. That's a much more radical position than I think you're wanting to take here though. When you say or imply people facing unaffordable housing can just move somewhere else, this is a position you're endorsing.
The analogy doesn't have to cover every nuance of the situation to be valuable. A necessity of life has become a competitive investment vehicle, and the people most hurt by this are told that it is good and correct and they should accept it by wildly upending their lives for no personal benefit.
Now you can dismiss these things as inherently less meaningful than, and therefore rightly subjected to, the economic desires of asset holders. That's a much more radical position than I think you're wanting to take here though. When you say or imply people facing unaffordable housing can just move somewhere else, this is a position you're endorsing.
The analogy doesn't have to cover every nuance of the situation to be valuable. A necessity of life has become a competitive investment vehicle, and the people most hurt by this are told that it is good and correct and they should accept it by wildly upending their lives for no personal benefit.
I love your comment, and this way of thinking.
> A necessity of life has become a competitive investment vehicle, and the people most hurt by this are told that it is good and correct and they should accept it by wildly upending their lives for no personal benefit.
I agree also with your other comments that this view is fundamentally inhuman. So many people in this thread are responding with, “Don’t like it? Move!” To the extent that is a humane viewpoint it is either privileged or defeatist. Society is us. We have chosen social policy which turns the fundaments of life into investment strategies for the over-propertied. We can choose differently.
> A necessity of life has become a competitive investment vehicle, and the people most hurt by this are told that it is good and correct and they should accept it by wildly upending their lives for no personal benefit.
I agree also with your other comments that this view is fundamentally inhuman. So many people in this thread are responding with, “Don’t like it? Move!” To the extent that is a humane viewpoint it is either privileged or defeatist. Society is us. We have chosen social policy which turns the fundaments of life into investment strategies for the over-propertied. We can choose differently.
If I had to describe the migratory patterbs of half of humanity I would describe it as "they are following tge money".
When african nations import manufactured products from europe that money leaves the local community. This means african countries must export their resources to the countries they are selling to.
Alternatively they can move to europe to work there so they can manufacture products to export to africa. Except in europe they will get insulted that they are economic refugees and should get lost. As if europeans ren't running an economy that benefits from this arrangement.
When african nations import manufactured products from europe that money leaves the local community. This means african countries must export their resources to the countries they are selling to.
Alternatively they can move to europe to work there so they can manufacture products to export to africa. Except in europe they will get insulted that they are economic refugees and should get lost. As if europeans ren't running an economy that benefits from this arrangement.
> Society is us. We have chosen social policy which turns the fundaments of life into investment strategies for the over-propertied. We can choose differently.
no we cannot, because it's not a choice. It's an effect. A different "choice" to have a desirable effect of your choosing is both hard, and can (and will, i bet) have undesirable consequences. A choice for example, could be to switch to a command economy instead, but i bet that would create housing projects that noone wants to live in.
no we cannot, because it's not a choice. It's an effect. A different "choice" to have a desirable effect of your choosing is both hard, and can (and will, i bet) have undesirable consequences. A choice for example, could be to switch to a command economy instead, but i bet that would create housing projects that noone wants to live in.
Scarcity doesn't go away just because we wish it would.
> A necessity of life has become a competitive investment vehicle
My perspective is that a necessity of life (land) has started bumping up against the limits of nature. Population has drastically increased, and for various reasons such as increased access to information, economic agglomeration, etc, certain areas of land are in far more demand than others relative to supply.
Allocating scarce resources (sufficient land to have a detached single family home and a driveway) in such a scenario will always lead to some people getting what they want, while others do not.
Some options are (not exclusive to these)
-letting certain classes of people have higher priority than others (such as California’s law that keeps property taxes artificially low for those who were there before others)
-letting the amount of money determine who gets to live where, due to increasing house prices and commensurate increases in property taxes.
-changing zoning laws so that areas are modified from low density to high density housing, increasing the supply. This one causes various knock on effects, hence it is fought against in popular places that have reached its limits under the existing scheme (such as Bay Area and SFH)
There are no options where no one has to sacrifice. The investment vehicle aspect of land is negligible and more of a consequence of the extreme variations in demand of land in different regions.
My perspective is that a necessity of life (land) has started bumping up against the limits of nature. Population has drastically increased, and for various reasons such as increased access to information, economic agglomeration, etc, certain areas of land are in far more demand than others relative to supply.
Allocating scarce resources (sufficient land to have a detached single family home and a driveway) in such a scenario will always lead to some people getting what they want, while others do not.
Some options are (not exclusive to these)
-letting certain classes of people have higher priority than others (such as California’s law that keeps property taxes artificially low for those who were there before others)
-letting the amount of money determine who gets to live where, due to increasing house prices and commensurate increases in property taxes.
-changing zoning laws so that areas are modified from low density to high density housing, increasing the supply. This one causes various knock on effects, hence it is fought against in popular places that have reached its limits under the existing scheme (such as Bay Area and SFH)
There are no options where no one has to sacrifice. The investment vehicle aspect of land is negligible and more of a consequence of the extreme variations in demand of land in different regions.
> My perspective is that a necessity of life (land) has started bumping up against the limits of nature. Population has drastically increased, and for various reasons such as increased access to information, economic agglomeration, etc, certain areas of land are in far more demand than others relative to supply.
I think this is another all-too-convenient scapegoat, similar to "we just need more houses." I would again suggest that perhaps the problem really truly is that people are using houses as collectibles rather than as places to live.
I think this is another all-too-convenient scapegoat, similar to "we just need more houses." I would again suggest that perhaps the problem really truly is that people are using houses as collectibles rather than as places to live.
As an illustration of how different the supply/demand situation is across the US, see this data:
https://www.redfin.com/news/?p=73975
All the data I see does not indicate that people are buying regular houses as collectibles in hot markets. There is simply that much demand and basically no supply, especially in western cities. I do not have hard data on how many of these sales are owner occupied or not, but from personal experience over the past 10+ years, none of these neighborhoods seem empty for part or all of the year.
https://www.redfin.com/news/?p=73975
All the data I see does not indicate that people are buying regular houses as collectibles in hot markets. There is simply that much demand and basically no supply, especially in western cities. I do not have hard data on how many of these sales are owner occupied or not, but from personal experience over the past 10+ years, none of these neighborhoods seem empty for part or all of the year.
Then we should absolutely stop and do our best to reverse immigration. Under your model immigration is how 3rd world countries export their unsustainable behavior.
> Cites are not fungible, I hate that this always comes up.
Yep. Why should we tell people "cities are fungible, just go live somewhere else so we can buy all the collectible homes here" instead of "cities are fungible, just go buy collectible homes somewhere else so we can live here"?
Yep. Why should we tell people "cities are fungible, just go live somewhere else so we can buy all the collectible homes here" instead of "cities are fungible, just go buy collectible homes somewhere else so we can live here"?
Thank you!
This comes up a lot when people argue in favor reforming how real estate is taxed.
When real estate isn’t for sale, it’s “value” is synthetic.
I wouldn’t actually sell my house for less than 400% what similar homes are worth.
For some people that means the value is 400% that of similar homes.
Thankfully the real estate tax folks don’t see it that way.
This comes up a lot when people argue in favor reforming how real estate is taxed.
When real estate isn’t for sale, it’s “value” is synthetic.
I wouldn’t actually sell my house for less than 400% what similar homes are worth.
For some people that means the value is 400% that of similar homes.
Thankfully the real estate tax folks don’t see it that way.
I actually want tax valuation to work like an offer - the tax man can choose to purchase your home for the valuation you use for taxation (you don't pay the tax in that case), or accept the tax payment.
if you value your house too high, you'd pay more tax than you'd need of course, but guarantee that it isn't going to be immediately bought up by the tax man. If you value it too low, you're risking a sale. So the ideal is to value it at market price - where the tax man will have no incentive to actually buy it out.
if you value your house too high, you'd pay more tax than you'd need of course, but guarantee that it isn't going to be immediately bought up by the tax man. If you value it too low, you're risking a sale. So the ideal is to value it at market price - where the tax man will have no incentive to actually buy it out.
In practice, wouldn’t this be regressive (tax poor more and rich less)?
Imagine a homeowner who uses public transportation, sends their children to public schools, and and supplements their income with public assistance.
They need to create a price for their home. They live in an area with good public transit and good public schools. These public services figure heavily into the price of the house, pushing it up for tax purposes.
Imagine the same house being owned by someone who sends their kids to private schools and drives everywhere. The quality of public schools and transportation doesn’t affect the value of the house.
In practice, people who are poor are less mobile than people who are wealthy. This tax system favors people who are mobile (and don’t consume public services).
How important is it that you stay at your current residence? The more you make, the easier the move (moving costs money too).
Also, because public assistance doesn’t change with the value of the home, the larger the tax payment, the greater the fraction of the tax bill it is.
This sounds nice, but is ultimately a tax on people who aren’t mobile.
Imagine a homeowner who uses public transportation, sends their children to public schools, and and supplements their income with public assistance.
They need to create a price for their home. They live in an area with good public transit and good public schools. These public services figure heavily into the price of the house, pushing it up for tax purposes.
Imagine the same house being owned by someone who sends their kids to private schools and drives everywhere. The quality of public schools and transportation doesn’t affect the value of the house.
In practice, people who are poor are less mobile than people who are wealthy. This tax system favors people who are mobile (and don’t consume public services).
How important is it that you stay at your current residence? The more you make, the easier the move (moving costs money too).
Also, because public assistance doesn’t change with the value of the home, the larger the tax payment, the greater the fraction of the tax bill it is.
This sounds nice, but is ultimately a tax on people who aren’t mobile.
> I actually want tax valuation to work like an offer - the tax man can choose to purchase your home for the valuation you use for taxation (you don't pay the tax in that case), or accept the tax payment.
>
> if you value your house too high, you'd pay more tax than you'd need of course, but guarantee that it isn't going to be immediately bought up by the tax man. If you value it too low, you're risking a sale. So the ideal is to value it at market price - where the tax man will have no incentive to actually buy it out.
I use to think this too, but it looks too easily gamed, and over many iterations the taxman would be left selling a bunch of properties lower than the price they paid for it.
In effect, this would be passed off onto the taxpayers, so the net effect is going to be that the taxpayers are paying for the profits of private speculators who purchase from the taxman and sell or rent the property for a profit.
>
> if you value your house too high, you'd pay more tax than you'd need of course, but guarantee that it isn't going to be immediately bought up by the tax man. If you value it too low, you're risking a sale. So the ideal is to value it at market price - where the tax man will have no incentive to actually buy it out.
I use to think this too, but it looks too easily gamed, and over many iterations the taxman would be left selling a bunch of properties lower than the price they paid for it.
In effect, this would be passed off onto the taxpayers, so the net effect is going to be that the taxpayers are paying for the profits of private speculators who purchase from the taxman and sell or rent the property for a profit.
But what if that number isn’t near what anyone would actually pay for the house?
Say, I live next door to my child’s school, and an elderly parent I care for.
I might not sell for anything.
The “market price” has to include what people are willing to pay for the item, not just what they’re willing to sell for.
Say, I live next door to my child’s school, and an elderly parent I care for.
I might not sell for anything.
The “market price” has to include what people are willing to pay for the item, not just what they’re willing to sell for.
> If I move to another city these things aren't coming with.
This is the reason for things like California Prop 13. It gives a benefit to long-time locals to continue living in the same place. Which on the whole seems like a good thing. People can set down roots and become "locals" instead of having a city of ever-changing population who then don't really care so much about the area because they are transient and will be moving away soon.
But most housing threads on HN favor the idea that incoming outsiders should be able to efficiently displace locals as long as they have more money to do so, and thus oppose prop 13.
This is the reason for things like California Prop 13. It gives a benefit to long-time locals to continue living in the same place. Which on the whole seems like a good thing. People can set down roots and become "locals" instead of having a city of ever-changing population who then don't really care so much about the area because they are transient and will be moving away soon.
But most housing threads on HN favor the idea that incoming outsiders should be able to efficiently displace locals as long as they have more money to do so, and thus oppose prop 13.
People who are born and grown up in an area but can't stay as adults are also "locals" that are hurt by prop 13.
Do people put roots down and become locals in the other 49 states?
They aren’t fungible to you, but to other people moving into your city from somewhere else because of economic opportunities they are (or they wouldn’t have moved so easily).
There's even lower hanging fruit than that. I have a 6 bedroom house, but local regulations state that I am not allowed to live with more than 2 people unrelated to me. Plenty of parking, tons of people looking for housing, but legally I am forced to keep 3 bedrooms empty.
Agreed. Heck I know several people who prefer to keep their condos/houses empty rather than rent them out at market rate because of 100% tenant friendly city and state laws. Someone can move in and refuse to pay rent, refuse to leave, use your house as a drug den, destroy your property and lots more, and you can do nothing about it. At that point the city is just incentivizing homeowners to contribute to the housing crisis.
> Someone can move in and refuse to pay rent, refuse to leave, use your house as a drug den, destroy your property and lots more, and you can do nothing about it.
This is one of those things that really just confuses me. It's like no one could agree on happy medium between "landlord can eject you whenever they want for whatever reason" and "no one can make you leave, ever, for any reason".
And to whoever downvoted you, there are some places in the bay that are demanding 6 months rent up front in order to move in because they can't do much if you stop paying rent.
This is one of those things that really just confuses me. It's like no one could agree on happy medium between "landlord can eject you whenever they want for whatever reason" and "no one can make you leave, ever, for any reason".
And to whoever downvoted you, there are some places in the bay that are demanding 6 months rent up front in order to move in because they can't do much if you stop paying rent.
These laws are hard to get actually correct. The major problem is court delays. There is a very high bar for kicking someone out before they get their day in court about whether it is fair to do so. This seems eminently reasonable but there is also a severe shortage of judicial services that result in court dates over a year out to resolve such issues. In that year of time, it's quite possible for a tenant with maybe $5K to their name to accumulate $500K in damages and debts. For many such tenants it is a cost they could never repay in their lifetimes which means even if the landlord gets the desired verdict they'll never see the capital they wanted.
I agree there are places in the world that are so biased against landlords that they don't even try to get this problem correct but I think for many cases the problem isn't bad laws but rather the delays to being able to execute reasonable actions to limit damages. I'm not sure what a good solution is for many cases because I think it would take fairly extreme evidence to kick someone out without their day in court if they decided to fight it. I do agree with landlords it should be easier to kick someone out if they stop paying rent and that fact is adequately documented. I mean stop paying rent in the sense of an appropriate pattern not a single late payment.
I agree there are places in the world that are so biased against landlords that they don't even try to get this problem correct but I think for many cases the problem isn't bad laws but rather the delays to being able to execute reasonable actions to limit damages. I'm not sure what a good solution is for many cases because I think it would take fairly extreme evidence to kick someone out without their day in court if they decided to fight it. I do agree with landlords it should be easier to kick someone out if they stop paying rent and that fact is adequately documented. I mean stop paying rent in the sense of an appropriate pattern not a single late payment.
A side effect of tenent friendly laws is that owners get more and more picky about who they rent to in the first place. It's cheaper to have a place empty for a few months than to take a risk on a potentially bad tenant.
Ultimately this is creating a class of people who can't rent. Their track record is poor - or if not them specifically they are in a group with a poor track record.
Not surprisingly this mostly affects the poorest and most vulnerable - those with the least job security - those with health/work issues and so on.
This overlaps with the group least likely to actually be able to purchase a home to begin with.
This issue will not be solved with free-market economics. Either one accepts the need for some layer of free social housing, or one accepts that a decent chunk of society will be homeless.
Ultimately this is creating a class of people who can't rent. Their track record is poor - or if not them specifically they are in a group with a poor track record.
Not surprisingly this mostly affects the poorest and most vulnerable - those with the least job security - those with health/work issues and so on.
This overlaps with the group least likely to actually be able to purchase a home to begin with.
This issue will not be solved with free-market economics. Either one accepts the need for some layer of free social housing, or one accepts that a decent chunk of society will be homeless.
From what I've heard is a common thing for landlords to do is a "pay to vacate" where they show up at the door with $1k in cash if the tenant will just leave.
if you go onto /r/landlord, you'll learn that "cash for keys" is (a) usually way more than $1k, and (b) not a fool-proof way of kicking someone out (since the squatter still need a place to live, and they know that the cash won't cover it). this was/is a huge HUGE issue with the COVID real estate moratoriums that popped up.
> show up at the door with $1k in cash
In SF, there have been six-figure buyouts to remove tenants from rent-controlled properties.
In SF, there have been six-figure buyouts to remove tenants from rent-controlled properties.
Sure, because those tenants signed contracts with perpetual leases (as also understood by the landlords who provided the contracts). Evicting in SF means you can't turn your property into a Condo (only a TIC) - so to maintain the value of the condo conversion option, landlords pay tenants to leave. The buyouts are proportional to the rent difference so it's not surprising that someone who's rent is increasing from say $1k/month to $4k/month would need a large sum of money (that's taxable!) to be convinced to leave.
Call the buyout $100k -- best case scenario, it's taxed as capital gains so you'd take home $85k. At $3k/month increase in rent, you'd be looking at a little over two years before you're below water.
Housing in California is broken in 1,000 different ways but the tenant buyouts seem to be pretty minor in the grand scheme of things.
Call the buyout $100k -- best case scenario, it's taxed as capital gains so you'd take home $85k. At $3k/month increase in rent, you'd be looking at a little over two years before you're below water.
Housing in California is broken in 1,000 different ways but the tenant buyouts seem to be pretty minor in the grand scheme of things.
My ex got about $40k cash to vacate her rent-controlled studio. Because turning off the heat during winter, greasy trashbins in the hallway, and holes in the staircase weren't doing it. The building was mostly elderly NYers and she was one of the few millennials so waiting for her to die wasn't going to work either.
How does one accumulate $500K in damages and debt in 1 year? That's like $41k/month.
buy three cats, and zero litter boxes, and zero litter. make sure they aren't neutered. get a single male cat since, hey, he's got needs.
cook lots of greasy ass food and drain that oil straight down the sink. toss condoms, paper towels, hell, ANYTHING, down the toilet, since it's basically a trash dispenser, right?
once you're done having the cats pee their way through the foundation (cat urine DESTROYS houses) and destroying the plumbing, steal some copper on your way out with some friends.
oh, and this is a pre-war establishment where everything is absolutely not up to code.
cook lots of greasy ass food and drain that oil straight down the sink. toss condoms, paper towels, hell, ANYTHING, down the toilet, since it's basically a trash dispenser, right?
once you're done having the cats pee their way through the foundation (cat urine DESTROYS houses) and destroying the plumbing, steal some copper on your way out with some friends.
oh, and this is a pre-war establishment where everything is absolutely not up to code.
Some people don't take kindly to being kicked out, even if they're in the wrong, and there's not a lot you can do to stop them from causing hundreds of thousands in damages while you go through the process of evicting them.
The first house I lived at in California was part 2 of that - previous owners destroyed the place during a foreclosure, so we got what was previously an $800k house for $400k in a short sale by a bank. Took ~$50k to fix up because we were willing to do the work ourselves over about a year.
It was disgusting. Glass and other obstructions flushed down the pipes, literal feces on the walls, holes everywhere, missing parts of the ceiling, fixtures ripped out, etc.
Move-in process was essentially move all our stuff to a storage area, continue renting until we'd made the place no longer a biohazard, then we moved in slowly as we fixed up rooms.
But hey, a few hours of work a day for a year essentially saved a year of a FAANG salary on the place.
It was disgusting. Glass and other obstructions flushed down the pipes, literal feces on the walls, holes everywhere, missing parts of the ceiling, fixtures ripped out, etc.
Move-in process was essentially move all our stuff to a storage area, continue renting until we'd made the place no longer a biohazard, then we moved in slowly as we fixed up rooms.
But hey, a few hours of work a day for a year essentially saved a year of a FAANG salary on the place.
Damn. Props to you but i would rather be 400k poorer instead of doing that.
Was told by local sherrif who handled judgment related asset seizures as well as foreclosure sales that in our state the original owner can do as they wish, even after a court ordered foreclosure sale, until they day they are required/made to vacate. He had seen all kinds of wanton destruction by the outgoing former owners simply out of spite with repair bills likely in the 10s of thousands, if not more.
That's a little different than a tenant who is renting wrecking someone else's property though, as the sheriff said in the case of foreclosures it's still their property up until the forced vacate date and they can technically do whatever they want and can't be sued for the damages, whereas tenants can but in most cases it's simply not worth it because the people you're suing usually don't have any assets or positive net worth in the first place.
Legally different but still grudge and destruction with no or negligible chance of recourse.
> they can't do much if you stop paying rent.
I'm aware of specific stories where bad-faith tenants have made enforcement difficult, but I'm also aware of enough specific stories from the other side where tenants -- even some who have committed no violations -- have found themselves without housing to know that as a total generalization, these statements are false.
And you don't get to a resident-sourced homelessness crisis if landlords are truly powerless (and sure, coastal homelessness numbers are driven by bus-ticket policies elsewhere, but it's not the whole story).
AFAICT there is in fact a medium between "landlord can eject you whenever they want for whatever reason" and "no one can make you leave, ever, for any reason". Whether or not it's a happy one probably depends more on court outcomes than any apparent shortcomings in statutes, but if anyone has specific complaints about the law, perhaps they should point them out.
I'm aware of specific stories where bad-faith tenants have made enforcement difficult, but I'm also aware of enough specific stories from the other side where tenants -- even some who have committed no violations -- have found themselves without housing to know that as a total generalization, these statements are false.
And you don't get to a resident-sourced homelessness crisis if landlords are truly powerless (and sure, coastal homelessness numbers are driven by bus-ticket policies elsewhere, but it's not the whole story).
AFAICT there is in fact a medium between "landlord can eject you whenever they want for whatever reason" and "no one can make you leave, ever, for any reason". Whether or not it's a happy one probably depends more on court outcomes than any apparent shortcomings in statutes, but if anyone has specific complaints about the law, perhaps they should point them out.
> I'm aware of specific stories where bad-faith tenants have made enforcement difficult, but I'm also aware of enough specific stories from the other side where tenants -- even some who have committed no violations -- have found themselves without housing to know that as a total generalization, these statements are false.
I'm aware of hundreds of stories about homicidal cardiologists, but I wouldn't try to make a judgement about cardiologists based on that because I have no reason to think the stories I'm exposed are a representative sample of cardiologists. In your case, tenants who have committed no violations finding themselves evicted make a much more sympathetic story than landlords who want to evict an annoying tenant, so I'd expect the former to be very overrepresented in what you hear.
I'm aware of hundreds of stories about homicidal cardiologists, but I wouldn't try to make a judgement about cardiologists based on that because I have no reason to think the stories I'm exposed are a representative sample of cardiologists. In your case, tenants who have committed no violations finding themselves evicted make a much more sympathetic story than landlords who want to evict an annoying tenant, so I'd expect the former to be very overrepresented in what you hear.
Sure. As the saying goes "the plural of anecdote is not data." And that goes as much for specific stories about sympathetic landlords suffering from abusive tenants as vice versa.
How would we find out what the systemic pattern is? Maybe we'd compile relevant court records and outcomes. Maybe we'd collect information from tax filings.
Or maybe we'd make bare assertions on HN.
How would we find out what the systemic pattern is? Maybe we'd compile relevant court records and outcomes. Maybe we'd collect information from tax filings.
Or maybe we'd make bare assertions on HN.
Once you are exposed to one homicidal cardiologist, it’s no longer an anecdote. Landlords who aren’t very thorough in background and credit checks are very very likely to have a bad experience (and they won’t repeat the same mistake twice).
Being a landlord is a hard way at making money.
Being a landlord is a hard way at making money.
I had a friend who let someone move in as part of an apartment share. Person NEVER paid them a nickel, never paid landlord anything, claimed they felt unsafe and got a restraining order. It was actually genius.
My (female) friend HAD TO MOVE OUT of the house she was renting, the landlord required she still pay rent on the lease. "self-help" (changing locks) was totally out.
All this would have been fine I think if she could have gone to court in a week or two (the person literally hadn't paid anyone anything).
Instead it was 18 months to the FIRST court date, plenty of drama between A and B, and at that court date it was clear it was going to take a LONG time longer (in fairness COVID came into picture but still).
It turned out of course this person had done this repeatedly. In my friends case the landlord just demanded she keep on paying rent and so was no help on eviction. So she was paying rent on a new place, paying rent on the old place AND paying legal bills vs a tenant getting free community legal help and who was an absolute expert in the rules.
Luckily for her for some reason tenant DID want to move eventually, and they basically arranged a settlement. She paid landlord for some damages, she paid tenant a cash for keys amount (substantial) and was allowed to go on with her life.
You could only afford this on a bay area tech level salary. For normal landlords and people this is insane.
When someone says the eviction has to be "for" a reason, and a court has to review that reason and approve it, in the bay area that easily 1-2 years if someone wants to stretch it out.
My (female) friend HAD TO MOVE OUT of the house she was renting, the landlord required she still pay rent on the lease. "self-help" (changing locks) was totally out.
All this would have been fine I think if she could have gone to court in a week or two (the person literally hadn't paid anyone anything).
Instead it was 18 months to the FIRST court date, plenty of drama between A and B, and at that court date it was clear it was going to take a LONG time longer (in fairness COVID came into picture but still).
It turned out of course this person had done this repeatedly. In my friends case the landlord just demanded she keep on paying rent and so was no help on eviction. So she was paying rent on a new place, paying rent on the old place AND paying legal bills vs a tenant getting free community legal help and who was an absolute expert in the rules.
Luckily for her for some reason tenant DID want to move eventually, and they basically arranged a settlement. She paid landlord for some damages, she paid tenant a cash for keys amount (substantial) and was allowed to go on with her life.
You could only afford this on a bay area tech level salary. For normal landlords and people this is insane.
When someone says the eviction has to be "for" a reason, and a court has to review that reason and approve it, in the bay area that easily 1-2 years if someone wants to stretch it out.
So she basically directly sublet part of her apartment, and is surprised the landlord didn't care and still held her responsible? That's exactly the stance the landlord should take in such a situation. Assuming it wasn't just directly a breach of contract of the rental terms to start with, which would even further just protect the landlord.
Did she even bother to draft a contract with the subletter? Or was this all just, "sure, stranger, move right on in to the property for which I am legally obligated? I'm sure this will all work out fine."
Did she even bother to draft a contract with the subletter? Or was this all just, "sure, stranger, move right on in to the property for which I am legally obligated? I'm sure this will all work out fine."
Did you miss the part about waiting 18 months for a court date?
A legal contract is only as strong as the incentives to litigate it. Doesn't seem likely a contract would've helped, it may even have existed.
A legal contract is only as strong as the incentives to litigate it. Doesn't seem likely a contract would've helped, it may even have existed.
She had lease with landlord, and was looking to share the place. She was planning on continuing to live in the unit. This is common in a college towns if the apartment is a 2 bedroom, often you would rent the second bedroom out.
Yes, landlord reasonably checked out. They agreed on terms in terms of the monthly amount, utilities etc. New roommate gave some reason to want to get going on getting their stuff moved in or measuring things or something, she gave them a copy of the key for that.
That's all it took.
Yes, landlord reasonably checked out. They agreed on terms in terms of the monthly amount, utilities etc. New roommate gave some reason to want to get going on getting their stuff moved in or measuring things or something, she gave them a copy of the key for that.
That's all it took.
Yes, sharing an apartment is typical in college. However, when I was in college, it was typical to go to the management and modify the lease to include the extra person. That way they are at least equally legally responsible for everything, and it gives the landlord a reason to care. The landlord may even run a background check, which may have exposed this issue, since you state this was not the first time.
Regardless, tough lesson to learn on not handing out a key to someone without a contract. I mean, that's a level of trust that I don't even have with my friends, much less someone I'm potentially going to room with. No contract, no keys.
I had a feeling there was more to the story. There probably still is, but I'm satisfied now on how this managed to "just happen". I still don't understand how, after the restraining order, this person then claimed legal residence in order to get your friend removed from her legal residence. I also don't understand why this wasn't immediately a phone call to the police to get this person removed from the property.
Regardless, tough lesson to learn on not handing out a key to someone without a contract. I mean, that's a level of trust that I don't even have with my friends, much less someone I'm potentially going to room with. No contract, no keys.
I had a feeling there was more to the story. There probably still is, but I'm satisfied now on how this managed to "just happen". I still don't understand how, after the restraining order, this person then claimed legal residence in order to get your friend removed from her legal residence. I also don't understand why this wasn't immediately a phone call to the police to get this person removed from the property.
Seems like the problem was the restraining order. Should have fought that one. Blame the part of the system that was true problem.
My sense was that the living situation was in fact untenable (ie, shared kitchen, accusations of theft etc).
> It's like no one could agree on happy medium between "landlord can eject you whenever they want for whatever reason" and "no one can make you leave, ever, for any reason".
No place in the US actually has the latter unless you've been letting them squat for half a decade or something, the issue is court delays and landlord's wanting to make their lot out to be worse than it is.
No place in the US actually has the latter unless you've been letting them squat for half a decade or something, the issue is court delays and landlord's wanting to make their lot out to be worse than it is.
> > "no one can make you leave, ever, for any reason".
> No place in the US actually has the latter
Not technically, no. But there are areas (e.g. San Francisco) where getting a non-paying tenant out is close enough to impossible that it might as well be.
> No place in the US actually has the latter
Not technically, no. But there are areas (e.g. San Francisco) where getting a non-paying tenant out is close enough to impossible that it might as well be.
AFAIK that's not actually true. There are some crazy edge cases but for the most part if a tenant stops paying rent you can absolutely evict them in SF. Most of the horror stories from landlords are attempts to evict for reasons besides non-payment - which SF does make somewhat difficult.
You'd be surprised. SF Rent Board will always seek the solution that keeps the tenant in their home.
So a tenant might stop paying rent, a few months later you get an eviction hearing, but then the tenant pays the rent this month and promises to pay the back rent. Your eviction has just been denied.
Tenant falls back on rent again, but made a good faith effort to pay some of the back rent. Eviction denied.
Finally, tenant stops paying entirely and doesn't respond to you. You stand a pretty good chance of getting an eviction then.
Meanwhile, over the past 12 months the tenant made 2 full rent payments and a couple thousand on the $18,000 in back rent owed. They get evicted and you get to clean up the mess.
So yes, it's not impossible to evict a tenant, but it's really damn hard (unless it's for something like violence or failure to pay and no response when rent is demanded).
So a tenant might stop paying rent, a few months later you get an eviction hearing, but then the tenant pays the rent this month and promises to pay the back rent. Your eviction has just been denied.
Tenant falls back on rent again, but made a good faith effort to pay some of the back rent. Eviction denied.
Finally, tenant stops paying entirely and doesn't respond to you. You stand a pretty good chance of getting an eviction then.
Meanwhile, over the past 12 months the tenant made 2 full rent payments and a couple thousand on the $18,000 in back rent owed. They get evicted and you get to clean up the mess.
So yes, it's not impossible to evict a tenant, but it's really damn hard (unless it's for something like violence or failure to pay and no response when rent is demanded).
Honestly, that sounds great. The risk of being a rentier should be higher than the risk of an index tracker. A lot of our problems can be traced to the fact that bricks and mortar are seen as a better RoI than stocks and shares, and one way to fix that is to change the risk profile of being a landlord by increasing tenants' rights.
> Honestly, that sounds great.
You're saying that it's totally fine for a renter to pay like one month out of every six months and keep doing that forever, just enough to defer evictions each time?
> The risk of being a rentier should be higher than the risk of an index tracker.
Risk and return should roughly correlate, or people will not do it. There is already very little return in renting out a house, so the risk needs to be fairly low, if society cares to have rental properties available.
> change the risk profile of being a landlord by increasing tenants' rights
What would you expect to happen as a result?
If the risk is too high to compared to the return, these rental units are simply removed from the market. Are you convinced that less available units make renters better off?
You're saying that it's totally fine for a renter to pay like one month out of every six months and keep doing that forever, just enough to defer evictions each time?
> The risk of being a rentier should be higher than the risk of an index tracker.
Risk and return should roughly correlate, or people will not do it. There is already very little return in renting out a house, so the risk needs to be fairly low, if society cares to have rental properties available.
> change the risk profile of being a landlord by increasing tenants' rights
What would you expect to happen as a result?
If the risk is too high to compared to the return, these rental units are simply removed from the market. Are you convinced that less available units make renters better off?
> If the risk is too high to compared to the return, these rental units are simply removed from the market. Are you convinced that less available units make renters better off?
Yes. We'll need an LVT too. Adjust the market so selling is the rational choice, not hoarding.
Markets are just tools, and right now the market for property isn't serving the needs of society. So we stick our collective thumb on the scales until it does.
Yes. We'll need an LVT too. Adjust the market so selling is the rational choice, not hoarding.
Markets are just tools, and right now the market for property isn't serving the needs of society. So we stick our collective thumb on the scales until it does.
It’s actually a great way to shrink rental stock and increase rent prices.
> But there are areas (e.g. San Francisco) where getting a non-paying tenant out is close enough to impossible that it might as well be.
You absolutely can evict people in SF, unless you are discussing the recent eviction moratorium, which is not ongoing.
You absolutely can evict people in SF, unless you are discussing the recent eviction moratorium, which is not ongoing.
It’s very difficult to evict folks in Colorado, according to someone I know who buys and rents homes for a living.
I think most landlords are pro tenant until they find someone who knows how to work the system. It costs them so much that they are skiddish to all renters.
I think most landlords are pro tenant until they find someone who knows how to work the system. It costs them so much that they are skiddish to all renters.
Landlords have chosen to enter an inherently adversarial relationship with the goal of profiting from the other party. I'm not entirely unsympathetic to their personal pains here, but I don't believe "pro tenant" has a useful meaning except in a context where you need to support them in opposition to some force or entity. And that entity is landlords.
> Landlords have chosen to enter an inherently adversarial relationship with the goal of profiting from the other party.
There isn't any reason for it to be adversarial, it's certainly not inherently so. Only if one or both sides want to make it adversarial.
It is supposed to be a win-win scenario. Some people prefer to rent instead of buying, so they need a supply of rentals and the owner needs someone to live there so it doesn't sit empty costing them money.
Fortunately I've never had one of the adversarial landlords. I paid them on time and took good care of the property and in exchange they have been super flexible and let me do whatever I want. That's a win-win.
There isn't any reason for it to be adversarial, it's certainly not inherently so. Only if one or both sides want to make it adversarial.
It is supposed to be a win-win scenario. Some people prefer to rent instead of buying, so they need a supply of rentals and the owner needs someone to live there so it doesn't sit empty costing them money.
Fortunately I've never had one of the adversarial landlords. I paid them on time and took good care of the property and in exchange they have been super flexible and let me do whatever I want. That's a win-win.
> > Landlords have chosen to enter an inherently adversarial relationship with the goal of profiting from the other party.
> There isn't any reason for it to be adversarial, it's certainly not inherently so. Only if one or both sides want to make it adversarial.
Landlords compete with their potential tenants for houses to buy. When landlord driven price increase, it prices out people from buying a home/flat, but they still need a roof over their heads. So they rent. This gives landlords cash needed to buy more houses/flats. This also keep rents up as landlords pay more for buildings. So tenants are less likely to accumulate cash for loans/something else. From small owners to big corporations it is a vicious cycle.
> There isn't any reason for it to be adversarial, it's certainly not inherently so. Only if one or both sides want to make it adversarial.
Landlords compete with their potential tenants for houses to buy. When landlord driven price increase, it prices out people from buying a home/flat, but they still need a roof over their heads. So they rent. This gives landlords cash needed to buy more houses/flats. This also keep rents up as landlords pay more for buildings. So tenants are less likely to accumulate cash for loans/something else. From small owners to big corporations it is a vicious cycle.
So you're saying that in a capitalistic society, people with capital do better? Colour me shocked.
The landlord also takes on risk and responsibility here. Like any business, if they do a shitty job they go broke. If they do a good job, they make bank and expand their business.
The landlord also takes on risk and responsibility here. Like any business, if they do a shitty job they go broke. If they do a good job, they make bank and expand their business.
They will go broke if they do bad job at extracting money from their renters, not bad job at providing value to them. Also: https://www.wsj.com/articles/landlords-were-never-meant-to-g... , privatization of profits and socializing losses.
No because you can't really decline to have a home if none of the options are good for you. If there are only shitty landlords then you'll be forced to choose a shitty landlord.
As a widget maker, I'm pro widget-users even though I technically have an adversarial relationship with them. In particular, I'm pro widget-users because without them I would be without money and without me they would be without widgets, so we're both supporting each other against the harsh forces of nature that would leave us all destitute if we didn't work together.
> without me they would be without widgets
It seems like it'd be obvious, but landlords don't actually produce land or provide housing. They roll in and take housing using their superior resources, then charge rent to access it.
In an ideal market, every renter would have the option of being a landlord just like every car lessor has the option of being a car owner. We just need enough housing supply to make investing in housing a risky venture instead of a government-guaranteed winner
https://www.worksinprogress.co/issue/the-housing-theory-of-e...
It seems like it'd be obvious, but landlords don't actually produce land or provide housing. They roll in and take housing using their superior resources, then charge rent to access it.
In an ideal market, every renter would have the option of being a landlord just like every car lessor has the option of being a car owner. We just need enough housing supply to make investing in housing a risky venture instead of a government-guaranteed winner
https://www.worksinprogress.co/issue/the-housing-theory-of-e...
> landlords don't actually produce land or provide housing
of course they do - they provide it by being part of the capital flow, which starts at construction. It might not be the same person, but it's a chain of financing that lead to the landlord purchasing the property.
Superior resources is just another name for capital. And you need capital to fund the construction. The landlord is just the last chain on this funding, and without them, the builders would not build (for who would be buying?).
Shelter is a cost. Everybody pays it, whether you own your own building or renting.
> every renter would have the option of being a landlord
they do if they had the capital. No one is stopping anyone from making a bid for a property - unlike back in the old days where people who were slaves were not entitled to own property as a right. The fact that some people have more capital and is willing to bid higher is how the current free market system works to allocate capital.
of course they do - they provide it by being part of the capital flow, which starts at construction. It might not be the same person, but it's a chain of financing that lead to the landlord purchasing the property.
Superior resources is just another name for capital. And you need capital to fund the construction. The landlord is just the last chain on this funding, and without them, the builders would not build (for who would be buying?).
Shelter is a cost. Everybody pays it, whether you own your own building or renting.
> every renter would have the option of being a landlord
they do if they had the capital. No one is stopping anyone from making a bid for a property - unlike back in the old days where people who were slaves were not entitled to own property as a right. The fact that some people have more capital and is willing to bid higher is how the current free market system works to allocate capital.
Man, I'm not saying you're completely wrong, but that's such a ridiculous stretch
I bought a few shares of Pfizer, does that make me a healthcare provider?
I bought a few shares of Pfizer, does that make me a healthcare provider?
only comparable if the widget you make is a necessity for life, really straining the meaning of the word "widget" imo.
How exactly is it inherently adversarial? Isn’t what you’re saying also true to literally any for profit transaction?
Only things that are absolute needs. You can walk away from a profitable transaction, you can't walk away from one you'll die without.
People are willing to take much more extreme action around housing (and food, medicine, ) than they are most other goods. They're also less likely to agree there is moral justification in profiting from these things. So even when entering these transactions (they must, after all), they may not respect the other party's profit goals.
People are willing to take much more extreme action around housing (and food, medicine, ) than they are most other goods. They're also less likely to agree there is moral justification in profiting from these things. So even when entering these transactions (they must, after all), they may not respect the other party's profit goals.
If there’s return, there’s risk. All markets are adversarial.
Yeah I don't really disagree with that. I don't believe housing should be a "market" in the sense I think is meant here. But if it is to be, I agree that landlords need to accept the risk of their tenants not paying and not leaving either.
Not paying sure. Not leaving no. That never should be the case. They own the property the should be able to get it vacated in reasonable time let's say 3 to 6 month. For any reason. There could also be a fixed time contract binding both sides.
covid moratoriums were basically that for a lot of landlords
There is a happy medium, and many cities are in it, it's just that landlords love painting that happy medium as tyranny.
They also never make any distinction between letting a basement or a room in a home, a private landlord letting a detached home, and a corporate landlord letting hundreds of units.
They also never make any distinction between letting a basement or a room in a home, a private landlord letting a detached home, and a corporate landlord letting hundreds of units.
Not arguing, but there are also many people who do not rent their vacant property because they are too rich to be bothered and are content with the capital gain appreciation.
Perhaps there needs to be a higher tax rate for vacant property that is not a primary residence.
Perhaps there needs to be a higher tax rate for vacant property that is not a primary residence.
The problem is ultimately how well the courts handle liars.
The middle ground is to investigate the situation and establish facts. And do it quickly.
That costs money, and poor tenants can’t afford it.
So many courts adopt the position of believing one side over the other.
This isn’t limited to liars … it applies to all bad faith actors. For example, in parts of the Midwest, it’s really hard to evict someone in winter.
So bad faith tenants will sign a lease in September, pay for a month or two, then stop. Can’t be evicted until spring.
And by “can’t be evicted” I mean can’t begin eviction proceedings. If the proceedings can be stretched out (“I’m in the hospital and can’t appear in court”) you can get to the next winter.
The middle ground is to investigate the situation and establish facts. And do it quickly.
That costs money, and poor tenants can’t afford it.
So many courts adopt the position of believing one side over the other.
This isn’t limited to liars … it applies to all bad faith actors. For example, in parts of the Midwest, it’s really hard to evict someone in winter.
So bad faith tenants will sign a lease in September, pay for a month or two, then stop. Can’t be evicted until spring.
And by “can’t be evicted” I mean can’t begin eviction proceedings. If the proceedings can be stretched out (“I’m in the hospital and can’t appear in court”) you can get to the next winter.
> It's like no one could agree on happy medium between "landlord can eject you whenever they want for whatever reason" and "no one can make you leave, ever, for any reason".
Renters vote. Prospective renters don't vote, because they don't live there.
Landlords vote too, but there aren't enough of them to counteract the renters.
Renters vote. Prospective renters don't vote, because they don't live there.
Landlords vote too, but there aren't enough of them to counteract the renters.
Could you not put ejection conditions in the lease itself? (SF resident here, but with no experience in landlording). I'm wondering why can't a landlord put in the lease a term like "if tenant does not pay rent for 30 days, tenant gives up all of his rights and landlord has the right to eject tenant within 15 days".
>landlord can eject you whenever they want for whatever reason
I don't understand. Why aren't landlords able to do this? Isn't it seen as immoral to steal property from an owner?
I don't understand. Why aren't landlords able to do this? Isn't it seen as immoral to steal property from an owner?
> Why aren't landlords able to do this? Isn't it seen as immoral to steal property from an owner?
Well, for one, the government should enforce contract neutrally - so if you sign a contract leasing your property, you can't unilaterally break this without cause.
Second, we as a society have an interest in giving people time to move their stuff out and find a new place to live.
Well, for one, the government should enforce contract neutrally - so if you sign a contract leasing your property, you can't unilaterally break this without cause.
Second, we as a society have an interest in giving people time to move their stuff out and find a new place to live.
Thanks for the response! Honestly, I was going to delete my comment, I felt like I was asking in bad faith, but can't since it had a reply.
I guess I see your point. I tend to side a bit harder with the landlords, but I don't want people tossed out on the streets without any sort of warning either.
I guess I see your point. I tend to side a bit harder with the landlords, but I don't want people tossed out on the streets without any sort of warning either.
> I tend to side a bit harder with the landlords, but I don't want people tossed out on the streets without any sort of warning either.
I expect that that hardly ever happens. Landlords aren't in the business to make life unnecessarily bad for renters, they're there to make money.
A tenant who stayed in the same place for 3 years, always pays on time and never damages the property is preferably to an unknown. Landlords know that starting an eviction can cost them up to a year of income, plus there is always the risk that the new tenant is going to be even costlier.
Why on earth would a landlord roll the dice on someone new? My guess is that many of those sob stories you are hearing from tenants are their side of the story.
They aren't going to tell you that the miss rent sometimes (and they'd have to miss a lot of months before a landlord will start the eviction process).
They aren't going to tell you that the landlord had to make substantial repairs to damages that they caused.
They aren't going to tell you that they sublet to "their cousins", and have 4 people to a room in a 3 room house.
When you listen to a landlord's side of the eviction story, it always comes down to money: "that house is my income and I wasn't getting it anymore".
No landlord is cutting off their income stream for several months just because they want to throw tenants onto the street.
I expect that that hardly ever happens. Landlords aren't in the business to make life unnecessarily bad for renters, they're there to make money.
A tenant who stayed in the same place for 3 years, always pays on time and never damages the property is preferably to an unknown. Landlords know that starting an eviction can cost them up to a year of income, plus there is always the risk that the new tenant is going to be even costlier.
Why on earth would a landlord roll the dice on someone new? My guess is that many of those sob stories you are hearing from tenants are their side of the story.
They aren't going to tell you that the miss rent sometimes (and they'd have to miss a lot of months before a landlord will start the eviction process).
They aren't going to tell you that the landlord had to make substantial repairs to damages that they caused.
They aren't going to tell you that they sublet to "their cousins", and have 4 people to a room in a 3 room house.
When you listen to a landlord's side of the eviction story, it always comes down to money: "that house is my income and I wasn't getting it anymore".
No landlord is cutting off their income stream for several months just because they want to throw tenants onto the street.
Doesn't matter if they have missed rent, they still need 30 days notice. These laws exist for a reason, they weren't created to address a problem that didn't exist at the time.
I said:
> they'd have to miss a lot of months before a landlord will start the eviction process
And you replied with:
> Doesn't matter if they have missed rent, they still need 30 days notice.
I can't tell if you are attempting to disagree with that statement of mine or not.
> they'd have to miss a lot of months before a landlord will start the eviction process
And you replied with:
> Doesn't matter if they have missed rent, they still need 30 days notice.
I can't tell if you are attempting to disagree with that statement of mine or not.
Landlords rarely kick people out without notice because society has made it illegal for them to do so.
Your take is naive. Historically there was a lot of money to be made being a "slum lord" and renting in poorer communities where people have bad credit so can't get mortgages , there's a reason the term exists.
Your take is naive. Historically there was a lot of money to be made being a "slum lord" and renting in poorer communities where people have bad credit so can't get mortgages , there's a reason the term exists.
> Your take is naive.
Oh really? What is my "take"?
> Historically there was a lot of money to be made being a "slum lord" and renting in poorer communities where people have bad credit so can't get mortgages , there's a reason the term exists.
Yeah, but that's not under discussion.
The point I made was that because evictions are so expensive (wiping out years of profit) and long for landlords, they are only ever a last resort.
When you hear right now, as in today, under current laws, sob stories from people who've been evicted successfully, it's highly probable that they're leaving out the actual reason that the landlord just wiped out up to a year of profit just to get them out the door.
No one is wiping out years of income and going into the red just because they want to be mean.
Oh really? What is my "take"?
> Historically there was a lot of money to be made being a "slum lord" and renting in poorer communities where people have bad credit so can't get mortgages , there's a reason the term exists.
Yeah, but that's not under discussion.
The point I made was that because evictions are so expensive (wiping out years of profit) and long for landlords, they are only ever a last resort.
When you hear right now, as in today, under current laws, sob stories from people who've been evicted successfully, it's highly probable that they're leaving out the actual reason that the landlord just wiped out up to a year of profit just to get them out the door.
No one is wiping out years of income and going into the red just because they want to be mean.
The poster upthread called registeredcorn questioned why we have any tenant protection laws at all.
I guess you wrote something intended to have nothing to do with that. While I see that wasn't your intent in context I read you as saying tenant protections don't matter.
I guess you wrote something intended to have nothing to do with that. While I see that wasn't your intent in context I read you as saying tenant protections don't matter.
That's just a lease. Leases have fixed terms. When the lease is up either side can give 30 days notice that they will not be renewing. That is true even in places with minimal to no tenant protection laws.
In a tenant protection environment, the tenant has the option to cancel when the lease ends, but the landlord does not. Regardless of where you are in the contract cycle, the landlord's only way to end the contract is through an eviction, and he will have to prove in court that the situation meets one of the lawful bases for eviction.
In a tenant protection environment, the tenant has the option to cancel when the lease ends, but the landlord does not. Regardless of where you are in the contract cycle, the landlord's only way to end the contract is through an eviction, and he will have to prove in court that the situation meets one of the lawful bases for eviction.
> In a tenant protection environment, landlords cannot just decline to renew leases.
Unless we're talking about some rent controlled context, where in the US is this law?
Unless we're talking about some rent controlled context, where in the US is this law?
For example, the entire state of California, including municipalities that don't have rent control and properties that aren't covered by existing rent controls.
https://sfrb.org/article/summary-ab-1482-california-tenant-p...
https://sfrb.org/article/summary-ab-1482-california-tenant-p...
What are the bounds of that though? No place that I have lived in California gives me the option of continuing my lease under the current terms (never once did they not increase my rent)
AB1482 is statewide and covers most rental stock. Units built in the last 15 years are exempt. Single family homes are exempt, but only if explicitly included in the lease (plenty of landlords got bit by this in 2020 - no notice to tenant, automatically covered by rent control/eviction control).
This is both rent control and eviction protection. You cant be evicted without “just cause” - all leases automatically roll over to "month to month".
This is both rent control and eviction protection. You cant be evicted without “just cause” - all leases automatically roll over to "month to month".
I think the large majority of units in CA are not covered by any sort of just cause eviction law. This law has several very large exemptions.
There's the whole "house as a human right" angle that is sometimes used to explain why tenant friendly laws exist, but it's not the only angle you have to approach the problem from. It's also true that a cities economy needs a lot of "minimum wage" or whatever workers, and for example if San Francisco didn't have tenant friendly laws like rent control then the hospitality industry would also suddenly need to pay a lot more to get bodies for their people-heavy business. After some deep conversations with a friend about this I now see this from his angle where cities are just state-sponsored big HOAs. If you get property in the HOA you have to abide by their rules and one of their rules is that for certain types of property if you rent it you can't easily kick out the tenants. If you don't like it, no one is forcing you to buy the property and even less to rent it, it's your call.
Because it's not just someone's property, it's also someone's home. The place they live. Society has collectively deemed kicking someone out of their home with no notice to be undesirable, even if they are currently struggling to pay rent.
You have to keep in mind the vast majority of tenancies are in good faith.
You have to keep in mind the vast majority of tenancies are in good faith.
True. I was reexamining the way I worded my question and I certainly could have put things better. There is more nuance there than I had given at first thought.
Having grown up in rentals, and having had close family member kicked out of a rental with something like 1 weeks notice, I am very conflicted over the issue. Thank you for not responding in kind to the way my question was worded.
Having grown up in rentals, and having had close family member kicked out of a rental with something like 1 weeks notice, I am very conflicted over the issue. Thank you for not responding in kind to the way my question was worded.
[deleted]
> prefer to keep their condos/houses empty rather than rent them out at market rate because of 100% tenant friendly city and state laws. Someone can move in and refuse to pay rent, refuse to leave, use your house as a drug den, destroy your property and lots more, and you can do nothing about it.
I'm in this situation right now. The only way I'll rent it out is if I personally know the tenant and their personal character. Otherwise, I'd rather leave the property empty. I didn't buy it as a rental, rather I paid off my primary residence and then had to move, so just kept it. I don't want to go outside the law, but that would be my only option as a landlord if someone tried to abuse me/my property, since the law offers me no meaningful protection. To avoid that liability, I simply don't rent.
I'm in this situation right now. The only way I'll rent it out is if I personally know the tenant and their personal character. Otherwise, I'd rather leave the property empty. I didn't buy it as a rental, rather I paid off my primary residence and then had to move, so just kept it. I don't want to go outside the law, but that would be my only option as a landlord if someone tried to abuse me/my property, since the law offers me no meaningful protection. To avoid that liability, I simply don't rent.
This is so alien to me. Why don’t you sell the place? Staying the owner of this place makes it so that you can’t spend your money tied up in this house, and this house can’t provide its roof to someone. Seems like both of you loose.
I had to move, but I want to come back. I already have a paid off house in this city after living here for 14 years. Selling it doesn't net me enough profit to meaningfully change things for myself in the new city after taxes, so it's better to hold onto it for when I eventually return.
Presumably value appreciating more than selling it and investing in other assets that are as safe.
Also, houses can allow you to lever up with non callable loans.
> This is so alien to me. Why don’t you sell the place?
Selling might trigger a very large tax liability, depending on original cost vs. current price. When that is the case, it's better to keep it in case you might want to return to the area in the future.
Selling might trigger a very large tax liability, depending on original cost vs. current price. When that is the case, it's better to keep it in case you might want to return to the area in the future.
The first $500k of appreciation is tax free. The rest is long term capital gains. If you want to minimize taxes, you should sell your house every time it appreciates in value by 500k and buy a new one. As long as you don't do so more than once every 2 or 3 years, which is how long it takes to reset the tax free increase.
A home 2 doors down from myself had been empty since the neighborhood was built in 2016 until 2020 when rental prices in our neighborhood blew through the ceiling.
I always assumed their financial calculus was such that the appreciation alone, on an empty home, was a better prospect to them than what they could've gotten in rent in those earlier years (weighted against upkeep/maintenance vs. leaving the place empty and coming by every 6 weeks to inspect the place -- which is what they were doing). Now that these homes are renting out for nearly 2x the mortgage price they have a tenant. I'm unsurprised to hear that it's commonplace. It's just... upsetting.
I always assumed their financial calculus was such that the appreciation alone, on an empty home, was a better prospect to them than what they could've gotten in rent in those earlier years (weighted against upkeep/maintenance vs. leaving the place empty and coming by every 6 weeks to inspect the place -- which is what they were doing). Now that these homes are renting out for nearly 2x the mortgage price they have a tenant. I'm unsurprised to hear that it's commonplace. It's just... upsetting.
For someone renting out a single home, I think it’s the risk of a bad tenant much more than the basic calculations — as GP said, there’s really nothing you can do about it.
I personally know a case of a misbehaving tenant not paying rent beyond the first two months pre-payment, submitted a fraudulent check for the first actual payment, had neighbor complaints endlessly with repeat HoA fines (fines given to owner, of course) — and 1.5 years to evict..
It also turned out he had started subletting it out for the same rent that he himself wasn’t paying.
That kind of thing can get you into a deep hole pretty quickly, and there’s not even much filtering you can do ahead of time, even with third party verification
I personally know a case of a misbehaving tenant not paying rent beyond the first two months pre-payment, submitted a fraudulent check for the first actual payment, had neighbor complaints endlessly with repeat HoA fines (fines given to owner, of course) — and 1.5 years to evict..
It also turned out he had started subletting it out for the same rent that he himself wasn’t paying.
That kind of thing can get you into a deep hole pretty quickly, and there’s not even much filtering you can do ahead of time, even with third party verification
Like another commenter mentioned, you'd real think that in the interest of addressing the housing shortage that there be some better solutions for these problems on both ends of the spectrum.
> I'm unsurprised to hear that it's commonplace. It's just... upsetting.
Law of unintended consequences.
Make it almost so expensive to evict that an eviction can wipe away years of profit, and landlords will rather have the place empty while it appreciates.
Law of unintended consequences.
Make it almost so expensive to evict that an eviction can wipe away years of profit, and landlords will rather have the place empty while it appreciates.
A friend bought a duplex in Berkeley. Due to the tenant-friendly laws there, she will only rent to international university affiliates whose roles/visas will require them to leave after a year or two.
Interestingly, she is very YIMBY and liberal, and even has a PhD in urban planning. But no one wants a forever tenant!
Interestingly, she is very YIMBY and liberal, and even has a PhD in urban planning. But no one wants a forever tenant!
You're not a liberal if you're casually violating fair housing law :)
Everyone wants to call themselves a liberal or progressive nowadays, it's bizarre. These things are about actions, not self-assigned labels.
Everyone wants to call themselves a liberal or progressive nowadays, it's bizarre. These things are about actions, not self-assigned labels.
Just curious as an outsider, what laws are she breaking by doing that?
Civil Rights Act of 1968, Unruh Civil Rights Act, ... there are a few other California specific legal statutes around civil rights/housing discrimination.
If you are sharing your own house vs renting out an autonomous unit, the rules are different (at least here in Seattle), you can discriminate a lot more legally than you could otherwise. So someone who rents room in their home only to Chinese international students is completely ok (as long as they share living space with the landlord). Not sure what the laws are in California, but federally it’s kosher.
> If you are sharing your own house vs renting out an autonomous unit
A duplex by definition is a building with two separate dwelling units.
A duplex by definition is a building with two separate dwelling units.
You are right, here are the seattle FAQ on first qualified applications:
> Yes. The first-in-time requirement applies to duplexes and triplexes even if the owner resides in one of the units. The non-owner occupied units are considered separate dwellings, and therefore are subject to the Seattle Open Housing Ordinance, which includes the first-in-time provisions.
The other two points where exceptions exists are for accessory dwelling units and (as I stated previously) when the owner lives in the same spaces being rented out, see http://www.seattle.gov/documents/Departments/CivilRights/Fai...
Now if the lady in question was renting out the basement, that might count as an accessory dwelling unit, and she would be exempt under Seattle rules (but this is in SF, so the rules would be different).
My guess is that as long as she doesn't advertise the unit (in the sense that she put it up for application), she can simply mention its availability to a small network that conveys it by word of mouth. It is impossible to legislate that kind of discrimination, there are tons of units that don't officially go on the market (via advertising on zillow, for example) but still get rented out.
> Yes. The first-in-time requirement applies to duplexes and triplexes even if the owner resides in one of the units. The non-owner occupied units are considered separate dwellings, and therefore are subject to the Seattle Open Housing Ordinance, which includes the first-in-time provisions.
The other two points where exceptions exists are for accessory dwelling units and (as I stated previously) when the owner lives in the same spaces being rented out, see http://www.seattle.gov/documents/Departments/CivilRights/Fai...
Now if the lady in question was renting out the basement, that might count as an accessory dwelling unit, and she would be exempt under Seattle rules (but this is in SF, so the rules would be different).
My guess is that as long as she doesn't advertise the unit (in the sense that she put it up for application), she can simply mention its availability to a small network that conveys it by word of mouth. It is impossible to legislate that kind of discrimination, there are tons of units that don't officially go on the market (via advertising on zillow, for example) but still get rented out.
The Fair Housing Act (the part of the 1968 Civil Rights Act you are referring to) exempts owner-occupied buildings with less than five units, so it wouldn't apply to the other unit in an owner-occupied duplex.
I didn't understand the GP to mean they were occupying the duplex. But in that context, it still violates california fair housing law.
Oh sure, rather flagrantly. I count at least four protected traits it discriminates on. (Mentioned in a post in another branch of the thread.)
What part of the civil rights act does it violate?
It's discussed on other parts of the thread. Also, I was assuming that this was not an owner-occupied duplex. It falls to state law if it is.
[deleted]
Is visa status a protected class for rentals in CA/Berkley?
Citizenship and national origin are, as is immigration status (under different laws.) Also source of income.
Renting only to international university affiliates on particular kinds of visas is directly discrimination on the basis of all of citizenship, national origin, immigration status, and source of income, and might also constitute disparate impact discrimination (which California FEHA also covers as well as direct discrimination) on other protected grounds if the direct discrimination wasn't enough.
Renting only to international university affiliates on particular kinds of visas is directly discrimination on the basis of all of citizenship, national origin, immigration status, and source of income, and might also constitute disparate impact discrimination (which California FEHA also covers as well as direct discrimination) on other protected grounds if the direct discrimination wasn't enough.
Yes it is, but it's impossible to enforce because landlords can ask for your drivers license/ID with the application and if you are on a visa your ID says "LIMITED TERM" on it. So they can always say yes or no based on that but pretend it was something else that made them make the choice.
Looks like immigration status is protected. I wonder if a plaintiff could win a case on the grounds that they were discriminated against because they weren't on a temporary visa.
As a former lawyer, I realize it's possible to make the argument, but it's probably clear from the legislative history of the law that it's meant to protect people who are on visas, not people who aren't.
Also, she would probably say that her rule is that she only rents to people who have an extremely compelling reason to leave after 1-2 years. Compelling reasons include time-limited positions (postdocs) or visa restrictions.
As a former lawyer, I realize it's possible to make the argument, but it's probably clear from the legislative history of the law that it's meant to protect people who are on visas, not people who aren't.
Also, she would probably say that her rule is that she only rents to people who have an extremely compelling reason to leave after 1-2 years. Compelling reasons include time-limited positions (postdocs) or visa restrictions.
Answering my own question- it appears that yes, it is- https://www.dfeh.ca.gov/Housing/#whoBody
>Everyone wants to call themselves a liberal or progressive nowadays, it's bizarre.
Thats just the scam the corporate left likes to play. They love to be super "progressive" while actually performing nothing progressive other than performance art.
It costs nothing to call yourself "progressive". Hell I bet Trump has probably called himself "progressive" ha ha.
Like you said, its actions that matter. If you look at that, essentially the elected progressives in this country trend towards 0.
Thats just the scam the corporate left likes to play. They love to be super "progressive" while actually performing nothing progressive other than performance art.
It costs nothing to call yourself "progressive". Hell I bet Trump has probably called himself "progressive" ha ha.
Like you said, its actions that matter. If you look at that, essentially the elected progressives in this country trend towards 0.
> the corporate left
This thing does not exist.
This thing does not exist.
Haha… all those woke Silicon Valley CEOs would prove you wrong.
I read this more as an indication that "liberal" philosophy is at best hypocritical (liberals "want things" (e.g. free education/housing) as long as they don't have to pay/work for it themselves) and at best contradictory (e.g. "open borders" while at the same time "social security").
Liberals can break laws just like conservatives can. Free country
Sure they can!
But ongoing intent to break certain categories of law will also mean that certain political labels are incorrect.
But ongoing intent to break certain categories of law will also mean that certain political labels are incorrect.
Nah labels are based on how you want others to behave not how you behave yourself
I know a landlord with a 4 unit rent controlled building in SF. As tenants leave, the units are left empty. Some units have been empty for 3+ years now.
Why? Because she is retiring and an empty building will sell for several hundred thousand more than one with tenants - giving up $300k in rent over a few years is an easy trade off when she can sell the whole building for $600k more.
Why? Because she is retiring and an empty building will sell for several hundred thousand more than one with tenants - giving up $300k in rent over a few years is an easy trade off when she can sell the whole building for $600k more.
[deleted]
> Interestingly, she is very YIMBY and liberal
Do you mean “liberal” the way progressives use it (i.e., center-right pro-corporate capitalist) or “liberal” the way conservatives use it (i.e., left of the Republican Party, with more liberal = more left)?
Do you mean “liberal” the way progressives use it (i.e., center-right pro-corporate capitalist) or “liberal” the way conservatives use it (i.e., left of the Republican Party, with more liberal = more left)?
The parent you’re replying too has no problem with tenant-friendly laws: rather, these occupation limits are both tenant and owner unfriendly, because you can’t live together in non-family arrangements that you might prefer (as a tenant or as owner). I sympathize.
With regards to your example, if you’re rich enough to be able to afford leaving a property you own empty, then I have little sympathy. It seems like their cities and states should introduce a sizeable vacancy tax. Or, as they did in Amsterdam in the 1980ies, tolerate squatting. And yes, maybe see if there’s something that can be done about backlogs in eviction court, but the baseline for me is that it should never be feasible for an owner to leave their house empty.
With regards to your example, if you’re rich enough to be able to afford leaving a property you own empty, then I have little sympathy. It seems like their cities and states should introduce a sizeable vacancy tax. Or, as they did in Amsterdam in the 1980ies, tolerate squatting. And yes, maybe see if there’s something that can be done about backlogs in eviction court, but the baseline for me is that it should never be feasible for an owner to leave their house empty.
Sounds like those places need a land value tax, too.
Why should we use this as an example? You’re talking about people who are throwing away money by leaving assets idle - and implying that they obviously don’t know how to operate in this market.
> You’re talking about people who are throwing away money by leaving assets idle
No, they are watching their assets shoot up in value every day without any operational burden.
> and implying that they obviously don’t know how to operate in this market
When did I say that? In fact what they are doing the most logical thing.
No, they are watching their assets shoot up in value every day without any operational burden.
> and implying that they obviously don’t know how to operate in this market
When did I say that? In fact what they are doing the most logical thing.
> > You’re talking about people who are throwing away money by leaving assets idle
> No, they are watching their assets shoot up in value every day without any operational burden.
It's not either/or. They might be watching the property value go up every year, but they are simultaneously throwing money away by leaving it empty. They could have been profiting from both sources but chose to profit only from one.
(Often rationally, since a bad tenant can destroy the property and never pay, but still.)
> No, they are watching their assets shoot up in value every day without any operational burden.
It's not either/or. They might be watching the property value go up every year, but they are simultaneously throwing money away by leaving it empty. They could have been profiting from both sources but chose to profit only from one.
(Often rationally, since a bad tenant can destroy the property and never pay, but still.)
As a potential landlord who is doing this very thing right now, it isn't really "throwing money away", because of asset appreciation. If you get stuck with a bad tenant it's way more hassle than if you had just let it sit and AirBnB'd it every once in a while. Especially for properties where the rent is less than the appreciation per month.
How do you feel about the ethical aspect? Now the home is not useful, except as an investment to you, but if you sold it there’s lots of ways you could make money instead (and in ways that provide value to others!). And the place would be someone’s home. Seems weird to let it be stay empty like that.
I had hoped to not wade too deep into this discussion for privacy reasons, but essentially I have quasi-rented it to someone close to me who I trust, and isn't in need of the place. They cover the utilities they use, and I don't charge them rent. Still, you have a valid point. I honestly don't like the AirBnBification of neighborhoods across the world. But, the time commitment I need right now to get licensure and then to interview rental candidates/hire a management just isn't worth the time commitment. Besides that, I like the optionality of visiting the city, and I did live in the house last year ( saved a ton on rent by buying in another state and working remotely there for my employer in California during the pandemic ). Hope that adds some clarity. I'm not part of the global elite!
You may not be part of the global super elite billionaires, but you certainly sound like a member of the global elite.
You are neglecting opportunity costs: if you could earn double (appreciation + rent) instead of just appreciation, you're leaving money on the table.
But also avoiding a very real possibility of significant costs (property destruction, litigation to remove bad tenants, etc.)
Think about this: land value appreciation is so crazy that you can not charge rent and still make enough money that a property has a good return on investment.
That extra money comes with additional risks, which the parent has judged to be not worth it.
> you can do nothing about it
lies, damn lies, and landlord lies..
lies, damn lies, and landlord lies..
The obvious solution is to just expropriate them and turn them into public housing. It's working in Berlin.
Or tolerate squatting, which used to be the case in the Netherlands.
>local regulations state that I am not allowed to live with more than 2 people unrelated to me
What? Where is that? It sounds insane and extreme overreach. How can somebody regulate with whom consenting adults choose to live?
What? Where is that? It sounds insane and extreme overreach. How can somebody regulate with whom consenting adults choose to live?
These kinds of regulations are extremely common (I might even go so far as to say they are the norm) in many US suburbs. Such restrictions are intended to prevent single-famiy homes from being used as large group houses. A probably intentional byproduct of the restrictions is also to keep lower-income residents out of desirable neighborhoods (by preventing for example, two families from occupying a large house that neither could afford individually). Minimum lot sizes have a similar consequence. If you're interested in getting into the history of housing restrictions, particularly as they pertain to efforts to limit lower-income (often minority) buyers, Richard Rothstein's The Color of Law is a good book to start with.
Occupancy limits are somewhat common in many cities/towns. But probably only enforced via neighborly complaint, so you don't really hear about them.
Just searching "occupancy limits city" popped up the limits for Boulder, CO: https://bouldercolorado.gov/occupancy-limits
Just searching "occupancy limits city" popped up the limits for Boulder, CO: https://bouldercolorado.gov/occupancy-limits
The kind of thing where you're fine unless you're "a problem" for one of your neighbors
A problem as defined by your nosiest, most uptight, or most xenophobic neighbor.
A problem as defined by your nosiest, most uptight, or most xenophobic neighbor.
Boulder is... special. A college town where a bunch of rich people decided to live. I've never seen a campus with so many non-students on it, just hanging out like they belong there or zipping through campus on their bikes at 40 mph. But most college towns have similar occupancy laws for neighborhoods where they want to keep students of the wrong sort out of.
If you have a family home, you probably don’t want 8 college students moving into the house next door to you. This was a restriction in my college town. As a student, I didn’t like it, but as a homeowner with a family, I completely understand.
> but as a homeowner with a family, I completely understand.
Why do you understand? Why would you care how many people live next door?
There are potential negatives, sure. Like noise or making a mess outside. But those are already covered by other ordinances, so just enforce those.
As a homeowner with a family, I wouldn't care if there are 50 people stuffed living in the house next door. As long as they're quiet and don't make a mess, it's none of my business.
Why do you understand? Why would you care how many people live next door?
There are potential negatives, sure. Like noise or making a mess outside. But those are already covered by other ordinances, so just enforce those.
As a homeowner with a family, I wouldn't care if there are 50 people stuffed living in the house next door. As long as they're quiet and don't make a mess, it's none of my business.
Most people in the world live and raise families in the conditions where they don't control what happens behind the floor, walls and ceilings. This seems like very strong entitlement.
[deleted]
Most people in the world don't have time to post on HN, or even have the privilege of knowing it exists. You posting a reply here is a very strong entitlement.
But if they did, they would probably come here and reply that they don't want 8 drunken college bros constantly partying next to their house either.
But if they did, they would probably come here and reply that they don't want 8 drunken college bros constantly partying next to their house either.
62% of the world has access to internet. HN is also free. There is no vetting process to see that you are wealthy. Somewhere like philippines, even the dirt poor know English, so English isn't necessarily a barrier either.
Personal I live in a SFH, and I have a family. Even though I don't want 8 drunken bros living next to me, they have as much right to exist as my rather loud and surely annoying toddler has.
Personal I live in a SFH, and I have a family. Even though I don't want 8 drunken bros living next to me, they have as much right to exist as my rather loud and surely annoying toddler has.
If you want to control who lives next to you, feel free to buy the neighboring properties.
That wouldn't help much - there would still be neighbors bordering your (now bigger) property, just further away. You need to buy an island instead.
Thankfully, I don't live in ancapistan, so I can vote instead.
Yes, and by voting the way that you do, you are creating a housing crisis.
I'd like for people expressing these political preferences to not be allowed to live in my neighbourhood either, but unlike you, I also recognize that you have as much right to live there as those 8 college students.
I'd like for people expressing these political preferences to not be allowed to live in my neighbourhood either, but unlike you, I also recognize that you have as much right to live there as those 8 college students.
Actually if you live in the bay area, you live in an oligarchy. A great part of the renters in the area cannot vote and thus are not represented in this matter.
If foreigners could vote in San Francisco, the majority of which are renters, it would overwhelmingly crush this position.
If foreigners could vote in San Francisco, the majority of which are renters, it would overwhelmingly crush this position.
8 people in an entire house? I don't see the problem.
3 college students could just about as easily be bad neighbors as 8.
Unless the idea is that 3 students would be too poor to live in that neighborhood, in which case a rule like that is even worse than I thought.
3 college students could just about as easily be bad neighbors as 8.
Unless the idea is that 3 students would be too poor to live in that neighborhood, in which case a rule like that is even worse than I thought.
Regulations like this are common.
Usually you need to get a special license, have home inspections annually, pay various fees, etc. if you want to do so.
Usually you need to get a special license, have home inspections annually, pay various fees, etc. if you want to do so.
Regulations where you'd specify minimum floor size, or rooms per person make sense for me. It's about straight up saying you can't live with people without state sanctioning the relationship.
In my region, the rules are so incredibly precise. Things like washing up areas must have at least 3 bowels in. Toilets must have flush handles above a certain height and below another height. Radiators must have 6 heat settings... Etc.
The entire aim seems to be to make running such a house not illegal, but very difficult and very expensive.
The entire aim seems to be to make running such a house not illegal, but very difficult and very expensive.
Precise laws are usually because enumerating every single bad alternative is an issue, so they just tell you what is permissible.
Besides, such specificity is usually drawn from building code best practices, which advocate for standardization. Which means that manufacturers don't bother creating radiators with less than six heat settings.
Besides, such specificity is usually drawn from building code best practices, which advocate for standardization. Which means that manufacturers don't bother creating radiators with less than six heat settings.
Good point, never thought about that. Here in the Netherlands, it used to be "common" to house other people than your direct family for some time, e.g. during harvest season.
House Hacking, Extreme Edition: legally adopting your roommates.
Is this in the US? I've never heard of this before and am curious to learn more. It sounds like something that is nearly unenforceable.
It doesn't have to be enforceable. But as soon as you do this, any potential hiccup like having to evict tenants or go to court for anything minor, and the state/police find out about your little "unenforceable" violation.
People on AirBnB generally are not 'tenants' and kicking them out is as easy as trespassing them, optionally with a Sheriff if they refuse to leave. You're reading way to much into Sheriff Bill worrying about what's happening. The AirBnB side is typically a civil matter.
Why do you have a 6 bedroom house if you only need 3 bedrooms?
It sounds like you're annoyed that you can't turn a profit on your 3 bedrooms and the housing problem is really a tangential concern.
It sounds like you're annoyed that you can't turn a profit on your 3 bedrooms and the housing problem is really a tangential concern.
Thats because your neighbours probably won’t like you opening a rooming house in their residential neighborhood without some kind of consultation with them on the zoning and appropriateness of such a thing.
I’ve seen houses where every room (including the living room) is occupied by a foreign student and the ‘landlord’ is running a slum rooming house. Thats what you’re not supposed to be able to do without getting approval. It impacts you negatively to avoid impacting your neighbours without consulting with them.
I’ve seen houses where every room (including the living room) is occupied by a foreign student and the ‘landlord’ is running a slum rooming house. Thats what you’re not supposed to be able to do without getting approval. It impacts you negatively to avoid impacting your neighbours without consulting with them.
As a curiosity, since you're probably better versed in this than I am, does the situation change if you yourself didn't live there? I'm pretty sure around here (300kperson city in Canada), the rules are different if one of the roommates is the owner or if it's a purely rental property... which seemed even more confusing!
As someone not from America, this seems insane to me. Who's stopping you from renting not living with people you aren't related to and why the hell are they allowed to tell you what to do with your own bedrooms? Equally, is 6 bedrooms normal? Sounds like a lot of cleaning.
[deleted]
I wonder if you could find exemptions for refugees. Seem to be a lot of those lately. Not ignoring the sad irony of this, but if you want to put that space to use there may some allowable loopholes.
I am working through this right now with a house that I recently bought. No way around the restrictions, but we did find one loophole. Two related families (eg two families in which the respective fathers are brothers) can live in the same house, at least under the way the restrictions are written where I live. We are able to house two refugee families in the same house legally as a result, but it's a shame that it is not easier to do, and possible with two unrelated families.
Many of these laws are a family plus two unrelated people. There have been broad changes in how a family is defined in this context.
> legally I am forced to keep 3 bedrooms empty.
Not at all! Look into what it would take to lease them out to a self-storage facility. :-P
Not at all! Look into what it would take to lease them out to a self-storage facility. :-P
What a terrible policy. Do you mind sharing where this is?
But what does enforcement look like?
Change the word "house" to "car" and I think the problem becomes not-so obvious.
It's often bemoaned that personal cars are a waste of money and space: they sit idle most of the time, we have to build parking lots to accommodate them and that takes space. It would be so much better if we could just hire cars on demand! But this doesn't scale because the demand is not spread out during the day -- absent carpooling, you still need one car per person twice a day, meaning the supposed savings don't exist.
The same could be said for housing. If I'm at work all day, then my house is sitting idle (it's not housing anyone) and it takes up space. Why not let someone live in my house while I'm at work? This also doesn't scale but for a different reason: we all work during the day (excluding night-shift workers) so at night we still need one house per person (ignoring families, stretching the metaphor a bit).
Now add "vacation homes" into the mix, now you're looking at ~20% of housing (calculated from empirical analysis) in any vacation hot-spots being rental properties. This means that 20% of the existing housing that could be available for permanent residents is missing.
Saying "just build more housing" is just not realistic. 20% more housing is a ludicrous amount of housing!
Hotels, on the whole, are much more economical in space utilization because people who are going on vacation do not vacation to _visit a home_. They go to do things in the place they are visiting and are thus _not at home_.
It's often bemoaned that personal cars are a waste of money and space: they sit idle most of the time, we have to build parking lots to accommodate them and that takes space. It would be so much better if we could just hire cars on demand! But this doesn't scale because the demand is not spread out during the day -- absent carpooling, you still need one car per person twice a day, meaning the supposed savings don't exist.
The same could be said for housing. If I'm at work all day, then my house is sitting idle (it's not housing anyone) and it takes up space. Why not let someone live in my house while I'm at work? This also doesn't scale but for a different reason: we all work during the day (excluding night-shift workers) so at night we still need one house per person (ignoring families, stretching the metaphor a bit).
Now add "vacation homes" into the mix, now you're looking at ~20% of housing (calculated from empirical analysis) in any vacation hot-spots being rental properties. This means that 20% of the existing housing that could be available for permanent residents is missing.
Saying "just build more housing" is just not realistic. 20% more housing is a ludicrous amount of housing!
Hotels, on the whole, are much more economical in space utilization because people who are going on vacation do not vacation to _visit a home_. They go to do things in the place they are visiting and are thus _not at home_.
We take two types of vacations: 1) foreign travel where we are constantly on the go visiting new places and 2) home rentals with extended family.
For the second category usually it is the beach, but sometimes in the mountains or other area. We tend to get 10-15 members of our extended family and friends and the activities often include making food communally, playing games, moving between the house and walking distance activity like the shore, even napping. The house very much gets used and isn't just a place to sleep.
For the second category usually it is the beach, but sometimes in the mountains or other area. We tend to get 10-15 members of our extended family and friends and the activities often include making food communally, playing games, moving between the house and walking distance activity like the shore, even napping. The house very much gets used and isn't just a place to sleep.
> But this doesn't scale because the demand is not spread out during the day -- absent carpooling, you still need one car per person twice a day, meaning the supposed savings don't exist.
Very rare for my neighbour to be using her car at the same time I use my car. Not every car driver commutes 5 days a week 9-5.
I work from home, have done for years, my neighbour is retired.
I guarantee in my village there will be at least 10 unused cars at any point during the year, probably nearer 50. There certainly aren't that many empty houses
Very rare for my neighbour to be using her car at the same time I use my car. Not every car driver commutes 5 days a week 9-5.
I work from home, have done for years, my neighbour is retired.
I guarantee in my village there will be at least 10 unused cars at any point during the year, probably nearer 50. There certainly aren't that many empty houses
Maybe stop bringing in a million people a year.
Agreed, but there are big structural barriers. We generally want necessary goods to have stable or decreasing prices over time. But in America, we encourage home ownership as an investment. For many, their biggest investment. That creates a big constituency who want housing prices to go up. But we also want people, especially those just starting out, to have affordable housing.
We can't have housing be both affordable and a good long-term investment. We need to pick. And given increasing prices and how 65% of Americans are howmeowners, I think we already did.
We can't have housing be both affordable and a good long-term investment. We need to pick. And given increasing prices and how 65% of Americans are howmeowners, I think we already did.
> One can blame Airbnb, but
> speculation in ... vacation towns [has] been a thing for a very long time.
> the existing [houses] will get more expensive no matter what.
In vacation towns, the issue is that tourists are flooding out of hotels, and into livable dwellings.
Our hotel vacancy rates are rising just as fast as our home prices.
Perhaps the solution is tearing down hotels and building high-rise apartments in their stead, but it seems a bit wasteful compared to the alternative (regulating and taxing Airbnbs to nudge tourists back into the hotels designed for them).
In vacation towns, the issue is that tourists are flooding out of hotels, and into livable dwellings.
Our hotel vacancy rates are rising just as fast as our home prices.
Perhaps the solution is tearing down hotels and building high-rise apartments in their stead, but it seems a bit wasteful compared to the alternative (regulating and taxing Airbnbs to nudge tourists back into the hotels designed for them).
On some level, this is hotels failing to compete. If I look up both airbnbs and hotels in a popular vacation town (randomly using Big Sky, MT, april 18-20, for this example) then I see hotels and airbnbs in similar locations, and at similar price points. However, there are airbnbs cheaper than the cheapest hotels, and they have a number of amenities that no hotels offer- notably, a washer/dryer in-unit, a full kitchen, and multiple actual rooms.
Given the same nightly price, who would choose a minimal pared-down hotel room over an entire furnished condominium?
Given the same nightly price, who would choose a minimal pared-down hotel room over an entire furnished condominium?
That speculation is being scaled/super-charged through technology, and making the proposed solution to build more harder, in part because an increase in corporate landlording dilutes the political power of regular homeowners.
I'm really trying to think of reasons why a PE market maker that just bought a sub-division would want to build more and depress their future rents (unless the area has massive population growth).
I'm really trying to think of reasons why a PE market maker that just bought a sub-division would want to build more and depress their future rents (unless the area has massive population growth).
> The solution is out there in front of us but everyone prefers to dance around it.
Jesus, man, slow down. It's a little early to start suggesting cannibalism as a solution to the housing crisis.
Jesus, man, slow down. It's a little early to start suggesting cannibalism as a solution to the housing crisis.
Number of housing units to households is the same as year 2000. 1.1:1
So the undersupply story is a myth. There has been a recent pull forward in demand that ate through all active listings though.
So the undersupply story is a myth. There has been a recent pull forward in demand that ate through all active listings though.
Im genuinely curious to read more on this. Know of a source for that number or some resources I can try to research on the topic? I just mostly see people reaching for conclusions but see very little data to back it up.
All the relevant data is on FRED
https://fred.stlouisfed.org/series/TTLHH
https://fred.stlouisfed.org/series/ETOTALUSQ176N
https://fred.stlouisfed.org/series/UNDCONTSA
Homes actively under construction is about to hit an all time high, higher than the 70s peak
Plus consider demographics. Millennial hump has passed avg home buying age, and there are demographic headwinds going forward, unless immigration policy becomes more permissive. Of course demographic impact will take decade or more to play out.
By demographic headwinds, I mean fewer young people, e.g. Inverted population pyramid. See Japan or China for how this will play out
https://fred.stlouisfed.org/series/TTLHH
https://fred.stlouisfed.org/series/ETOTALUSQ176N
https://fred.stlouisfed.org/series/UNDCONTSA
Homes actively under construction is about to hit an all time high, higher than the 70s peak
Plus consider demographics. Millennial hump has passed avg home buying age, and there are demographic headwinds going forward, unless immigration policy becomes more permissive. Of course demographic impact will take decade or more to play out.
By demographic headwinds, I mean fewer young people, e.g. Inverted population pyramid. See Japan or China for how this will play out
Hey thanks for this!
US housing inventory just hit historic lows of 860k. It was 1.5m pre-pandemic. https://twitter.com/LoganMohtashami/status/15031205369098035...
This inventory metric is simply active listings. It has nothing to do with structural housing supply. It also doesn't include houses that are listed and sold within the same month
If 1m people decided to sell tomorrow, suddenly inventory would be normal. At the end of the day what matters is how many housing units are there and how many households. To say there's a shortage is simply wrong, given that the ratio is well in line with historical norms.
The number of active listings is low because a surge of demand due to low interest rates and then later FOMO ate through active inventory. If rates hit 5% within the month, you'll be surprised how quickly inventory returns to normal.
Way too much statistics crimes when talking about housing
If 1m people decided to sell tomorrow, suddenly inventory would be normal. At the end of the day what matters is how many housing units are there and how many households. To say there's a shortage is simply wrong, given that the ratio is well in line with historical norms.
The number of active listings is low because a surge of demand due to low interest rates and then later FOMO ate through active inventory. If rates hit 5% within the month, you'll be surprised how quickly inventory returns to normal.
Way too much statistics crimes when talking about housing
Ok, I'll revisit this thread when rates are 5% and inventory jumps back to 1.5m.
Great! Should only be a few months.
I use logic and accurate interpretation of the data in my assessment, all these counter arguments use statistic butchering and hopium. Yet people cling to the narrative for whatever reason. Bias is a hell of a drug.
If inflation persists at 4-5% we will see 6% mortgages within the year. Many are blinded by the last decade of low inflation. If inflation suddenly dissipates, due to a shock etc, then housing prices can preserve at these levels.
I use logic and accurate interpretation of the data in my assessment, all these counter arguments use statistic butchering and hopium. Yet people cling to the narrative for whatever reason. Bias is a hell of a drug.
If inflation persists at 4-5% we will see 6% mortgages within the year. Many are blinded by the last decade of low inflation. If inflation suddenly dissipates, due to a shock etc, then housing prices can preserve at these levels.
What’s funny is how much property values and rent have risen in the US in 2020 to 2022, when population growth has been flat due to Covid. (Population has increased 1 million in that time, from 331.5 million to 332.5 million.) obviously, newborns aren’t buying houses, but the excess deaths (not to mention early retirements requiring around the clock care) were entirely due to Covid and should have opened up a number of properties for first time homebuyers.
A town close to me has lots of land to build new homes, few restrictions, fast fiber Internet and prices are still going up way faster than before which seems to indicate multiple things are causing this.
Prices have increased tremendously even in cities with stagnant population. It's not just pure supply and demand - real estate has a tendency to occupy enough of income in a given area so that the lower paid cannot afford it.
Exactly. Formerly the 'unseen' behavior was seasonal renting brokered through agents or high-end advertising. This still kept locals out of the house, but 1) it was harder for normal people to become aware of the listings in the first place 2) One renter who comes every weekend for an entire season 'feels' more like a local.
Now what we have is listings that are easily found via google and a much broader set of visitors whose faces change every week. Our limited brains interpret that as a much bigger shift than it may actually be.
Now what we have is listings that are easily found via google and a much broader set of visitors whose faces change every week. Our limited brains interpret that as a much bigger shift than it may actually be.
"...the truth is that speculation in real estate and vacation towns have both been a thing for a very long time."
Eh, in the US, it was limited by the Glass-Steagal protections enacted after the speculators ruined the world economy almost 100 years ago. We can thank the 'Modernisation Acts' of 1999/2000 and QE for the economic rollercoaster in the US(so goes the world?) for the last 20 years in housing, energy & metals.
https://en.wikipedia.org/wiki/Glass_Steagal
https://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bl...
https://en.wikipedia.org/wiki/Commodity_Futures_Modernizatio...
Eh, in the US, it was limited by the Glass-Steagal protections enacted after the speculators ruined the world economy almost 100 years ago. We can thank the 'Modernisation Acts' of 1999/2000 and QE for the economic rollercoaster in the US(so goes the world?) for the last 20 years in housing, energy & metals.
https://en.wikipedia.org/wiki/Glass_Steagal
https://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bl...
https://en.wikipedia.org/wiki/Commodity_Futures_Modernizatio...
Nobody is dancing around anything. We need to stop pretending its ignorance driving the housing bubble. The problem is real estate is treated as an investment and in many cases the most important investment for ordinary people. More housing works against their interests.
In addition to the rising need for housing vs the number of new ones is leaving homes vacant. E.g., allegedly about 10% of San Francisco's housing stock is vacant. As with stocks, investors don't buy them anymore because of dividends, but only to hope they rise in value.
https://hostagenews.com/report-10-of-san-franciscos-housing-...
https://hostagenews.com/report-10-of-san-franciscos-housing-...
> The solution is out there in front of us but everyone prefers to dance around it.
Could not agree more, just so we're all on the same page it is:
https://en.wikipedia.org/wiki/Human_population_planning
Oh, sorry, were you referring to something else? :-)
Could not agree more, just so we're all on the same page it is:
https://en.wikipedia.org/wiki/Human_population_planning
Oh, sorry, were you referring to something else? :-)
> If the population rises and we refuse to build more houses, the existing ones will get more expensive no matter what.
Mix in low interest rates and you get a major property bubble. Population growth and low interest rates are the two major predictors of housing price increases.
Mix in low interest rates and you get a major property bubble. Population growth and low interest rates are the two major predictors of housing price increases.
The problem is that interest rates are too low. 5% interest rates would fix house prices (and other capital mis-allocation).
The reason why lots of boomers are sitting on large amounts of housing equity is that they bought before the transition to low rates. The reverse will also hold - anyone buying now before the transition to higher rates will get clobbered (in terms of loan to equity - probably they'll be ok repayment wise so long as they have a fixed mortgage)
The reason why lots of boomers are sitting on large amounts of housing equity is that they bought before the transition to low rates. The reverse will also hold - anyone buying now before the transition to higher rates will get clobbered (in terms of loan to equity - probably they'll be ok repayment wise so long as they have a fixed mortgage)
And commensurately there's a tight relationship between the percentage of income spent on rent (often cited as a third, it used to be less than half that), and the percentage of people on the street.
Is the claim that not enough houses are being built or have been built backed up by data? Real estate investors don't seem to have much problem finding homes to turn into rentals.
We lost four years of housing growth because of the recession.
The problem is adversarial. If real estate were more affordable, what of those who have invested in it?
Sure building more houses help but many houses sit empty. There are other problems.
Well, there are two solutions.
True, we could lower the population back down by exiling real estate agents.
where I live all they do is build houses. this idea that we arent building houses mystifies me.
NIMBYs are a special breed of evil
> I'm imagining a scenario where two iBuyer companies try to outbid each other algorithmically, driving the prices further and further out of reach of people who are looking for a primary home.
But iBuyers are always low-balling. They are bidding under the asking price with an all-cash offer that they hope will make up in speed and ease what it lacks in price.
> It's not that uncommon to see nearly entire neighborhoods converted to short term rentals now in some areas where they're still legal. Hearing that really depressed me.
I lived in Lake Tahoe for ten years before AirBnB was a thing and three out of four homes there were absentee owners that only used them a few weeks a year. It made it a very hard place for small businesses to stay afloat. Most visitors stayed at big hotels or paid huge premiums for ad hoc "cabin rentals" through local realtors. The most depressing part was Halloween - kids hiking up and down steep hills to mostly empty houses. :)
But iBuyers are always low-balling. They are bidding under the asking price with an all-cash offer that they hope will make up in speed and ease what it lacks in price.
> It's not that uncommon to see nearly entire neighborhoods converted to short term rentals now in some areas where they're still legal. Hearing that really depressed me.
I lived in Lake Tahoe for ten years before AirBnB was a thing and three out of four homes there were absentee owners that only used them a few weeks a year. It made it a very hard place for small businesses to stay afloat. Most visitors stayed at big hotels or paid huge premiums for ad hoc "cabin rentals" through local realtors. The most depressing part was Halloween - kids hiking up and down steep hills to mostly empty houses. :)
> iBuyers are always low-balling
Low-balling according to their own estimate (Zestimate) with imperfect knowledge. If this Zestimate overvalues a house, but the iBuyers assume “we are low-balling anyways,” they may find themselves in an iBidding war ending in the winner’s curse: whoever pays the most for the overvalued house wins.
Not a problem though right? They overvalue some, undervalue others, it evens out. But, as the article points out, the nature of this algorithmic buying is that the iBuyers will only - or at least predominantly - end up with the houses they overpaid for or got only a slightly good deal on because many sellers will be willing to take longer for a better deal. The end result is very thin margins or, as seen with Zillow, substantial losses as they hold a lot of lemons.
Low-balling according to their own estimate (Zestimate) with imperfect knowledge. If this Zestimate overvalues a house, but the iBuyers assume “we are low-balling anyways,” they may find themselves in an iBidding war ending in the winner’s curse: whoever pays the most for the overvalued house wins.
Not a problem though right? They overvalue some, undervalue others, it evens out. But, as the article points out, the nature of this algorithmic buying is that the iBuyers will only - or at least predominantly - end up with the houses they overpaid for or got only a slightly good deal on because many sellers will be willing to take longer for a better deal. The end result is very thin margins or, as seen with Zillow, substantial losses as they hold a lot of lemons.
Yes, that's exactly it. The "Zestimate" is often way off, and the owner knows a lot more about it than Zillow does. If the Zestimate price is lower than the buyer thinks they can get, they won't take the offer. If the Zestimate price ignores the run-down condition of the house or other issues Zillow missed, they snap that up. So Zillow mostly wound up with the homes that they overvalued.
Zillow wasn't pursuing the strategy of a traditional iBuyer, which as you note is to lowball. Zillow thought they were providing a service of market-making and didn't consider the risks (I still don't see why it wasn't obvious to them...). If they offered some discount from the Zestimate, that would have been a lot smarter, but it would have undermined their goal of making a market, as well as undermining the very concept of the Zestimate (if Zillow says my house is worth X, why are they offering me 80% of X?). The alternative would be to appraise each house in person instead of basing the purchase price on the Zestimate, but that wouldn't scale.
> if Zillow says my house is worth X, why are they offering me 80% of X?
Because they want to make money. Which they can’t by buying for X and then selling for X.
Because they want to make money. Which they can’t by buying for X and then selling for X.
>But iBuyers are always low-balling. They are bidding under the asking price with an all-cash offer that they hope will make up in speed and ease what it lacks in price.
But is asking price "market" price. As in does the seller price a 10-20% premium calculating this. Always easier to negotiate down than up.
But is asking price "market" price. As in does the seller price a 10-20% premium calculating this. Always easier to negotiate down than up.
Are you saying AirBnB fixed all this? I don't see them renting much in late October nor passing out candy.
No, they're saying the problem existed before AirBnB.
> It's honestly quite scary how I'm in the top 2% of income earners in my generation and yet I could barely afford to buy a small place in a semi-desirable area. I can easily see myself not being able to compete in algorithmically dominated markets flush with venture cash in the future and I earn more than just about everybody I know today.
A thought exercise: suppose that no new houses are ever built and that housing turnover is nearly zero. What happens to the price of housing in that limit? Market forces do not necessarily entitle the top n% of the income distribution to housing.
I was a bit cynical about this too: I live in Los Angeles, where a "small place in semi-desirable area" gets listed for 1.5M and goes for nearly 2M. I'm somewhere in the top 5% of earners in California, but that $2M 1950s tract housing would be >50% of my post-tax income.
A thought exercise: suppose that no new houses are ever built and that housing turnover is nearly zero. What happens to the price of housing in that limit? Market forces do not necessarily entitle the top n% of the income distribution to housing.
I was a bit cynical about this too: I live in Los Angeles, where a "small place in semi-desirable area" gets listed for 1.5M and goes for nearly 2M. I'm somewhere in the top 5% of earners in California, but that $2M 1950s tract housing would be >50% of my post-tax income.
> A thought exercise: suppose that no new houses are ever built and that housing turnover is nearly zero. What happens to the price of housing in that limit? Market forces do not necessarily entitle the top n% of the income distribution to housing.
I don't think it's disturbing because "clearly the top 2% of income earners should be entitled to housing," but because clearly everyone needs housing, and if the top 2% of earners can't even afford it, that means it's even worse for everyone else.
I don't think it's disturbing because "clearly the top 2% of income earners should be entitled to housing," but because clearly everyone needs housing, and if the top 2% of earners can't even afford it, that means it's even worse for everyone else.
Owning and having are not the same thing: you can have housing while renting it, receiving it as a gift from parents or your spouse, etc.
The reality that almost never gets brought up is that the other side of the coin is that these are natural pressures that are probably healthy.
We know that any given habitat, like the Earth, has finite resources and has some upper bound to supporting life. This is how those pressures manifest. We can’t just keep growing the population and have everything be affordable. Surging food, energy and housing prices are the first feedback mechanism in this process.
If everybody can afford everything forever, we get infinite population growth.
We know that any given habitat, like the Earth, has finite resources and has some upper bound to supporting life. This is how those pressures manifest. We can’t just keep growing the population and have everything be affordable. Surging food, energy and housing prices are the first feedback mechanism in this process.
If everybody can afford everything forever, we get infinite population growth.
People not being able to own homes is not "healthy". Having to pay 50% of your salary to landlords is not "healthy". It is concentration of wealth, it is the very definition of precarity. Unless your hope is to see a collapse of societies, things go really bad when people can't afford fundamental needs.
You replied without understanding my comment. Let me pose the question back to you: if everyone can comfortably afford food, housing and basic necessities, what is going to cause population growth to level off?
Your characterization of bad things happening is exactly my point - you’re just failing to understand that I’m saying that’s the healthy part.
Your characterization of bad things happening is exactly my point - you’re just failing to understand that I’m saying that’s the healthy part.
if everyone can comfortably afford food, housing and basic necessities, what is going to cause population growth to level off?
This is exactly backwards; both across and within countries, richer people have fewer children.
This is exactly backwards; both across and within countries, richer people have fewer children.
The world cannot support 10 billion rich people (by current standards). High prices are one of a number of expected natural feedback mechanisms.
You’re pointing to a correlation which has no bearing on the future.
You’re pointing to a correlation which has no bearing on the future.
As the other response to you shows, you're the one missing the point. Population growth massively slows down the more your basic needs are met. Countries that have high children counts are countries where the solution to actually reaching wealth is multiplying until few of them die, or one of them ends up making a lot of money (relative to the country they live in).
> Population growth massively slows down the more your basic needs are met.
No, this is the point you’re missing: your presumption is predicated on being able to meet everyone’s basic needs cheaply. What I’m saying is that this is not possible, and that high prices are the feedback mechanism.
No, this is the point you’re missing: your presumption is predicated on being able to meet everyone’s basic needs cheaply. What I’m saying is that this is not possible, and that high prices are the feedback mechanism.
> > It's honestly quite scary how I'm in the top 2% of income earners in my generation and yet I could barely afford to buy a small place
> I live in Los Angeles, where a "small place in semi-desirable area" gets listed for 1.5M and goes for nearly 2M. I'm somewhere in the top 5% of earners in California, but that $2M 1950s tract housing would be >50% of my post-tax income.
I think the obvious answer here is that people in the top 2% or top 5% are not buying houses... It's the people in the top 0.1%. Last time I was home shopping, we were regularly outbid by all-cash offers of 50%-100% over asking price, no contingencies. These competing bidders are not teachers and nurses. They're not even high-paid tech employees. Do you really think a Senior Software Engineer at Microsoft has $2.5M in cash sitting in his checking account to buy a home? No way. These are all businesses, investors, serial landlords buying their 60th house, hedge funds, 0.1% wealthy people--that's who's buying all these houses. Not us.
> I live in Los Angeles, where a "small place in semi-desirable area" gets listed for 1.5M and goes for nearly 2M. I'm somewhere in the top 5% of earners in California, but that $2M 1950s tract housing would be >50% of my post-tax income.
I think the obvious answer here is that people in the top 2% or top 5% are not buying houses... It's the people in the top 0.1%. Last time I was home shopping, we were regularly outbid by all-cash offers of 50%-100% over asking price, no contingencies. These competing bidders are not teachers and nurses. They're not even high-paid tech employees. Do you really think a Senior Software Engineer at Microsoft has $2.5M in cash sitting in his checking account to buy a home? No way. These are all businesses, investors, serial landlords buying their 60th house, hedge funds, 0.1% wealthy people--that's who's buying all these houses. Not us.
To be fair, it's doable as a senior or staff engineer at a big company earning 300 to 500k/yr. I'm (lucky enough to be) in that range and qualified for a $1.5M loan. Combined with 500k for a down payment, you can see how those $2M houses are technically affordable. For now.
Income data always lags reality by a couple of years: in my experience, a lot of people have a lot more money than you'd think. The winners of the eight purchases I've attempted have been young dual income professional families.
Income data always lags reality by a couple of years: in my experience, a lot of people have a lot more money than you'd think. The winners of the eight purchases I've attempted have been young dual income professional families.
I'm a senior staff engineer with 20+ years of c++ experience and I make less than 200k even after stocks and bonuses. But I live in a part of the US where that gets me an almost 4000 square foot home within walking distance to nightlife and a short bike to a downtown with highrises and art museums and orchestras and operas. The weather is horrible swinging over 115 degrees over the course of a year, but right now it's wonderful out. Redefine what semi-desirable means. Yes I'd love to walk out my back door and dig clams or pull in a haul of crabs to cook on the beach, but putting all of us on a coast won't work. Also with a couple of exceptions in the Pacific Northwest climate change will hit the coasts hard. Cramming us all into condos on those few stretches of protected beach is even less feasible. Mountains will be somewhat less impacted, ski resort areas will expand and continue their price growth. But everyone moving there isn't really any more feasible long term.
I'm under the impression that 'cash offer' just means that whoever is buying has already secured their financing. That means there's almost no risk of the deal falling through and the sale can go from contingent to pending immediately. This is better for the buyer because they sell faster. Senior software eng at microsoft can pull this off no problem (no one is buying a house with cash in their bank, not even rich people).
It means that they aren't using a mortgage to buy it. If there's a mortgage involved, then the offer becomes contingent on the bank's due diligence which can cause the deal to fall through in a variety of ways.
For example: the bank will only loan you money up to the appraised value of the home, which is done after the deal is signed (banks won't send an appraiser to every house you make an offer on). If the appraiser says the house is worth 500K and you bid 800K, you need to find 300K some other way (usually cash) or the deal falls through.
For example: the bank will only loan you money up to the appraised value of the home, which is done after the deal is signed (banks won't send an appraiser to every house you make an offer on). If the appraiser says the house is worth 500K and you bid 800K, you need to find 300K some other way (usually cash) or the deal falls through.
At least in the SF market what matters is a financing contingency, not all cash vs mortgage. As long as you go through underwriting first and get full approval (not pre-approval) an offer with a mortgage and no financing contingency is 99% as good as an all-cash offer. Sellers are not impressed by cash offers anymore unless they're the high bidder... in which case it is the high offer not the cash nature that matters.
And lenders that work in SF understand how this works and indeed can go through full underwriting without a property having been selected. Appraisal is the only thing that might matter which is why it is a good idea to hold back some cash.
And lenders that work in SF understand how this works and indeed can go through full underwriting without a property having been selected. Appraisal is the only thing that might matter which is why it is a good idea to hold back some cash.
While it is true cash offers in the strict sense mean real cash, it may also mean no-contingency offers. You can go through mortgage underwriting first and commit to pay the gap between appraised value and deal value, and can make a no-contingency offer with minimum risk. Or, if you are willing to lose your deposit (usually 3-5%) you can also make a no-contingency offer to be more attractive.
> You can go through mortgage underwriting first and commit to pay the gap between appraised value and deal value, and can make a no-contingency offer with minimum risk.
Of course, but unless the amount you commit to bridge is unbounded, you're still contingent in appraisal price. And if you did commit to that, you're just making a cash offer with extra steps.
Deposits in my experience are token (around 2%). And usually sellers will verify that you have the cash on hand for no-contingency offers, since 2% is not worth waiting and then redoing the house selling process.
Of course, but unless the amount you commit to bridge is unbounded, you're still contingent in appraisal price. And if you did commit to that, you're just making a cash offer with extra steps.
Deposits in my experience are token (around 2%). And usually sellers will verify that you have the cash on hand for no-contingency offers, since 2% is not worth waiting and then redoing the house selling process.
> no one is buying a house with cash in their bank, not even rich people
That's how I bought my house, and I earn less as a solopreneur than many FAANG employees in this community. My "cash offer" came with the standard proof of funds: a piece of paper the local Wells Fargo branch printed for me on their letterhead that said I have an $X balance as of that date, where $X was greater than the price I was offering for the house. I walked into the same branch and wired that cash to an escrow company a few days before closing.
That's how I bought my house, and I earn less as a solopreneur than many FAANG employees in this community. My "cash offer" came with the standard proof of funds: a piece of paper the local Wells Fargo branch printed for me on their letterhead that said I have an $X balance as of that date, where $X was greater than the price I was offering for the house. I walked into the same branch and wired that cash to an escrow company a few days before closing.
[deleted]
No, cash offer means actually pay it cash. If there's any kind of financing involved, the bank will need to approve the purchase, slowing down the process, which is what a cash offer bypasses.
> no one is buying a house with cash in their bank, not even rich people
They most certainly are. Tons of real estate sales here (Silicon Valley) are all-cash because the other people making offers are also all-cash, so the only way to make a competitive offer is if it is all-cash.
So regular people who need a mortgage are completely shut out of the market.
> no one is buying a house with cash in their bank, not even rich people
They most certainly are. Tons of real estate sales here (Silicon Valley) are all-cash because the other people making offers are also all-cash, so the only way to make a competitive offer is if it is all-cash.
So regular people who need a mortgage are completely shut out of the market.
As I noted above this is not really true anymore. My agent told me flat out that sellers (read: seller's agents) are not impressed with all-cash offers anymore. As long as you make a no-contingencies offer that's plenty good enough. They might ask if you have a 5-10% reserve just in case the appraisal comes in a bit low but in the three offers we made that never came up, even against other buyers offering all cash.
Getting a mortgage approved was also easier than I expected; when you move into Jumbo territory and have more than 20% cash to put down the bank seems to assume if you were industrious enough, lucky enough, or connected enough to come up with $500k, $1m, or whatever cash then you're probably good for the loan.
They also counted unvested RSUs as assets at a slight discount to the average stock price (I think it was the previous 90 day average?).
Getting a mortgage approved was also easier than I expected; when you move into Jumbo territory and have more than 20% cash to put down the bank seems to assume if you were industrious enough, lucky enough, or connected enough to come up with $500k, $1m, or whatever cash then you're probably good for the loan.
They also counted unvested RSUs as assets at a slight discount to the average stock price (I think it was the previous 90 day average?).
> If there's any kind of financing involved, the bank will need to approve the purchase, slowing down the process, which is what a cash offer bypasses.
That's not "already secured" then, is it?
That's not "already secured" then, is it?
Correct. But the point was that if you're getting financing from an institution, there is no such thing as secured, before they evalute the house and the offer.
It means they have cash in a bank account ready to go. Maybe they took out a loan against other assets to obtain the cash, but a "cash offer" is literally the person is handing over a cashier's check at closing.
This means there is 0% chance of the deal falling through. Not almost no risk, none at all. Failure to follow through with the deal would be breach of contract and the buyer is liable for damages, up-to-and-including, being forced to hand over the money for the house.
This means there is 0% chance of the deal falling through. Not almost no risk, none at all. Failure to follow through with the deal would be breach of contract and the buyer is liable for damages, up-to-and-including, being forced to hand over the money for the house.
Your impression is wrong. "Cash offer" means there is no 3rd party loan involved. Obviously, if someone's aunt is lending the buyer money, nobody is going to catch that. But "cash offer" absolutely does not mean "secured financing".
No, there's still a distinction. Secured financing can still fall through.
> Do you really think a Senior Software Engineer at Microsoft has $2.5M in cash sitting in his checking account to buy a home? No way.
It's not common, but definitely possible. E.g. if you were part of an acquihire. Or just got lucky somehow. I know a senior with a crypto portfolio worth more than that because he dropped a few thousand into bitcoin in the very early days.
It's not common, but definitely possible. E.g. if you were part of an acquihire. Or just got lucky somehow. I know a senior with a crypto portfolio worth more than that because he dropped a few thousand into bitcoin in the very early days.
Agreed with your analysis, and add previous homeowners who can sell quickly and are making the cash from the equity.
You don’t need a lot of there is only one decent house a week for an entire metro of 2-3m people somebody has a rich uncle, a heloc or some windfall earnings they can lean on to make it happen
but what about all-cash mortgage lending services and margin loans?
> What happens to the price of housing in that limit?
The price continues to reflect the supply and demand of the houses. You’re either lucky to inherit the land, or you earn enough to outbid others for it. It might even be impossible to outbid those who are bringing inherited wealth to the table.
It might become a transient community, where you work and save and then leave to settle somewhere else.
The price continues to reflect the supply and demand of the houses. You’re either lucky to inherit the land, or you earn enough to outbid others for it. It might even be impossible to outbid those who are bringing inherited wealth to the table.
It might become a transient community, where you work and save and then leave to settle somewhere else.
> suppose that no new houses are ever built
Why would you suppose that? I don't really see what you're getting at, that's a very unintuitive assumption; it shouldn't happen if market forces are allowed to run their course.
Why would you suppose that? I don't really see what you're getting at, that's a very unintuitive assumption; it shouldn't happen if market forces are allowed to run their course.
I was trying to draw attention to the fact that "I'm in the top 2% of earners but I can't afford a house" isn't surprising when legislative factors make it hard to add housing stock, when turnover is low, and when there's net population inflow.
My supposition was intentionally exaggerated to clarify what happens when you don't build enough housing: not to be pedantic, but understanding what happens in "extreme cases" is a common technique in math and physics to understand what happens in more common ones.
My supposition was intentionally exaggerated to clarify what happens when you don't build enough housing: not to be pedantic, but understanding what happens in "extreme cases" is a common technique in math and physics to understand what happens in more common ones.
New afordable housing isn't built. Everything is "luxury" so that developers can maximize profit. When someone tries to build affordable duplexes the NIMBYs say not in my town.
Even luxury units add supply to the middle and affordable parts of the housing stock. Today's luxury units are often bought and moved into by someone moving up from a mid-market place, the buyer of which is likely moving up from a 25 year old now affordable place.
(Alternately, if no luxury unit is built, many of those buyers will be forced to buy the best-of-the-rest if they want to move in, putting more pressure on the middle, which in turn puts pressure on the affordable.)
(Alternately, if no luxury unit is built, many of those buyers will be forced to buy the best-of-the-rest if they want to move in, putting more pressure on the middle, which in turn puts pressure on the affordable.)
I think many things are intentionally mislabeled as “luxury”. One can buy a simple refrigerator from Best Buy and claim that it’s stainless. I’ve seen listings brag about how the place has a Nest thermostat.
Isn’t luxury the only thing that’s even allowed to be built in most NIMBY cities?
Try building large “market-rate” housing in Palo Alto and see what happens (even within the confines of their already ridiculous zoning laws).
It's luxury almost everywhere.
The only place cheaper housing is being built are in developments on the far outer suburbs of flyover cities. But even those builders are having trouble with supplies and labor.
The only place cheaper housing is being built are in developments on the far outer suburbs of flyover cities. But even those builders are having trouble with supplies and labor.
One trick they use in my country is adding a pool to apartment buildings.
The pools are unused most of the time, but having a pool in the building increases the value estimated by property appraisals' checklists.
The pools are unused most of the time, but having a pool in the building increases the value estimated by property appraisals' checklists.
[deleted]
>> it shouldn't happen if market forces are allowed to run their course.
Apparently you haven't met my neighbors.
Apparently you haven't met my neighbors.
Likewise, why would you suppose that market forces are running their course?
Sounds like the logical thing to do is start desiring a different place with sounder housing/zoning policy. Voting with your feet is a thing when you can’t win at the ballot box.
I think this is another large flaw in our voting system, where things are too local (like zoning). You get a small community of rich people in Berkeley block any new housing, and you want to live there but have no influence on the zoning laws.
Japan's zoning is national and doesn't have this problem. Thus Tokyo is far more affordable than San Francisco, Mountain View, etc.
Japan's zoning is national and doesn't have this problem. Thus Tokyo is far more affordable than San Francisco, Mountain View, etc.
This has perplexed me as well. Here in the UK, the top 1% of incomes is £175K. Assuming the bank lets you borrow 5x, and you're married to someone with a more middling income, you can borrow ~£1M.
Yet there's a ring around London where it's hard to see any family homes that are under £1M.
I mean sure maybe they're sitting on equity or mom and dad are contributing, but by my estimation there are a huge number of people who have thrown absolutely everything into owning a home. We'll see how they fare if rates rise.
Yet there's a ring around London where it's hard to see any family homes that are under £1M.
I mean sure maybe they're sitting on equity or mom and dad are contributing, but by my estimation there are a huge number of people who have thrown absolutely everything into owning a home. We'll see how they fare if rates rise.
What's the top 3% of income of people who work in London? It's probably not "all of the UK" that matters as an income reference, but rather the people who are earning incomes and wanting to live in that area (plus all the people from around the world who would consider buying a house in/near London, but not 100 miles away from London).
Yeah true, couldn't find London specific stats. Fair guess is that the lions share of UK to earners are based in London.
> there are a huge number of people who have thrown absolutely everything into owning a home
I don't know what the situation is like in the UK, but here in Austria banks are really really eager to give people as much money as they'll take.
Getting a mortage that runs 30 years? Sure thing! Why not make it 35 years? 60% of your paycheck goes into mortage? Why not? You have less than 10% of the required amount in cash? Who cares!
The people who are buying homes right now are getting into massive debt, with variable interest rates. If interest rates rise, a lot of home owners won't be able to pay their mortages anymore, and they won't be able to sell because the only reason people can afford these crazy mortages is because the interest rates are so low. It looks like a bubble to me, and the only thing that's redeeming to me is that everyone has an interest in keeping the bubble going.
I don't know what the situation is like in the UK, but here in Austria banks are really really eager to give people as much money as they'll take.
Getting a mortage that runs 30 years? Sure thing! Why not make it 35 years? 60% of your paycheck goes into mortage? Why not? You have less than 10% of the required amount in cash? Who cares!
The people who are buying homes right now are getting into massive debt, with variable interest rates. If interest rates rise, a lot of home owners won't be able to pay their mortages anymore, and they won't be able to sell because the only reason people can afford these crazy mortages is because the interest rates are so low. It looks like a bubble to me, and the only thing that's redeeming to me is that everyone has an interest in keeping the bubble going.
London is one of the most popular places for people to whitewash their money via real estate.
It doesn't seem surprising.
It doesn't seem surprising.
I wouldn't underestimate the effect of equity - property prices in London have effectively doubled over the past decade, so there's a lot of people who bought a decade ago sitting on hundreds of £ks of unearned equity. The borrowing limits in the UK (4.5x salary) have quite a lot of headroom before interest rates make them completely unaffordable (assuming there's not a mass reduction in salary at the same time).
What's the top 1% for net worth though?
The problem is it is becoming impossible to be self made. Most people buying real estate in south east of UK and London have middling salaries but substantial help from their parents. The working class kid who made it to 70k/year? Tough luck.
People already made their money in London. Buying a home there means buying into an expensive mature area. Most people buying come from old money or they are over leveraged or foreign sources.
You should try to make some other city into something and buy into their future price increases.
You should try to make some other city into something and buy into their future price increases.
And that's why I live in Rugby.
Large 5 bed detached house in a quiet cul-de-sac, good sized garden, ample parking on the driveway for 4 cars if needed, and well under £1m.
Train to London Euston takes 49 minutes and whilst the season ticket isn't cheap (nearly £10k) you're still coming out ahead with the lower cost of living.
Large 5 bed detached house in a quiet cul-de-sac, good sized garden, ample parking on the driveway for 4 cars if needed, and well under £1m.
Train to London Euston takes 49 minutes and whilst the season ticket isn't cheap (nearly £10k) you're still coming out ahead with the lower cost of living.
> there's a ring around London where it's hard to see any family homes that are under £1M
If you mean the Stockbroker Belt [1], well, yes.
[1] https://en.wikipedia.org/wiki/Stockbroker_Belt
If you mean the Stockbroker Belt [1], well, yes.
[1] https://en.wikipedia.org/wiki/Stockbroker_Belt
Hence the absurd govt-backed "buy-and-rent-to-buy" schemes that the UK has seen showing up over the last decade.
> We'll see how they fare if rates rise.
They'll be fine. If asset prices go down, rates will go down.
They'll be fine. If asset prices go down, rates will go down.
Honest to God, the founders of Airbnb should have been sent to prison.
That would have fixed much of this, it's point blank illegal to run a bed and breakfast out of your home. Now if you're my buddy, and you want to slide me $200 to crash at my house for a week that's fine, but if you add technology to it, it ends up destroying entire neighborhoods.
Ride-sharing is a bit different, since I'd argue the reduction in drunk driving deaths more than outweigh any negative side effects. It's amazingly easy to just call an Uber when you've had one too many. Countless lives have been saved already.
That would have fixed much of this, it's point blank illegal to run a bed and breakfast out of your home. Now if you're my buddy, and you want to slide me $200 to crash at my house for a week that's fine, but if you add technology to it, it ends up destroying entire neighborhoods.
Ride-sharing is a bit different, since I'd argue the reduction in drunk driving deaths more than outweigh any negative side effects. It's amazingly easy to just call an Uber when you've had one too many. Countless lives have been saved already.
> Honest to God, the founders of Airbnb should have been sent to prison.
This isn't how the legal system works.
If something is illegal, and you do it, it doesn't mean you always go to jail.
If something is illegal, and you finance other people doing it, it almost always mean you get a fine.
This isn't how the legal system works.
If something is illegal, and you do it, it doesn't mean you always go to jail.
If something is illegal, and you finance other people doing it, it almost always mean you get a fine.
> That would have fixed much of this, it's point blank illegal to run a bed and breakfast out of your home.
Why? It's your home, you can do anything in it. Why should you need a license to rent out your own home for a few days? Does it physically destroy neighborhoods or just your perception of it? If so, why should anyone care?
Why? It's your home, you can do anything in it. Why should you need a license to rent out your own home for a few days? Does it physically destroy neighborhoods or just your perception of it? If so, why should anyone care?
I think it is fine to argue that the current rules about what you can and cannot do within a particular zoning classification are wrong. In the sense that so much US zoning eliminates retail from residential, I would make that argument myself.
However, there are actual rules, the rules exist for a mixture of good and bad reasons, and it has never been true to say "It's your home, you can do anything in it.".
However, there are actual rules, the rules exist for a mixture of good and bad reasons, and it has never been true to say "It's your home, you can do anything in it.".
>Why? It's your home, you can do anything in it.
No, you aren't free to do "anything" in your home, including provide commercial services if not properly zoned and insured.
>Why should you need a license to rent out your own home for a few days?
This is not what's happening in many places. AirBnB went from "a place to crash" to an amateur hotelier platform.
No, you aren't free to do "anything" in your home, including provide commercial services if not properly zoned and insured.
>Why should you need a license to rent out your own home for a few days?
This is not what's happening in many places. AirBnB went from "a place to crash" to an amateur hotelier platform.
It's because whatever you do in your house is affecting everyone around it. So you making little extra money is taking value away from everyone else in your neighborhood.
The fact that you don't know anymore everyone in your block is hugely affecting safety and let alone extremes like your airbnb guests getting loud, throwing trash around, making parties etc.
In my area we have a legal agreement between all apartment owners that things like this are not accepted.
In my area we have a legal agreement between all apartment owners that things like this are not accepted.
Might as well eschew all zoning laws and turn your home into a junkyard or a industrial manufacturing facility by the same rationale: it is your home, after all.
Some people are consistent and are 100% okay with that as well.
Let's take this to the extreme, do you think you have a right to set up a commercial kitchen in your home, and set up patio furniture for random people to show up and order take out?
Don't you see an issue of every single person decides to do this in your neighborhood, traffic being the first thing.
The other issue too, is most people are renting out apartments, and then Airbnbing them. Like, at that point it's not your property, you're just granted temporary permission to use it. Likewise, most condo boards don't want you to use your property as an Airbnb.
Don't you see an issue of every single person decides to do this in your neighborhood, traffic being the first thing.
The other issue too, is most people are renting out apartments, and then Airbnbing them. Like, at that point it's not your property, you're just granted temporary permission to use it. Likewise, most condo boards don't want you to use your property as an Airbnb.
> Let's take this to the extreme, do you think you have a right to set up a commercial kitchen in your home, and set up patio furniture for random people to show up and order take out?
You can do this in Japan. Why shouldn't you be able to do this?
You can do this in Japan. Why shouldn't you be able to do this?
Japan doesn't have nearly as many cars per capita.
Regards you can't just ignore zoning laws because you feel like it.
Regards you can't just ignore zoning laws because you feel like it.
We could change the zoning laws so that it isn't illegal, though.
One of the ways you can reduce cars is by zoning to allow greater density, which enables forms of transit which are more space-efficient than cars are. It's a chicken and egg problem, but people will be crying out for better cycle ways and trains and buses if housing becomes more dense.
Also, having commercial spread throughout residential areas reduces the amount of travel between areas, because you don't need to go far to get to the amenities you want.
One of the ways you can reduce cars is by zoning to allow greater density, which enables forms of transit which are more space-efficient than cars are. It's a chicken and egg problem, but people will be crying out for better cycle ways and trains and buses if housing becomes more dense.
Also, having commercial spread throughout residential areas reduces the amount of travel between areas, because you don't need to go far to get to the amenities you want.
It's a bit strange to give Japan's lower cars per capita as a rationale for this, when surely the reason there are fewer cars per capita is because people have access to their daily necessities without a car because of more permissive zoning.
I'm perplexed to see that you are afraid of random people coming into your neighborhood. In fact I'm more perplexing about the zoning laws in America.
What you mentioned is a very common thing in multiple countries - No one is afraid of random people coming into the neighborhood. (Neither do they all have guns to protect themselves).
What you mentioned is a very common thing in multiple countries - No one is afraid of random people coming into the neighborhood. (Neither do they all have guns to protect themselves).
> set up a commercial kitchen in your home, and set up patio furniture for random people to show up and order take out?
This already happens in my country. It's a great way to support entrepreneurship and small businesses. I can't imagine how authoritarian the country must be to criminalize this. Are you living in North Korea or Cuba by any chance
This already happens in my country. It's a great way to support entrepreneurship and small businesses. I can't imagine how authoritarian the country must be to criminalize this. Are you living in North Korea or Cuba by any chance
This seems to be pretty common where I'm living in Mexico and is also pretty great. But also everywhere is walkable and no one is driving their canyonero to go and pick up tacos.
> Why? It's your home, you can do anything in it
You kinda can, but you don't get the type of legal protections a hotel or B&B that plays by the rules has.
Also like it's your home, but it's not your roads, cops, firemen, sewage system, power grid, courts... you wanna use all those services you have to play by their rules and there's a lot of rules and they don't exactly make a lot of sense.
You kinda can, but you don't get the type of legal protections a hotel or B&B that plays by the rules has.
Also like it's your home, but it's not your roads, cops, firemen, sewage system, power grid, courts... you wanna use all those services you have to play by their rules and there's a lot of rules and they don't exactly make a lot of sense.
[deleted]
How would you feel if I paid your next door neighbor to store radioactive waste in their yard? What if I paid them to demolish their home and put up a giant flashing billboard facing your bedroom window?
Do you think it would impact the value of you property? Do you think that would be fair?
People care because it is a matter of justice, which is one of the fundamental precepts of society.
Do you think it would impact the value of you property? Do you think that would be fair?
People care because it is a matter of justice, which is one of the fundamental precepts of society.
So what if a NIMBY pays to stop rezoning to high density in their suburb? Isn't it the same then?
If you account for societal benefits and not just the owner's personal gain then I don't think they are the same.
It's really just matter whether you view regulations as legitimate tool to curve/change behaviors that you think are detrimental to society.
It's really just matter whether you view regulations as legitimate tool to curve/change behaviors that you think are detrimental to society.
Legislating morality has been an utter failure. And here you advocating for legislating not morality but your own personal feelings and experiences. I take an issue with the entitlement that other people should change their behavior to protect your housing prices
I disagree it has been an utter failure, first exmaple that comes to mind is lack of affordable health care in US compared to most western countries, and other less "controversial" examples: child labor and minimum age for marriage.
And no I'm not advocating for anything based on my own personal feelings, but if something is deemed as harmful to society, yes perhaps we need to pass legislation to minimize it.
But also all laws in some way or other are based on morals - who decided that stealing is wrong? Why isn't it just fair use of "free market" of force?
And no I'm not advocating for anything based on my own personal feelings, but if something is deemed as harmful to society, yes perhaps we need to pass legislation to minimize it.
But also all laws in some way or other are based on morals - who decided that stealing is wrong? Why isn't it just fair use of "free market" of force?
Did the law actually fix those issues, or did the electorate's views on those things change, and then the law was changed to reflect that? In a democracy, laws only get passed when you have a majority of lawmakers on board, which is generally a good proxy for the electorate's views on issues. The causation is not at all clear to me.
Last summer in the midst of the pandemic, someone AirBnB'd an empty house a few streets over from us to throw a giant party. I know this because I could hear the music as though I were in a night club from my back yard. There were also cats with out of state plates parked all over the place. Our town is generally fairly lax on laws like noise restrictions, maybe because it's never been an issue and avoids involving the police in squabbles amongst neighbors, so apparently it was legal. Anyway, it was of no benefit to anyone who actually lived in town and a major PITA for everyone living in the surrounding blocks, so I can easily see how residents might choose to outlaw such rentals.
Because it's the law. Whether or not you agree with the law is irrelevant.
The law only applies to poor people. Rich people can and do ignore laws all the time. When corporations get involved they can just bully around all the local municipalities with size
I think most of the answers to my question repeat this assertion, without really answering the "why?" part.
If you are a legalist, a loophole in the law is the law as well. So yes, whether or not you agree with the loophole is irrelevant
If you are a legalist, a loophole in the law is the law as well. So yes, whether or not you agree with the loophole is irrelevant
>Does it physically destroy neighborhoods or just your perception of it?
Yes, it does. People buy homes for more than financial reasons. Living in a community of homeowners with neighbors you've known for years is a completely different experience than living in a revolving door community of renters. There's been a whole decade of news reports about Airbnb ruining neighborhoods and condo buildings, to the point that it's not even worth citing a particular incident.
Yes, it does. People buy homes for more than financial reasons. Living in a community of homeowners with neighbors you've known for years is a completely different experience than living in a revolving door community of renters. There's been a whole decade of news reports about Airbnb ruining neighborhoods and condo buildings, to the point that it's not even worth citing a particular incident.
So we should criminalize perfectly harmless things because it ruins your experience? It doesn't seem logical
It can't be perfectly harmless if it is ruining someone's experience. Its kind of like urinating in public...maybe it doesn't hurt anyone but it sure does ruin a lot of people's experience...and thus it is criminalized.
If there were more public toilets, there'd be fewer public urination. The law is there to catch the few that do it.
But if there's tonnes of public urination because there are no public toilets, then even tho the law says no, people are still going to do it. There's a demand to pee that cannot be stopped.
The idea that airbnb should be outlawed is irrelevant - the fact is that there's demand for it. This means there's a lack of short term rentals in the area. The demand must be satisfied, and so the price of it grows.
But if there's tonnes of public urination because there are no public toilets, then even tho the law says no, people are still going to do it. There's a demand to pee that cannot be stopped.
The idea that airbnb should be outlawed is irrelevant - the fact is that there's demand for it. This means there's a lack of short term rentals in the area. The demand must be satisfied, and so the price of it grows.
Isn't this like saying Walt Disney World shouldn't be able to sell tickets to out-of-staters? State residents who know each other could have a higher chance of running into each other at the park if it wasnt full of out-of-staters, and that could build valuable community.
> If so, why should anyone care?
It's not about 'why' care, it's about the fact that they already do care enough to have caused regulation.
It's not about 'why' care, it's about the fact that they already do care enough to have caused regulation.
I think people would be mostly fine with it if it were only "for a few days", but it's not.
> The scary thing is that it's easy to see how something how like this could drive a market boom and bust cycle.
It would take a lot more than a billion dollars to make a dent in the national housing market. Total housing sales in Feb22 amounted to $161 billion.
That's enough to make a temporary splash in a rural market, but Zillow would need to spend 100x more than what they lost to even move the needle. And spend 10000x as much to really drive a boom/bust cycle nationally.
It would take a lot more than a billion dollars to make a dent in the national housing market. Total housing sales in Feb22 amounted to $161 billion.
That's enough to make a temporary splash in a rural market, but Zillow would need to spend 100x more than what they lost to even move the needle. And spend 10000x as much to really drive a boom/bust cycle nationally.
Zillow lost almost $1 billion. The total transaction amount was much higher.
But in a way if the rental prices were to stay reasonable (say it was a non profit running the schtick) isn't a great way for as many people as possible to share a limited ressource? Maybe property is like golden handcuffs, nice but locks you down...again it's more a western thing as we in the east tend to buy cash down... Though I would like to see some company buying out the inner city ground floor space of some of the banks or insurances that ghostify my town and inject some fun rental people instead
> But in a way if the rental prices were to stay reasonable
There's zero evidence to believe that this will be the case. I will never trust large multi-family property management companies driven by software to consider keeping rental rates reasonable. That's antithetical to our capitalist system, profit is the one and only goal.
> Maybe property is like golden handcuffs, nice but locks you down...
In terms of utilizing the space, sure. However, buying property has been the primary method of wealth accumulation for most of the country going back the last several decades. Property ownership is also one of the best ways to protect yourself against inflation, which we're all getting serious exposure to. And with the speed at which houses are moving in this market (listings stay up 2-3 days in my area for the most part), property owners aren't very locked down either.
There's zero evidence to believe that this will be the case. I will never trust large multi-family property management companies driven by software to consider keeping rental rates reasonable. That's antithetical to our capitalist system, profit is the one and only goal.
> Maybe property is like golden handcuffs, nice but locks you down...
In terms of utilizing the space, sure. However, buying property has been the primary method of wealth accumulation for most of the country going back the last several decades. Property ownership is also one of the best ways to protect yourself against inflation, which we're all getting serious exposure to. And with the speed at which houses are moving in this market (listings stay up 2-3 days in my area for the most part), property owners aren't very locked down either.
"There's zero evidence to believe that this will be the case"
Well I guess it depends on the regulatory framework, imo it's the constructor lobbies pushing such a narrative... in more developed societies where cheap labour isn't so available rental has become the norm...of course one could also argue that high real estate prices mean the rich and unscrupulous can hide and flip huge amounts of ill earnt gains... but it doesn't have to be so...
Are there housing cooperatives in the US?https://en.m.wikipedia.org/wiki/Housing_cooperative
The problem here is that they were buying the homes at prices above what they would actually sell for to real buyers and Zillow ended up racking up losses in that way. In your scenario in which two iBuyers outbid each other -- fine, but wouldn't the same situation as Zillow's happen? They'd just end up with overpaid inventory.
Whether or not the market works itself out later, it puts everything into a weird state while the bidding war is going on. If iBuyer1 and iBuyer2 together buy up the inventory of a zip code for 120% of asking, then what are people who are willing to go to 105% to do? Maybe it just resets the market to whatever the drunken algorithm decided it to be.
Buy in one of the surrounding zip codes? Wait out the idiots?
In a housing bubble, hopping a zip code over isn't always possible.
One can always wait out the market. You could tell me to simply wait for the next housing crash to buy up property, but until that happens, it's not an option.
The whole observation the other person made
> automation creating adverse market incentives for smaller market participants
matters not just in the long-term state but while the adverse conditions exist.
One can always wait out the market. You could tell me to simply wait for the next housing crash to buy up property, but until that happens, it's not an option.
The whole observation the other person made
> automation creating adverse market incentives for smaller market participants
matters not just in the long-term state but while the adverse conditions exist.
> who are willing to go to 105% to do?
i too, want to only pay less money than the highest bidder for the mona lisa.
There's no such thing as 105%. By definition, iBuyer paying "120%" is the true 100%. If they overpay, they lose when there's no buyer after them to sell to, and their debt will not be serviceable. At that time, the "105%" buyer could buy at a lower price.
i too, want to only pay less money than the highest bidder for the mona lisa.
There's no such thing as 105%. By definition, iBuyer paying "120%" is the true 100%. If they overpay, they lose when there's no buyer after them to sell to, and their debt will not be serviceable. At that time, the "105%" buyer could buy at a lower price.
> It's honestly quite scary how I'm in the top 2% of income earners in my generation and yet I could barely afford to buy a small place in a semi-desirable area.
Top 5% puts you at over $300K/year. Top 2% is much higher.
Even a top 5% person can easily afford a house in any semi-desirable city. LA, Bay Area are not semi-desirable. They are highly desirable.
Top 5% puts you at over $300K/year. Top 2% is much higher.
Even a top 5% person can easily afford a house in any semi-desirable city. LA, Bay Area are not semi-desirable. They are highly desirable.
They did say in their generation which could basically mean anything at that point
> Tangentially related, I talked to a friend who works on geospatial data for one of the big vacation rental companies, and he was remarking how many homes in many desirable areas are now rentals. It's not that uncommon to see nearly entire neighborhoods converted to short term rentals now in some areas where they're still legal. Hearing that really depressed me.
Adding to your data points: this is happening in some CA beach communities. Many beachfront homes in Huntington Beach and Newport Beach have been turned into AirBnBs that seem to cater to social media influencers desperate for instagram-able pics.
Some more anecdotal data: I know a couple of people who are professional AirBnB hosts and they're constantly in the market buying real estate to turn them into rentals. They buy cash in the cities I mentioned above, as well as San Diego, Las Vegas, Los Angeles, NYC, Brooklyn, Nashville, Austin, and others. This is a lucrative business, at least for the time being.
Adding to your data points: this is happening in some CA beach communities. Many beachfront homes in Huntington Beach and Newport Beach have been turned into AirBnBs that seem to cater to social media influencers desperate for instagram-able pics.
Some more anecdotal data: I know a couple of people who are professional AirBnB hosts and they're constantly in the market buying real estate to turn them into rentals. They buy cash in the cities I mentioned above, as well as San Diego, Las Vegas, Los Angeles, NYC, Brooklyn, Nashville, Austin, and others. This is a lucrative business, at least for the time being.
“ The scary thing is that it's easy to see how something how like this could drive a market boom and bust cycle.”
The opposite really. Speculators do their best to buy low which pushes the price back up toward the mean in the aggregate, and sell high, which pushes it back down toward the mean.
Speculation is a stabilizing force overall.
The boom and bust cycle in real estate is very real, but driven by other things.
The opposite really. Speculators do their best to buy low which pushes the price back up toward the mean in the aggregate, and sell high, which pushes it back down toward the mean.
Speculation is a stabilizing force overall.
The boom and bust cycle in real estate is very real, but driven by other things.
> Speculation is a stabilizing force overall.
a sophisticated speculator is.
an unsophisticated speculator is actually destabilizing, because they might incorrectly speculate capital (that they cannot really afford), causing a loss in market efficiency in allocating capital to where it's needed.
The 2008 GFC is in part caused by unsophisticated speculators (home buyers) to speculate on property. Initially they saw some good profits, which lead to even more unsophisticated people to try get in on the game (and the banks happily obliged).
a sophisticated speculator is.
an unsophisticated speculator is actually destabilizing, because they might incorrectly speculate capital (that they cannot really afford), causing a loss in market efficiency in allocating capital to where it's needed.
The 2008 GFC is in part caused by unsophisticated speculators (home buyers) to speculate on property. Initially they saw some good profits, which lead to even more unsophisticated people to try get in on the game (and the banks happily obliged).
You made it halfway there. Keep going.
What happens when that unsophisticatded speculator purchases a bunch of properties at prices above what they're worth? If he can't make the payments on them, eventually he'll be forced to sell, or perhaps even declare bankruptcy.
Those properties will eventually be sold at the market equilibrium price, possibly even lower than that because he will likely need to sell in a hurry to meet his obligations, or because a bank forclosed on him and wants the money now and will also accept a below market price to liquidate them quickly.
Which is exactly what happened to Zillow. They realized they paid too much and couldn't make money with them and are now unwinding their position at a loss.
The 2008 crash was caused by fraud on the part of consumers on their loan applications. It was not caused by speculation. Income was not properly documented on a lot of those loans. Many lenders actually did verify income and required a significant down payment from buyers, and weathered the crisis well.
The fraud coupled with low down payment requirements turned these loans into very risky assets, but the banks securitized them and sold them to third parties, who percieved them as nearly risk free assets. The real scandal was that those assets were rated as very low risk by Moody's and S&P but turned out to be basically junk quality.
And then lots of investors used leverage to buy them and, lo and behold, they were not risk free assets, and the use of leverage when investing in those securities destroyed a lot of investors and institutions when those securities stopped performing. The fact that the ratings agencies stamped the assets as very low risk is the real scandal: banks thought they were almost as good as treasury bonds and they clearly were not.
After the crash, a lot of those securities got picked up at basment bargain prices, and most of them actually did peform fairly well, with 90%+ of individual loans performing. I invested in a company that picked up a lot of those securities at fire sale prices after the crash and did pretty well.
Which gets back to my original point: speculation is only a destabilizing force if the speculators are not well capitalized against losses, and things move against them.
The 2008 crash would have turned out differently if the purchasers of those loans used less leverage or were better capitalized, or did their own due dilligence when investing.
What happens when that unsophisticatded speculator purchases a bunch of properties at prices above what they're worth? If he can't make the payments on them, eventually he'll be forced to sell, or perhaps even declare bankruptcy.
Those properties will eventually be sold at the market equilibrium price, possibly even lower than that because he will likely need to sell in a hurry to meet his obligations, or because a bank forclosed on him and wants the money now and will also accept a below market price to liquidate them quickly.
Which is exactly what happened to Zillow. They realized they paid too much and couldn't make money with them and are now unwinding their position at a loss.
The 2008 crash was caused by fraud on the part of consumers on their loan applications. It was not caused by speculation. Income was not properly documented on a lot of those loans. Many lenders actually did verify income and required a significant down payment from buyers, and weathered the crisis well.
The fraud coupled with low down payment requirements turned these loans into very risky assets, but the banks securitized them and sold them to third parties, who percieved them as nearly risk free assets. The real scandal was that those assets were rated as very low risk by Moody's and S&P but turned out to be basically junk quality.
And then lots of investors used leverage to buy them and, lo and behold, they were not risk free assets, and the use of leverage when investing in those securities destroyed a lot of investors and institutions when those securities stopped performing. The fact that the ratings agencies stamped the assets as very low risk is the real scandal: banks thought they were almost as good as treasury bonds and they clearly were not.
After the crash, a lot of those securities got picked up at basment bargain prices, and most of them actually did peform fairly well, with 90%+ of individual loans performing. I invested in a company that picked up a lot of those securities at fire sale prices after the crash and did pretty well.
Which gets back to my original point: speculation is only a destabilizing force if the speculators are not well capitalized against losses, and things move against them.
The 2008 crash would have turned out differently if the purchasers of those loans used less leverage or were better capitalized, or did their own due dilligence when investing.
> I'm imagining a scenario where two iBuyer companies try to outbid each other algorithmically, driving the prices further and further out of reach of people who are looking for a primary home.
That’s not how market making works. Market makers don’t consume other peoples’ orders, which is required to push up the asked price or down the bid price.
Market making is effectively (1) observing that the market is currently willing to buy some asset at the price A and sell it at the price B (where A < B) and then (2) simultaneously submitting a buy order at price A1 (where A1 > A) and a sell order at price B1 (where B1 < B). Thus the market maker reduces the difference between the buy price and sell price (the “spread”).
That’s not how market making works. Market makers don’t consume other peoples’ orders, which is required to push up the asked price or down the bid price.
Market making is effectively (1) observing that the market is currently willing to buy some asset at the price A and sell it at the price B (where A < B) and then (2) simultaneously submitting a buy order at price A1 (where A1 > A) and a sell order at price B1 (where B1 < B). Thus the market maker reduces the difference between the buy price and sell price (the “spread”).
The problem is not about homes being overpriced.
The truth is that there is much much much more money in the middle class globally (almost 3x that of 2000) and on top of that the normal inflation, and freezing of supply.
As long as “desirable location” stay the same, and the amount of people affording it growing so significantly. The expectation of being able to afford one is a strange one.
See https://www.nasdaq.com/articles/world-reimagined%3A-the-rise...
The truth is that there is much much much more money in the middle class globally (almost 3x that of 2000) and on top of that the normal inflation, and freezing of supply.
As long as “desirable location” stay the same, and the amount of people affording it growing so significantly. The expectation of being able to afford one is a strange one.
See https://www.nasdaq.com/articles/world-reimagined%3A-the-rise...
A bunch of Chinese and Indian people increasing their standard of living to middle class doesn't suddenly mean American middle class people (whose asset percentage has been shrinking) can afford US houses.
Global middle class is meaningless in this discussion
Global middle class is meaningless in this discussion
> rther and further out of reach of people who are looking for a primary home.
This happens to all assets all the time. When it rains, umbrellas go up in price. Companies competing with this and failing is only a transfer of wealth between VC's and homeowners. You don't need to ascribe a moral sentiment to that transfer, its just what it is.
If the prices then bust afterward, then homeowners that sold won, the ones that stayed didnt take advantage of the opportunity, and home buyers lost at the high and will win at the bottom. Like in any other price fluctuation!
This happens to all assets all the time. When it rains, umbrellas go up in price. Companies competing with this and failing is only a transfer of wealth between VC's and homeowners. You don't need to ascribe a moral sentiment to that transfer, its just what it is.
If the prices then bust afterward, then homeowners that sold won, the ones that stayed didnt take advantage of the opportunity, and home buyers lost at the high and will win at the bottom. Like in any other price fluctuation!
Top 2% puts you fairly deep into the six figures, no? I've not even surpassed top 10% and haven't had too much issue getting into 2 homes in the last 3 years. Both in areas I would consider "semi-desirable", which leaves me wondering what exactly do other folks consider "semi-desirable"? Unless of course you mean buying a home outright, in which case this makes total sense
top % income earners aren't the top wealth owners. One should examine the rate of wealth growth (not just via income, but via other forms of gains, such as capital gains and business income). I bet you will find that the top 2% income earners are barely even the top 50% wealth gainers that year.
> The scary thing is that it's easy to see how something how like this could drive a market boom and bust cycle.
iBuyers don't buy from each other or hold the house for long. As soon as they sell then everyone sees what a market price looks like without them.
> automation creating adverse market incentives
You seem interested in how markets drive outcomes so I'd suggest looking into the effects of residential zoning and other barriers to construction. The US has spent the last 50 years coming up with creative excuses to prohibit new housing and it gets more expensive every year. Probably related!
Not the best example, but one I have handy: https://twitter.com/DurhamFella/status/1441808710066577410?s...
iBuyers don't buy from each other or hold the house for long. As soon as they sell then everyone sees what a market price looks like without them.
> automation creating adverse market incentives
You seem interested in how markets drive outcomes so I'd suggest looking into the effects of residential zoning and other barriers to construction. The US has spent the last 50 years coming up with creative excuses to prohibit new housing and it gets more expensive every year. Probably related!
Not the best example, but one I have handy: https://twitter.com/DurhamFella/status/1441808710066577410?s...
You honestly think 2 iBuyer companies would have the liquidity to move the entire housing market? I don’t think you understand the size of the US housing market.
If you’re in the top 2% of earners and can’t buy a home, you either live in a ridiculously expensive city (outlier) or have a money management issue.
If you’re in the top 2% of earners and can’t buy a home, you either live in a ridiculously expensive city (outlier) or have a money management issue.
iBuyers often move into a specific area. A huge percentage of Zillow's purchases was in one city in Arizona (or New Mexico, I forgot where). And two iBuyers in a city can totally move the market.
Yep. You should see the situation in beautiful yet remote places like the Isle of Skye in Scotland or the Outer Hebrides. If you have some land, it's a no brainer to build a holiday rental. A pre-fab will cost you maybe 120k (after the land) and it's k/week or more during peak season to rent it out.
Of course, it means prices are going insane. A complete wreck of a house we were interested in buying and turning into an actual home which I thought would be worth max 200k went for 450, cash, from a buyer who never even saw it.
They'll tear it down, stick a new house on it, and make their investment back in 5 years.
Meanwhile, all the locals kids, go away and don't come back. What is there for them there anymore? Not a lot.
Of course, it means prices are going insane. A complete wreck of a house we were interested in buying and turning into an actual home which I thought would be worth max 200k went for 450, cash, from a buyer who never even saw it.
They'll tear it down, stick a new house on it, and make their investment back in 5 years.
Meanwhile, all the locals kids, go away and don't come back. What is there for them there anymore? Not a lot.
We need a land value tax or at the very least higher property taxes. That would disincentivize people from speculating into housing. It's no surprise that cities with the highest home prices have some of the lowest effective property tax rates.
"We need a land value tax or at the very least higher property taxes. That would disincentivize people from speculating into housing."
That's like saying we need a bilge pump for our basement to fix that leaky pipe. You've properly diagnosed the problem, but your solution is idiotic.
Why are people piling into hosuing right now? Answer that question and the solution becomes exceedingly obvious. It's the same reason Bill Gates and his ultra-rich friends are buying up farmland in the Midwest and the same reason people are buying into the stock market so heavily. They're trying to avoid inflation.
Inflation was 8% year over year last month. The last thing any investor wants to hold right now is dollars. If inflation stays steady for the next 12 months, you are guaranteed a value loss of 8% if you just leave it in the bank. Almost anything, baseball cards, used cars, copper pipes, etc. is a better investment than that.
And on top of that, people are realizing they can borrow $400k from the bank at 4% when inflation is raging at 8%. It's literally free money, with leverage to boot. There is no easier and faster way to use leverage to short the dollar right now than investing in real estate. It's no wonder housing prices are going nuts. Everyone and their dog is trying to avoid inflation, and the rush to buy housing exacerbates the price increases even further.
The solution to the issue is one no one will ever get behind: raise interest rates such that the real rate of inflation (nominal interest rate minus the inflation rate) is positive. That means that if inflation is 8%, interest rates need to be at least 8%.
And that's why the problem will persist for many years into the future: there is no way anyone at any level of our society will tolerate 8%+ interest rates. The housing market would collapse in such a way that 2008 would look like child's play. The bond markets would get destroyed. The stock market will absolutely crater 50%, easily. The interest due on the federal debt would go to astronomical levels, resulting in ridiculous tax increases to pay for it.
That's the solution. Or, the government can just let inflation run rampant for a few years, and default on the debt without having to not pay anyone, and without having to have a big old nasty recession. We'll just have the 1970's style stagflation for the next decade.
For those reasons inflation is here to stay. If you can find a better way to short the dollar over the next 10 years and use leverage to do it, by god, that's the best investment you can make right now.
But the saddest part of this whole ordeal is that at some point in the future, the only way to solve this inflation crisis is to do exactly what I described: make interest rates positive again. That is the lesson of the 1970's.
They tried to raise rates several times, but they never raised them enough such that the real interest rate was positive, and as you'd expect, any time the Fed got close to getting there, the economy teetered on the brink of a recession, and there was an election coming up, and well, they chickened out and lowered rates again.
Regan's election was very much a result of the economic devestation of the 1970's. Another moral of the story is that if you don't want fiscally conservative reupblican's like Regan to get elected, the guy in the White House had better deal with this shit soon.
But my money is on Desantis in 2028 after we see year over year inflation rates of 15%+ for most of the 2020's. You heard it here first.
That's like saying we need a bilge pump for our basement to fix that leaky pipe. You've properly diagnosed the problem, but your solution is idiotic.
Why are people piling into hosuing right now? Answer that question and the solution becomes exceedingly obvious. It's the same reason Bill Gates and his ultra-rich friends are buying up farmland in the Midwest and the same reason people are buying into the stock market so heavily. They're trying to avoid inflation.
Inflation was 8% year over year last month. The last thing any investor wants to hold right now is dollars. If inflation stays steady for the next 12 months, you are guaranteed a value loss of 8% if you just leave it in the bank. Almost anything, baseball cards, used cars, copper pipes, etc. is a better investment than that.
And on top of that, people are realizing they can borrow $400k from the bank at 4% when inflation is raging at 8%. It's literally free money, with leverage to boot. There is no easier and faster way to use leverage to short the dollar right now than investing in real estate. It's no wonder housing prices are going nuts. Everyone and their dog is trying to avoid inflation, and the rush to buy housing exacerbates the price increases even further.
The solution to the issue is one no one will ever get behind: raise interest rates such that the real rate of inflation (nominal interest rate minus the inflation rate) is positive. That means that if inflation is 8%, interest rates need to be at least 8%.
And that's why the problem will persist for many years into the future: there is no way anyone at any level of our society will tolerate 8%+ interest rates. The housing market would collapse in such a way that 2008 would look like child's play. The bond markets would get destroyed. The stock market will absolutely crater 50%, easily. The interest due on the federal debt would go to astronomical levels, resulting in ridiculous tax increases to pay for it.
That's the solution. Or, the government can just let inflation run rampant for a few years, and default on the debt without having to not pay anyone, and without having to have a big old nasty recession. We'll just have the 1970's style stagflation for the next decade.
For those reasons inflation is here to stay. If you can find a better way to short the dollar over the next 10 years and use leverage to do it, by god, that's the best investment you can make right now.
But the saddest part of this whole ordeal is that at some point in the future, the only way to solve this inflation crisis is to do exactly what I described: make interest rates positive again. That is the lesson of the 1970's.
They tried to raise rates several times, but they never raised them enough such that the real interest rate was positive, and as you'd expect, any time the Fed got close to getting there, the economy teetered on the brink of a recession, and there was an election coming up, and well, they chickened out and lowered rates again.
Regan's election was very much a result of the economic devestation of the 1970's. Another moral of the story is that if you don't want fiscally conservative reupblican's like Regan to get elected, the guy in the White House had better deal with this shit soon.
But my money is on Desantis in 2028 after we see year over year inflation rates of 15%+ for most of the 2020's. You heard it here first.
> I'm imagining a scenario where two iBuyer companies try to outbid each other algorithmically, driving the prices further and further out of reach of people who are looking for a primary home.
This is just my personal anecdote but... I'm pretty sure when I was rushing to show up to "new listings" on the weekends and waiting in line for 10-40 families to get a walkthrough "open house" wise, I feel like the sellers were going to pick a family that showed up over a Zillow website. What % of closed houses were being bought by families instead of "iBuyers" as you said it?
This is just my personal anecdote but... I'm pretty sure when I was rushing to show up to "new listings" on the weekends and waiting in line for 10-40 families to get a walkthrough "open house" wise, I feel like the sellers were going to pick a family that showed up over a Zillow website. What % of closed houses were being bought by families instead of "iBuyers" as you said it?
I think people should expand what "desirable" means to them. There's a ton of suitable houses all over the country. Everyone seems to need to own a SFH in a trendy part of a trendy city.
I don't understand this comment, maybe you can expand. It makes sense to me that what is desirable for a primary residence would significantly overlap with what is desirable for rental, comfortable space, walkable to a city center, etc. Is your point that people should be more accommodating to the rental market? IMHO I think all cities should strongly regulate what can be a rental and add tax to homes when it is not occupied, prioritizing affordable permanent residence.
This isn't just a "trendy city" problem, it's wide spread across the country.
I'm arguing that people should lower their standards. It should be easy to understand that not everyone can afford own property walking distance to the city center.
I fully agree with you on prioritizing primary residence.
I fully agree with you on prioritizing primary residence.
Everyone can with smaller cities. Living in a megacity and expecting it is the problem.
How big of a city are you talking about? I live in a city of just over 50k and house prices have been an issue for years and keeps getting worse. It's the same for every "city" around this size that I've looked into. I've seen a town with <20k where house prices have more than doubled in the past 2 years. It's a bold statement to say everyone can afford to own a desirable home in even a smaller city.
“All over the country” doesn’t have good jobs, good schools, access to entertainment, etc.
But, I agree on the SFH part. The expectation that a 3000sqft house on 1/4 acre is the norm is completely unsustainable. Yet that seems to be what many people want. Even in high COL areas where demand and cost should be driving density.
But, I agree on the SFH part. The expectation that a 3000sqft house on 1/4 acre is the norm is completely unsustainable. Yet that seems to be what many people want. Even in high COL areas where demand and cost should be driving density.
There are absolutely good jobs in every city in America. Entertainment can mean anything...and frankly people should be able to find fun things to do on their own without needing bars, nightclubs, concert venues, etc.
I concede that good schools are a major barrier. I'm young and won't be having children anytime soon so I don't think about it much.
Where I live, the public schools are pretty rough. It's cheaper to stay here and send your kids to private school rather than move to a family dominated neighborhood with excellent public schools.
I concede that good schools are a major barrier. I'm young and won't be having children anytime soon so I don't think about it much.
Where I live, the public schools are pretty rough. It's cheaper to stay here and send your kids to private school rather than move to a family dominated neighborhood with excellent public schools.
Every city, sure, but cities are expensive. Even cities that used to be affordable, like Portland and Austin. But between the cities? Not much. Some small towns might work if you’re the town lawyer or MD, but a town can only support so many of those. And if you’re an engineer or banker? Not much employment.
Portland and Austin are the very essence of "trendy city" those places are very expensive. I'm not arguing that people move to small towns. There are hundreds of cities in the US with 100,000+ populations (not even including the metro areas). The idea that each of these cities is unaffordable and without a job market is just wrong.
Everyone wants to live in NYC, SF, DC, Miami...etc because the other areas aren't cool enough for them.
Everyone wants to live in NYC, SF, DC, Miami...etc because the other areas aren't cool enough for them.
Not for long. Salt Lake City was one such city just 3-5 years ago. Now everything has doubled and it's almost as expensive as the trendier cities, without the higher-paying jobs.
Well, you should just lower your standards when it comes to picking a job, too. Maybe you could be a grocery clerk or a gas station attendant?
Of course that's what people want. Because it beats the pants off a 1100 ft^2 condo or apartment with no private yard and shared walls/floors/ceilings in almost every regard of daily, lived experience.
I totally get why people want that; what I don't get is why they can't understand that so many other people also want it that most everyone will have to compromise on some aspect.
I totally get why people want that; what I don't get is why they can't understand that so many other people also want it that most everyone will have to compromise on some aspect.
Not me. I just want mixed residential housing. Yeah, it’s not happening because America made that effectively illegal. We’re finally rolling some of that back, but it’s going to take decades to undo and by that time the shortage will continue.
Sorry man that sucks. I own a property that's effectively a duplex in Atlanta. My buddy owns a duplex in Denver. It's not everywhere that mixed residential homes are banned!
Are you in CA?
Are you in CA?
Normally when people talk about mixed-use development, they are talking about zoning rules that allow residential and commercial use in close proximity, not necessarily about forced single-family use (although that is also an issue in many places).
Ah I see I misunderstood. FWIW though there's businesses scattered all over my neighborhood and seemingly no zoning rules. Lots of folks, especially the ones on this forum, would probably not live in Atlanta simply because of their perception of the city.
Atlanta has the advantage of being an old city, relative to the US's history of development. It certainly has its own issues with post-WWII development (especially in its sprawly areas), but the older parts have retained lots of the perks of pre-automobile urbanization.
In California, there's currently a fight between the state government, which wants cities to allow more housing, and local governments, which are opposed to higher density housing because the NIMBYs ("not in my back yard") fight it. The restrictive zoning laws are at the local level, not the state level.
> The restrictive zoning laws are at the local level, not the state level.
True, but the restrictive zoning laws are made possible at the state level.
A thread here on HN a few weeks ago mentioned Japan which they described as having basically 5 classifications for "types of things you can do on land you own", ranging from "essentially anything at all" to "notable limitations". Within whatever classification your land is given, you can do whatever you want, local neighborhood be damned.
I don't know if that's an accurate description, but it sounds like a system with a very different set of tradeoffs than the one found across the USA.
True, but the restrictive zoning laws are made possible at the state level.
A thread here on HN a few weeks ago mentioned Japan which they described as having basically 5 classifications for "types of things you can do on land you own", ranging from "essentially anything at all" to "notable limitations". Within whatever classification your land is given, you can do whatever you want, local neighborhood be damned.
I don't know if that's an accurate description, but it sounds like a system with a very different set of tradeoffs than the one found across the USA.
Are there jobs near those houses? Specialist doctors? Good schools?
I WFH so I could probably buy one of those houses, but most of my friends in my age bracket are expected to show up to an office 5 days a week, so those suitable houses are no good for them.
I WFH so I could probably buy one of those houses, but most of my friends in my age bracket are expected to show up to an office 5 days a week, so those suitable houses are no good for them.
Yeah those are good points. I live in a bit of a bubble where most folks around me either WFH or have to travel to work. There are absolutely "specialist doctors" in every large city though...
You might be surprised how hard it is to actually find specialists, even in big cities. In the SF bay area for example for a couple different procedures I had done in the last decade there were perhaps 3 specialists in the whole area who could do it, far enough from me that I had to book a hotel room to stay in closer to the facility and avoid 4+ hours of driving.
A family friend was diagnosed with a difficult brain tumor, and to get it removed via a (if memory serves, this was a while ago) gamma knife procedure, he had to drive 6+ hours north from a relatively large mid-california city up to Sacramento because we had one of the only facilities equipped for it there at the time.
In general people often will get transported to other hospitals for treatment, often multiple hours or even across state lines. Now imagine that you have to do this multiple times a month because you moved to a less-urban area due to housing prices...
A family friend was diagnosed with a difficult brain tumor, and to get it removed via a (if memory serves, this was a while ago) gamma knife procedure, he had to drive 6+ hours north from a relatively large mid-california city up to Sacramento because we had one of the only facilities equipped for it there at the time.
In general people often will get transported to other hospitals for treatment, often multiple hours or even across state lines. Now imagine that you have to do this multiple times a month because you moved to a less-urban area due to housing prices...
Is my family there? My church? The park where I learned to play soccer? My daughter's best friend?
When you sit around talking about choice of living area without weighing, or even acknowledging these connections, do you realize how inhuman this sounds? Do you not have similar things binding you to a place?
Shit even specialist doctors, have you ever depended on one? If you're needing long-term specialist care you got some major shit to deal with. Rapport, trust, history with an individual doctor is an important part of that care. And people need care aside from just the doctors. Who is driving you to these appointments, caring for you afterwards? Are they coming to the new city with you?
There are a lot of things in a place you know. You can't reduce all or really very many of them down to mere transactions in a marketplace.
When you sit around talking about choice of living area without weighing, or even acknowledging these connections, do you realize how inhuman this sounds? Do you not have similar things binding you to a place?
Shit even specialist doctors, have you ever depended on one? If you're needing long-term specialist care you got some major shit to deal with. Rapport, trust, history with an individual doctor is an important part of that care. And people need care aside from just the doctors. Who is driving you to these appointments, caring for you afterwards? Are they coming to the new city with you?
There are a lot of things in a place you know. You can't reduce all or really very many of them down to mere transactions in a marketplace.
I feel you. It’s horrible if you’ve grown up somewhere and suddenly can’t afford a home in the same spot.
But life’s unfair. Houses get sold to the highest bidder. This is what happens when everyone wants to live in the same areas. I’m not arguing that you SHOULDNT be able to afford a home in your preferred spot. I’m observing that it’s IMPOSSIBLE for everyone to own property in their preferred spot within their budget.
You can still rent, or buy cheaper homes in cheaper areas in your city.
We can’t just will affordable housing into existence when ~97% of people live on ~3% of the land.
But life’s unfair. Houses get sold to the highest bidder. This is what happens when everyone wants to live in the same areas. I’m not arguing that you SHOULDNT be able to afford a home in your preferred spot. I’m observing that it’s IMPOSSIBLE for everyone to own property in their preferred spot within their budget.
You can still rent, or buy cheaper homes in cheaper areas in your city.
We can’t just will affordable housing into existence when ~97% of people live on ~3% of the land.
If you work from home you go to good remote schools and see the best doctors remotely.
+1 GP is top 2% of their generation but not necessarily top 2% of the area they're looking into. Sounds fairer when put that way.
Yes. The problem is:
1. A lot of high earners want to cram into a small space
2. The existing high earners living in that space don't want to allow more built in that space because they like the neighborhood how it is
So all these high earners compete against each other, and houses become as expensive the winning high-earning bidders can afford.
For this to stop happening, #1 or #2 needs to stop. So, either the high earners need to stop cramming into a small space, or policy must be changed so the locals can't stop the growth of housing supply.
(Usually when I've pointed this out in the past, I get mobbed by NIMBYs who insist that growing the housing supply will somehow cause prices to skyrocket even more. There seems to be a widespread NIMBY belief that standard economics doesn't apply to housing, for mysterious reasons that no one ever quite gets around to explaining. It'll be interesting to see if it happens again today.)
1. A lot of high earners want to cram into a small space
2. The existing high earners living in that space don't want to allow more built in that space because they like the neighborhood how it is
So all these high earners compete against each other, and houses become as expensive the winning high-earning bidders can afford.
For this to stop happening, #1 or #2 needs to stop. So, either the high earners need to stop cramming into a small space, or policy must be changed so the locals can't stop the growth of housing supply.
(Usually when I've pointed this out in the past, I get mobbed by NIMBYs who insist that growing the housing supply will somehow cause prices to skyrocket even more. There seems to be a widespread NIMBY belief that standard economics doesn't apply to housing, for mysterious reasons that no one ever quite gets around to explaining. It'll be interesting to see if it happens again today.)
Per-unit rent will go down if you increase supply of housing, but the value of the land underneath will go up if you increase the amount of houses allowed to be built on said land. There's one part of "standard economics" that a lot of people forget with property, which is that land in desirable locations is of limited supply and you cannot increase its supply.
Land at the boundaries of a city is not equivalent with land in the centre, because of location value.
I do agree that #2 should stop, but be warned that it doesn't solve land values going sky-high; it actually increases land values. The solution is land value tax, a la Henry George.
Land at the boundaries of a city is not equivalent with land in the centre, because of location value.
I do agree that #2 should stop, but be warned that it doesn't solve land values going sky-high; it actually increases land values. The solution is land value tax, a la Henry George.
> but the value of the land underneath will go up if you increase the amount of houses allowed to be built on said land.
which is what would incentivize the owner of that land (ostensibly a single family home land owner) to sell and let high density to be built. If the land doesn't increase in value this way, the owner would not have any incentive to sell.
which is what would incentivize the owner of that land (ostensibly a single family home land owner) to sell and let high density to be built. If the land doesn't increase in value this way, the owner would not have any incentive to sell.
It can happen because new homes are more expensive. People prefer new and will pay more. That raises the average price which raises prices on the existing supply.
Or it lowers price on the existing supply because wealthier buyers are going to the new supply now rather than bidding up the existing supply.
[deleted]
Fundamentally, NIMBYism and dysfunctional thinking drives this, homes cannot both be affordable and a sure good investment as a matter of definition
Cities can regulate this. Recent example in San Diego: https://www.nbcsandiego.com/news/politics/san-diego-mayor-si...
I would imagine if your algorithm was anything but the most simplest it could check for this. Having some check like "What is the median income among the workforce" and to not bid above a certain amount relative to that will help prevent overbidding on a house that no one in the area can realistically afford, short of bots.
iBuyers are supposed to be playing a rational strategy over a large portfolio; they pay what they think the house is worth, and unlike an irrational/emotional human who really wants that property for his primary home, they have no reason to participate in bidding wars past what they think the house is worth. The the point of the iBuyer is to turn around and unload it after a few weeks or months on someone who wants it for a primary residence; it's not in their interest to pay more than such a buyer can afford.
People are living longer and tolerating less construction. We're only building or freeing up enough homes in desirable areas to skim the very top of our generation.
People are living longer and tolerating less construction. We're only building or freeing up enough homes in desirable areas to skim the very top of our generation.
> entire neighborhoods converted to short term rentals now in some areas where they're still legal. Hearing that really depressed me.
Why? It makes me happy that more people get to enjoy a desirable area rather than using the law to keep them out.
Why? It makes me happy that more people get to enjoy a desirable area rather than using the law to keep them out.
Sounds like a good sci-fi story... Rebellion against the AI landlords.
It's "easy to see" if you don't do any math. US real estate market is around ~$200 billion. That $0.881 billion of zillow is a rounding error.
It's because US monetary policy has created an enormous transfer of wealth to the wealthy and out of the general economy. They do this by extending credit at low interest rates with the collective understanding that the value of the dollar will continue to be printed away. The wealthy (like me...) buy stuff on credit now and pay it back later with much cheaper future dollars.
COVID threw a wrench in the scheme temporarily and caused a lot of that money to start trickling down, which is why we're seeing wages rise rapidly and high consumer-level inflation.
By the way, bitcoin fixes this.
COVID threw a wrench in the scheme temporarily and caused a lot of that money to start trickling down, which is why we're seeing wages rise rapidly and high consumer-level inflation.
By the way, bitcoin fixes this.
Monetary policy and fiat currency are unequivocally good things. Deflation is what caused the 50 year recession from 1860-1910. Not being able to control inflation leads to mass unemployment.
My comment explains in detail the specific mechanism I'm concerned about in a way that everyone can understand it. Your comment regurgitates something from a textbook that people have on reason to actually trust. I don't have a problem that you disagree with me. I have a problem that it's an argument from authority.
Also, I wonder if you're conceding that the Fed steals from the economy in general and gives to the super wealthy, and simply think that that's a necessary side effect of having a well-functioning economy. It seems like it.
Also, I wonder if you're conceding that the Fed steals from the economy in general and gives to the super wealthy, and simply think that that's a necessary side effect of having a well-functioning economy. It seems like it.
Bitcoin is not a viable currency. It's value is not anywhere near stable enough. It's honestly incredible that you haven't even thought of the very first problem with using bitcoin as a currency. Yes, the rich abuse the current system. They will do the same with any system. Saying "we shouldn't ensure that our currency has predictable value because that would make the rich even richer" is insane when the rich will be richer no matter what you do.
> I have a problem that it's an argument from authority.
https://danluu.com/cocktail-ideas/ you are the developer who thinks building a bridge is easy. Please just admit that you don't understand what you're talking about.
> I have a problem that it's an argument from authority.
https://danluu.com/cocktail-ideas/ you are the developer who thinks building a bridge is easy. Please just admit that you don't understand what you're talking about.
> Bitcoin is not a viable currency. It's value is not anywhere near stable enough.
It can't go from zero to stable overnight. It has to start somewhere and gain stability over a long period of time.
> It's honestly incredible that you haven't even thought of the very first problem with using bitcoin as a currency.
You're behaving like a troll. There is an absolutely obvious objection to your prior sentence, but rather than see that, you pretend like it isn't the case, and attack me personally. You don't know me and you don't know my thinking.
You're also behaving as a troll because you've totally changed the topic instead of answering my direct objections to your prior comments.
I'm done talking to you. I assume your next comment will also be trollish, and I hope people see through it. But please just don't answer.
It can't go from zero to stable overnight. It has to start somewhere and gain stability over a long period of time.
> It's honestly incredible that you haven't even thought of the very first problem with using bitcoin as a currency.
You're behaving like a troll. There is an absolutely obvious objection to your prior sentence, but rather than see that, you pretend like it isn't the case, and attack me personally. You don't know me and you don't know my thinking.
You're also behaving as a troll because you've totally changed the topic instead of answering my direct objections to your prior comments.
I'm done talking to you. I assume your next comment will also be trollish, and I hope people see through it. But please just don't answer.
Wealth and power get transferred over to the blockchain. You end up with the same structures in a less controllable currency.
Ah yes, nothing says egalitarianism quite like the distribution of Bitcoin. Why allow one percenters to borrow money they actually have to reinvest in giving people jobs when we can just give them the printing press?
That's entirely what company valuations like Tesla are.
Keep in mind you also will not (for now at least) have to spend a ridiculous amount on interest like many people did before you.
It is going to get interesting when the millennial generation suddenly starts mass inheriting baby boomer houses - not sure how that is going to play out honestly.
It is going to get interesting when the millennial generation suddenly starts mass inheriting baby boomer houses - not sure how that is going to play out honestly.
I recently bought a home. We toured a Zillow home, and I can understand what they were going for and where they failed.
We were able to pull up to the driveway, book a tour for that minute, and walk in the front door. It was almost a magical experience compared to the process of finding and going to showings. The listings were clear and thorough. The experience was extremely compelling.
The downside: the homes were absurdly overpriced. I bought a home for about 10% less than the last Zillow listing. For less, I got three times the land, 40% more square footage, a better location, updated appliances, new carpets, landscaped back yard, horseshoe driveway, two car garage. Almost zero effort had been put into modernizing the Zillow home and it showed.
I suspect if I had come in with a very low offer, they'd have accepted it. But for what?
If I was Zillow, I'd have licensed the tech to realtors. I'd definitely be inclined to buy a home through them if they weren't the ones selling the property directly.
We were able to pull up to the driveway, book a tour for that minute, and walk in the front door. It was almost a magical experience compared to the process of finding and going to showings. The listings were clear and thorough. The experience was extremely compelling.
The downside: the homes were absurdly overpriced. I bought a home for about 10% less than the last Zillow listing. For less, I got three times the land, 40% more square footage, a better location, updated appliances, new carpets, landscaped back yard, horseshoe driveway, two car garage. Almost zero effort had been put into modernizing the Zillow home and it showed.
I suspect if I had come in with a very low offer, they'd have accepted it. But for what?
If I was Zillow, I'd have licensed the tech to realtors. I'd definitely be inclined to buy a home through them if they weren't the ones selling the property directly.
If I can give any home buying tip from my experience of buying two houses it's been to look at places that are in "the middle". Both homes I've bought in SoCal have had some god-awful photos online, and the finish is new-ish, but done by someone in the 70s so it's new but tacky in a little-old-lady way.
This ends up pricing the house too expensive to flippers, and not nice enough to sell compared to other houses because it doesn't have the farmhouse sink and looks exactly like a grandma took out a home equity line and renovated (which is what happened).
This ends up pricing the house too expensive to flippers, and not nice enough to sell compared to other houses because it doesn't have the farmhouse sink and looks exactly like a grandma took out a home equity line and renovated (which is what happened).
We took the same approach with our house, and the results were marvelous. Major props to our realtor for seeing the potential hidden in those god-awful listing photos.
[deleted]
> The downside
If this wasn’t another house in the same neighborhood then the differentiator most certainly wasn’t Zillow or their pricing.
If this wasn’t another house in the same neighborhood then the differentiator most certainly wasn’t Zillow or their pricing.
It was within about five minutes drive
Why is this being downvoted. It's completely correct. The value of a home purchase is not just the building, but the land it sits on.
OP got a bigger, more modern house, with a larger yard for less, but it's meaningless until we understand the market circumstances of both homes for sale.
It could be that Zillow is overpriced here, or it could be that Zillow is properly priced, we have no idea from the information provided here.
OP got a bigger, more modern house, with a larger yard for less, but it's meaningless until we understand the market circumstances of both homes for sale.
It could be that Zillow is overpriced here, or it could be that Zillow is properly priced, we have no idea from the information provided here.
You missed better location
Better location =/= more valuable location
why not?
Because better is subjective. NYC has more crime, worst public schools, and smaller homes than a lot of suburbs, but I guarantee that NYC is more expensive.
It's an extreme example, but it's not the only example.
It's an extreme example, but it's not the only example.
Better location is a completely subjective statement. Show me the comps.
> the homes were absurdly overpriced
That’s saying a lot for a red hot real estate market.
I still get updates from Zillow every month saying my home increased 5% in value in the last 30 days and up 30% over the last 12 months. Something is wildly off with their algorithm.
That’s saying a lot for a red hot real estate market.
I still get updates from Zillow every month saying my home increased 5% in value in the last 30 days and up 30% over the last 12 months. Something is wildly off with their algorithm.
The agent I was working with showed me two houses on the same block that were much more modern and had sold for less within the previous few months. The Zillow house in question had been on the market for almost four months and was in far worse shape.
I’m surprised you have an issue with arranging visits to open houses?
Open RedFin, check the houses for sale, go to the open house when there is one? That’s at least how it works in the Bay Area. We never had to schedule or book anything, and only after seeing a house we liked, we asked our agent to check it out and submit an offer.
Open RedFin, check the houses for sale, go to the open house when there is one? That’s at least how it works in the Bay Area. We never had to schedule or book anything, and only after seeing a house we liked, we asked our agent to check it out and submit an offer.
The house I bought was listed for two weeks. They had one day of showings. The following day they stopped accepting offers. Maybe it's different in the Bay, but here in Raleigh houses are available to tour for essentially eight hours.
The alternative being to ask above market the house so it sits on the market for longer ? I don't understand what Zillow changes in this story ? (I'm genuinely curious - not from US)
Zillow eliminates the notion of showings as an event. They plug in a smart lock and (at least to my understanding) you can tour the minute the listing goes up. There's no rushing to showings, your can tour any house that's in their portfolio on the market.
> Zillow eliminates the notion of showings as an event
Showings aren't an event unless the seller (perhaps through their agent) decides they should be.
> They plug in a smart lock and (at least to my understanding) you can tour the minute the listing goes up.
A lockbox with a key that buyers agents can get access to has been routine for sales of homes where the seller doesn't actively choose to limit showing for a long time; changing the technology doesn't fundamentally change anything. If access is made directly to buyers that would be a slight change in accessibility (also an increase in risk for the seller), but not, in practice, a huge difference.
Showings aren't an event unless the seller (perhaps through their agent) decides they should be.
> They plug in a smart lock and (at least to my understanding) you can tour the minute the listing goes up.
A lockbox with a key that buyers agents can get access to has been routine for sales of homes where the seller doesn't actively choose to limit showing for a long time; changing the technology doesn't fundamentally change anything. If access is made directly to buyers that would be a slight change in accessibility (also an increase in risk for the seller), but not, in practice, a huge difference.
Most investors seem to overask and let it sit on the market. The carrying cost of an extra month is more than offset by the higher final sale price.
I was at Zillow for many years and left in 2020. On the tech side the pivot into iBuying was absolutely bonkers. The message from senior leadership was basically: I have no idea what your teams should be working on but it’s definitely not what they are currently working on so stop that and figure something else out.
This has nothing directly to do with their market failure but they probably are driven by the same leadership problems.
This has nothing directly to do with their market failure but they probably are driven by the same leadership problems.
Sounds familiar, I read this as leadership saying... "you all need to change what you are doing because you must not know what you're doing because we don't know what we're doing and we're the ones in charge."
i wish we lived in the same area and could have an OTR conversation about this. believe it or not, the new "strategy" now that ZO is all shut down is even less well-defined and more pie-in-the-sky than ZO ever was.
Please share!
what is ZO?
Zillow Offers. The name of the iBuying service the company provided. (Former Zillow myself, as of a couple of weeks ago.)
[deleted]
Anecdote on the estimates. We bought a house for X and renovated it. The day before we listed it both Zillow and Redfin estimate had an estimate around the purchase price X. When we listed it for 2X, both companies changed their estimate to be close to the listing. However, Redfin changed the entire price history as well showing a gentle slope. Zillow preserved their previous history and showed a spike.
+1 I have always been annoyed by Redfin's rewrite of history. At least have the decency to show two lines (original prediction for last year and how it turned out to be).
Same, I find this to be a bizarre practice. What's the point if the snapshots are revised?
I assume the rationale is that it's are supposed to be an indicator of the actual value of the property at a point in time, not the accuracy of their algorithm at that point in time. So if they update with new information, it's assumed that instead of the price suddenly jumping (which looks very odd if you're trying to understand a local property market), the original snapshots are assumed to have been wrong
At least in my area, they've completely given up on providing a "historical" estimate of the house in question and just have a trend graph for the general area. I assume this data is also heavily massaged, too, though.
I am guessing they don't save the price history as snapshots. They have the current estimate, and then they walk it back in time from the market averages.
This happens all the time with most data providers.
Another anecdote - We sold a house in late 2020, decided to get an offer through zillow first, since we had a newborn and staging would have been a hassle.
Zillow lowballed us 10% under their zestimate, and still tacked on an 8% fee - we ended up going with a realtor instead, and ended up getting 15% over the Zestimate, with a 6.5% fee.
Zillow lowballed us 10% under their zestimate, and still tacked on an 8% fee - we ended up going with a realtor instead, and ended up getting 15% over the Zestimate, with a 6.5% fee.
Noticed the same, but I still think Zillow tweaks historical but just not as brazenly as Redfin.
Some twitter threads from Zillow insiders I saw around this referenced a couple things:
* the pricing algorithm was good, but the business leadership got hungry and kept overriding it with higher offers in the hunger to do more business.
* they were trying to do so much business that they couldn't source the labor need to flip - painting, landscaping etc. They were so backlogged they were just sitting on houses they overpaid for (due to overriding the algorithm), and the constant cashflow aspect that makes flipping work at scale was destroyed
Matt Levine's take was something like:
if the pricing algorithm is good but it tells you that the flip strategy is only profitable on relatively small number of properties, then it's not profitable at scale cuz you're paying a big engineering team to create, tune and maintain it.
* the pricing algorithm was good, but the business leadership got hungry and kept overriding it with higher offers in the hunger to do more business.
* they were trying to do so much business that they couldn't source the labor need to flip - painting, landscaping etc. They were so backlogged they were just sitting on houses they overpaid for (due to overriding the algorithm), and the constant cashflow aspect that makes flipping work at scale was destroyed
Matt Levine's take was something like:
if the pricing algorithm is good but it tells you that the flip strategy is only profitable on relatively small number of properties, then it's not profitable at scale cuz you're paying a big engineering team to create, tune and maintain it.
The author buried the lede. Zillow came up with a model to choose bid and ask prices. The model said, "Don't buy". They didn't believe the model and chased the deal, and lost money.
Sometimes it's better to sit on your hands.
Sometimes it's better to sit on your hands.
Yeah this article makes it sounds like algorithmic trading is wrong by design, but that’s not really true in this case at least
It's such a glaring red flag that one of the largest public resources for getting pricing information on housing is also buying and selling that housing. Come on, this is so glaringly abusable that any teenager could tell you what's wrong.
Can you illustrate the mechanism of abuse? Pricing information on housing is readily available to almost everyone, outside of the couple stated that do not mandate it. Zillow makes it easier, but Redfin and realtor.com and countyoffice.org and other websites offer the same information scraped from municipal websites.
The prinicipal of separation of concerns should be all you need for a legal reason for keeping listing companies like zillow from also participating in the market. Clearly they are a company, company's only limitations are they exist to make as much money as possible for share holders and they have no morals, only regulations and laws limit their actions. Therefore they shouldn't be in the business of buying/selling houses if their main goal is to list house values, that is a severe conflict of interest.
Separation of concerns is not a legal concept.
Zillow does not have any fundamental control over the market. They do not have any obligation to show true prices. They are a private entity who happens to offer price estimates a service. Nobody is ever forced to buy or sell at that price.
Zillow does not have any fundamental control over the market. They do not have any obligation to show true prices. They are a private entity who happens to offer price estimates a service. Nobody is ever forced to buy or sell at that price.
Zillow could lie about regional home values and blame it on their "secret sauce".
Why would anyone trust Zillow’s opinions over anyone else’s opinion? Everyone has access to the same historical sales data that the market actually cleared at. In fact, it is has never been easier for the average person to research historical sales information. They can filter the parameters of the house they are interested in the area they are interested and find all the previous sales data, all while sitting on the toilet, thanks to websites like Redfin and Zillow.
They can “lie” all they want, it makes no difference to what price a house sells for.
They can “lie” all they want, it makes no difference to what price a house sells for.
People tell outrageous lies on Facebook all the time and they seem to work.
Deception works (especially subtle deception), and laziness is a thing.
Also, Zillow's current value estimates are about "current" values, not past values.
Deception works (especially subtle deception), and laziness is a thing.
Also, Zillow's current value estimates are about "current" values, not past values.
Zillow’s current value estimates are their opinion (or what they want people to think is their opinion). Regardless, it is no different than a real estate agent or a cashier at target saying they think a specific property is worth $x.
At the end of the day, a buyer and seller coming together and agreeing on a price is the only thing that matters. A seller pays as much as they do because they do not have a better option, and a buyer sells for as little as they do because they have no better option. Zillow cannot affect this.
At the end of the day, a buyer and seller coming together and agreeing on a price is the only thing that matters. A seller pays as much as they do because they do not have a better option, and a buyer sells for as little as they do because they have no better option. Zillow cannot affect this.
Perception matters. Direction and rate of value increases in a neighbourhood matters. The perception of the neighbourhood affects the value of a particular property.
Zillow can affect that perception. It is making calls about entire neighbourhoods, not just one property that it has a declared interest in. It is acting as a supposed uninterested party (valuing the market overall) and an interested party (benefiting from the valuing of a particular property). That's the potential conflict of interest.
How much home buying do real estate agents engage in vs just acting as an agent, compared to Zillow (in relative terms)? I don't know, maybe it's similar...
Zillow can affect that perception. It is making calls about entire neighbourhoods, not just one property that it has a declared interest in. It is acting as a supposed uninterested party (valuing the market overall) and an interested party (benefiting from the valuing of a particular property). That's the potential conflict of interest.
How much home buying do real estate agents engage in vs just acting as an agent, compared to Zillow (in relative terms)? I don't know, maybe it's similar...
And yet they lost hundreds of millions, so maybe not as abusable as you might imagine.
I am especially annoyed at Zillow SF holding "Data Science" meetups in San Francisco at the penthouse place, while advertising for TWO data science positions.. meanwhile, frat guys are at the golf course by the dozens, across three states. The people that they hired at that time, probably built this setup exactly as required by the frat guys. Happy banking Zillow!
There's some poetry in older banks claiming they're pivoting to being tech companies (i.e. Capital One) while some tech companies are heading straight towards being banks.
Former C1 employee here with a personal opinion. C1 is walking the walk; everyone up to the CEO is very tech-forward (which quite surprised me initially)
There was the line about Netflix seeing the writing in the wall about needing to produce their own content because everyone was going to make their own steaming service. "We need to become HBO before HBO becomes us."
If the right answer is a blend of two business models, then both companies becoming more like the other make sense.
If the right answer is a blend of two business models, then both companies becoming more like the other make sense.
It was surprising to me to learn that airlines are basically banks
https://www.reddit.com/r/urbanplanning/comments/rgkne9/how_a...
https://www.reddit.com/r/urbanplanning/comments/rgkne9/how_a...
If one enjoys Wendover videos, there was a recent one about that: https://www.youtube.com/watch?v=ggUduBmvQ_4
The author has a valid point in that the information asymmetry will attract sellers whose property is overvalued to sell to Zillow. I suspect though that something different happened in reality. I live in a 70 unit condo building, so there are a lot of very good comparables. Zillow bought one of the units about 10% over market value, which makes me think that they're doing some sort of market manipulation, like charging a 20% fee that is not part of the real estate record. So they wanted to pump up prices, but it didn't work.
It’s very hard to do good real estate pricing models from raw data. You can get all sorts of metrics on the property statistics but one important factor in the cost of the home is the state of renovation. Since most listings don’t have a historical listing of work done in the home your best hope of accurately assessing this comes from something like computer vision on the listing pictures. Assessing the quality of work, recency of work, quality of materials and factoring that into a house price is extremely hard. It would not surprise me at all if Zillow paid near market value for a whole bunch of dated homes that hadn’t kept up with the times and would sell for below the market of similar homes in the neighborhood according to typical metrics. The stories make it seem like their model had even more issues than that. Still I’m surprised anyone actually tried this idea given how poor the algorithms are and how obvious it is that key data points are not available.
What was stopping Zillow from having a human look at the property and adjust the price based on factors that their algorithm didn't consider?
What stopped them is that the entire rational for Zillow's approach is that human appraisal isn't needed. An algorithm, they think, should be able to do a good enough job. Any individual person who, when presented with this scenario, thought they should have brought in a human to look at the house does has been selected out of working for Zillow.
Nothing, but that would require them hiring an appraiser on each transaction, which would be humbling for them to have to do (and while biased as an appraiser myself, I would not trust anyone else other than a licensed appraiser to do that type of adjustment work, because it’s a daily part of our jobs).
Or they could have an internal team of appraisers doing that type of work, but the business might not like it when the appraisers don’t validate their pricing structure because real data does not support it.
Or they could have an internal team of appraisers doing that type of work, but the business might not like it when the appraisers don’t validate their pricing structure because real data does not support it.
It's wild that they didn't have human appraisers review at least a sample of the houses to groundtruth the algorithm.
Greed and wanting to be ahead of others will blind you to truth standing right in your face. While everyday workers at Zillow didn’t have a say in company policy, you can’t tell me that the executives and project managers didn’t know what they were doing or why they were doing it. They didn’t want to be told their idea was bad or couldn’t work (which it did work until it didn’t) early on, so they got the debt they refused to pay through due diligence.
And Zillow has been around for almost 20 years, so it’s not like they didn’t have awareness of how the home market works or how to validate pricing metrics. From the outside it fells like willful ignorance, but perhaps they suffer from the same ills any large company trying to “move fast and break things”.
And Zillow has been around for almost 20 years, so it’s not like they didn’t have awareness of how the home market works or how to validate pricing metrics. From the outside it fells like willful ignorance, but perhaps they suffer from the same ills any large company trying to “move fast and break things”.
In my experience, Zillow is sometimes conspicuously bad at valuing condos and literally doesn't know their market value, no matter how obvious it may be to you https://news.ycombinator.com/item?id=30724925
> Here’s the problem: my autodraft team ended up with a roster almost exclusively stocked with the players idiosyncratically overrated by Yahoo!. For example, an older player whose younger backup had just earned praise from the coach, suggesting that he might be about to lose his job.
I guess this is pretty obvious but just to be explicit, what's happening I guess is that players that are "correctly" valued by the algorithm are getting taken by others, and only the overvalued ones are left for the algorithm to choose.
I guess this is pretty obvious but just to be explicit, what's happening I guess is that players that are "correctly" valued by the algorithm are getting taken by others, and only the overvalued ones are left for the algorithm to choose.
Zillow's estimates of home values in my area have consistently been 150% of actual prices, as far as I've seen over the past years. Not that I've looked that closely and given that this is a hard area for them with low sales and a broad range of values for reasons not easy for their algorithms to quantify.
However, I always took that to be intentional, sort of a "see how valuable your home is / how high the values are where you're looking at"; hype that cost them nothing but made everyone feel better. Did the person that set that "glamor bonus" fudge factor get fired or just wasn't allowed to talk to the team deciding offer prices?
However, I always took that to be intentional, sort of a "see how valuable your home is / how high the values are where you're looking at"; hype that cost them nothing but made everyone feel better. Did the person that set that "glamor bonus" fudge factor get fired or just wasn't allowed to talk to the team deciding offer prices?
The Zestimate history for a condo I used to own is hilarious. There have been several sales of this property over 5 years, all at about the same price.
If you follow the Zestimate through time, it climbs rapidly until there is a sale, then it goes "oh shit" and plummets down to the sale price, which is barely different from the last time it was sold. This cycle repeats each time the property is sold.
Zillow is absolutely certain that this property should be rapidly increasing in value, no matter how many times it sells at about the same price it sold for last time.
When we sold the property, the agent told us it was in an awkward spot: too expensive for single people, not quite big enough for high-earning families. So it's stuck in price limbo as all the neighboring condos skyrocket.
Based on this experience, I remain convinced that there are micro-structural factors the fancy data science pricing models just can't seem to capture yet.
If you follow the Zestimate through time, it climbs rapidly until there is a sale, then it goes "oh shit" and plummets down to the sale price, which is barely different from the last time it was sold. This cycle repeats each time the property is sold.
Zillow is absolutely certain that this property should be rapidly increasing in value, no matter how many times it sells at about the same price it sold for last time.
When we sold the property, the agent told us it was in an awkward spot: too expensive for single people, not quite big enough for high-earning families. So it's stuck in price limbo as all the neighboring condos skyrocket.
Based on this experience, I remain convinced that there are micro-structural factors the fancy data science pricing models just can't seem to capture yet.
It varies widely by Area how accurate the zestimate is. In some places Redfin is much higher than Zillow, in others places it’s reversed. Sometimes they’re too high, sometimes they’re too low. I presume the algorithm does best when the prices are fairly flat, but in this market real estate prices changed dramatically and it seems pretty impossible for an algorithm to figure it out without modeling the entire economy and movement patterns of the population.
Another anecdote: I’m in Oakland, where condo prices went down slightly during the pandemic overall, yet Zillow’s estimates are always much higher than Redfin’s (which seem to be in the same ballpark as the sale prices).
maybe Redfin actually incorporates "price at end of closing" into their models, instead of say .. "wishful drinking" prices from Zillow and crew?
Odd. My house is valued at $330k on zillow, would sell for $420K+ in a few days.
Mine is pretty accurate ($2.5M), based on recent sales and a couple of solicitations from realtor friends.
FWIW, we have had a high frequency of home sales in the past year, so that might help. I just looked up my previous house (sold 5 years ago), and Zillow is saying $740K, which I am pretty sure is massively overvalued, however the street it is on, and general area, have a fairly low turnover, so less recent data.
FWIW, we have had a high frequency of home sales in the past year, so that might help. I just looked up my previous house (sold 5 years ago), and Zillow is saying $740K, which I am pretty sure is massively overvalued, however the street it is on, and general area, have a fairly low turnover, so less recent data.
Mine is pretty accurate as well ($44.8M), based on recent mentions in Architectural Digest and a couple of solicitations from fellow G650 owners.
There isn't exactly a large market for homes at that price point. Plus at that price, a thorough DD is an order. So not unexpected that your home's value would be accurate.
Humble brag
Not if you bought a home a decade or two ago and house prices went up around you with no action of your own.
I drive an old Honda Civic and my neighbors all have Tesla, Porsche, etc.
I drive an old Honda Civic and my neighbors all have Tesla, Porsche, etc.
I'm working on my second million!
...I gave up on my first.
...I gave up on my first.
I didn't mean it that way, and it's all relative really. There are a ton of houses above and below my price point.
No, you're rich.
It varies a lot based on location and what's sold locally. If there aren't a lot of similar properties in the area that have sold recently it will be much less accurate.
Zillow purchased a home in my neighborhood for $370K, is now trying to sell it for $410K. Prior to this purchase other houses with a larger footprint in our exact same neighborhood were selling for $250K(literally just months before). For some reason zillow chose to pay 100K over what would have been fair value for the house.
I'm planning to sell very soon and love the iBuyer model.
Don't have to deal with showings, or fix anything, or hope a buyer's financing doesn't fall through at the last minute. To me that's worth whatever percent they're getting.
Sadly, no iBuyer operates in my fly-over state.
Don't have to deal with showings, or fix anything, or hope a buyer's financing doesn't fall through at the last minute. To me that's worth whatever percent they're getting.
Sadly, no iBuyer operates in my fly-over state.
Not sure why the article goes to such lengths to legitimize "Corporate flipping", calling it iBuying or whatever.
No matter what terminology you use, buyers without cash-in-hand are getting screwed.
No matter what terminology you use, buyers without cash-in-hand are getting screwed.
> No matter what terminology you use, buyers without cash-in-hand are getting screwed.
"Cash is king" is a common phrase in real estate for good reason. In pretty much all instances, a cash buyer has a leg up over everyone else. In a liquidity crunch, cash buyers get discounts because people can't get loans; in hot markets, they get discounts because they can wave contingencies; in cool markets, they get discounts because they can move faster; etc.
"Cash is king" is a common phrase in real estate for good reason. In pretty much all instances, a cash buyer has a leg up over everyone else. In a liquidity crunch, cash buyers get discounts because people can't get loans; in hot markets, they get discounts because they can wave contingencies; in cool markets, they get discounts because they can move faster; etc.
This hasn't always been the case with real estate though. The market used to be much more accessible, and tech bubbles overlapping into it are just further destroying it.
look up Opendoor’s buy with cash product. Turns every buyer into a cash buyer in exchange for the same commission as any other buyer agent (maybe lower?)
Flyhomes is in that game, too: https://www.flyhomes.com/
Re opendoor etc
> A less competitive market is less dynamic and worse for sellers, but it is better for the iBuyers that remain.
If they can avoid taking on the bad deals that Zillow was previously shielding them from. I've seen how in some markets the disappearance of a provider that falls victim to this kind of adverse customer selection merely moves the problem to other providers in a cascading fashion. It's not clear that there are that many profitable deals to be made on the iBuying model
> A less competitive market is less dynamic and worse for sellers, but it is better for the iBuyers that remain.
If they can avoid taking on the bad deals that Zillow was previously shielding them from. I've seen how in some markets the disappearance of a provider that falls victim to this kind of adverse customer selection merely moves the problem to other providers in a cascading fashion. It's not clear that there are that many profitable deals to be made on the iBuying model
its easy to lose money if you're buying at retail and then selling at retail... there is really no money to be made in that scenario. I buy and remodel and either sell or rent the houses I aquire, but I do this at drastically reduced rates below retail. IMHO its the only way to buy. Every property I invest in has a problem, which is why the price is so low, alot of times its 10x below retail because of this. The top reasons why a house might have a problem is 1) the owners died and taxes were never paid, 2) the bank (or an individual) foreclosed on it reducing the price, 3) there are leins from the county or federal government that are making the house not sellable or worth nothing as a result, 4) the house has permit or code enforcement issues that the owner cannot resolve on their own ... Anyway, the best way to buy property is this way, and one rule I learned from attending auctions in person along time ago (its mostly online now) was that once the bidding goes above a third of its retail value, I'm out... Because sometimes you may have to invest 10-40k to make a house back to normal, and so paying even half its retail value just makes no sense.
I bet humans could have done a lot better than -$881M, and it wouldn't have been very costly to employ them. How many homes did Zillow iBuy in total, 10-20k? If it takes 5 minutes to evaluate a house, that would be 100,000 minutes, which is ~50 people working full time for a week. Spending $100k on that could have saved 100s of millions, plus it might have generated better training data for the model.
"Do market makers in the stock market run into this problem?"
Yes, that's why they have to account for the probability that whoever hits their bid is an informed trader (vs. uninformed/noise trader). And it's part of the reason they can provide price improvement when they source order flow from retail brokers, whose customers are mainly uninformed/noise traders.
Yes, that's why they have to account for the probability that whoever hits their bid is an informed trader (vs. uninformed/noise trader). And it's part of the reason they can provide price improvement when they source order flow from retail brokers, whose customers are mainly uninformed/noise traders.
How did opendoor manage to do the same thing better? The article seems like a takedown of the model, but opendoor managed to do the same thing profitably.
From what I've read it seems Zillow never had the actual expertise to do this, they were always a house price checking site. On the other hand opendoor started out doing this from the start.
From what I've read it seems Zillow never had the actual expertise to do this, they were always a house price checking site. On the other hand opendoor started out doing this from the start.
I recall reading months ago that Zillow made cash offers with inspections waived, in order to expedite the process. I believe they had an algo which would access average repair cost which they would factor in the actual offer.
Each house needs to be inspected by multiple experts as there are many toxic properties with huge liabilities.
Each house needs to be inspected by multiple experts as there are many toxic properties with huge liabilities.
If I was stuck in a toxic house that I couldn't afford to fix that Zillow no contingency offer would be like a literal dream come true!
> Zillow’s exit from the market strengthens the position of companies like Opendoor or Offerpad, which do something similar
Does Opendoor just have better algorithms/models? What factors allow them to have different outcomes from Zillow?
Does Opendoor just have better algorithms/models? What factors allow them to have different outcomes from Zillow?
Yes. Source: I was employee 24 at Opendoor. Zillow's pricing algorithms are and always were terrible.
They tried to paper over this during their iBuying push with humans, and then in an effort to outgrow Opendoor, they incentivized growing at any cost without the proper controls to prevent adverse selection. And due to some unfortunate timing with the market cooling, they got wrecked for it.
They tried to paper over this during their iBuying push with humans, and then in an effort to outgrow Opendoor, they incentivized growing at any cost without the proper controls to prevent adverse selection. And due to some unfortunate timing with the market cooling, they got wrecked for it.
If I remember the discussion at the time, OpenDoor and Offerpad are pure-play iBuying while Zillow was an already huge business pivoting into iBuying to make up for declines in its advertising business. Zillow had a reason to scale faster than the others and they didn't do it very well.
This is a good question. I am long on some company figuring out how to really streamline the home buying/selling process. Everyone dreads it, nothing worse than trying to buy or sell a home. These companies could be great buffers allowing the quick sale/buying of a home with minimal overhead. There is definitely a market for providing 'peace of mind' and the guarantee of not being screwed which today there is a high probability of from all angles.
Hopefully Opendoor can figure it out. They're probably going to need a lot of cash, homes, and software to really put it together into something that can be automated and scale.
Hopefully Opendoor can figure it out. They're probably going to need a lot of cash, homes, and software to really put it together into something that can be automated and scale.
Mostly that they no longer have to compete with Zillow
Scale is the enemy of profitability for this.
If you make lowball offers you won’t have many accepted but you will make money on the ones they accept. If you make higher offers you’ll be killed if anything goes wrong at all.
If you make lowball offers you won’t have many accepted but you will make money on the ones they accept. If you make higher offers you’ll be killed if anything goes wrong at all.
I wonder Zillow could do market making without the actually buying and selling that introduce so much of the risk. Gather into from prospective buyers about what they're looking for and identify houses that are a good fit and serve them up to the buyers. Not sure how to monetize, but this is essentially cannibalizing realtors, which is always where I thought their business model was going in the first place.
With the articles reference to second had car sales it interesting to compare to British Car Auctions (BCA) here in the UK. They have something like a 60% market share on second had sales, they are completely dominant as the central “trading house” for second hand sales. Most second hand car forecourts are buying a significant portion of their cars from a BCA auction.
The other thing they have which compares to what Zillow were doing is webuyanycar.com. It is literally what it says, you get a quote from their site to value it, go to their location and they buy your car. When I did it I was there for just 7 minutes, easiest car sale ever! And they payed be nearly 1k more than anyone else.
They are truly the market makers with this system, ensuring a steady stream of cars into their auctions. Have full visibility in real time of the pricing on both sides and are only holding the cars for about one week.
Some argue that they were a major contributing factor to the used car price inflation last year (on top of the issues with new car availability).
The other thing they have which compares to what Zillow were doing is webuyanycar.com. It is literally what it says, you get a quote from their site to value it, go to their location and they buy your car. When I did it I was there for just 7 minutes, easiest car sale ever! And they payed be nearly 1k more than anyone else.
They are truly the market makers with this system, ensuring a steady stream of cars into their auctions. Have full visibility in real time of the pricing on both sides and are only holding the cars for about one week.
Some argue that they were a major contributing factor to the used car price inflation last year (on top of the issues with new car availability).
> Some argue that they were a major contributing factor to the used car price inflation last year (on top of the issues with new cad availability).
And they would be wrong. Market makers do not get to set prices, supply and demand does.
And they would be wrong. Market makers do not get to set prices, supply and demand does.
Based on S4 forms, Zillow execs made a cumulative $1.3B from what might have been called a ponzi scheme, so it was overall well played.
> so it was overall well played
in one breath it is overtly and explicitly illegal, second breath same sentence.. "wellplayed" .. any red flags here?
I have heard "contemporaneously, during the Fall of Rome, there was a precipitous rise in the number of lawyers"...
in one breath it is overtly and explicitly illegal, second breath same sentence.. "wellplayed" .. any red flags here?
I have heard "contemporaneously, during the Fall of Rome, there was a precipitous rise in the number of lawyers"...
They should’ve set it up so you can be sent a set of cameras to put across your house, they photograph and setup a smart lock, etc.
In return people would be able t book a viewing to your house without a buyers agent nor would a sellers agent be involved. Cut both parties out, pass some savings to the buyer and seller and take a large cut.
Everyone wins.
In return people would be able t book a viewing to your house without a buyers agent nor would a sellers agent be involved. Cut both parties out, pass some savings to the buyer and seller and take a large cut.
Everyone wins.
Who do you talk to about the listing in this case?
Has anyone seen an analysis of why their pricing models were above market, and/or worse than OpenDoor?
Mike DelPrete has done several:
- https://www.mikedp.com/articles/2021/12/16/opendoor-vs-zillo...
- https://www.mikedp.com/articles/2021/11/3/zillow-exits-ibuyi...
- https://www.mikedp.com/articles/2021/12/16/opendoor-vs-zillo...
- https://www.mikedp.com/articles/2021/11/3/zillow-exits-ibuyi...
How do you _lose_ money investing in homes since 2010 or so? The market has been going gangbusters everywhere with a zip code, with solid double-digit gains in all place with more than one Starbucks
Any time that you’re working with imperfect knowledge and trying to operate a business on a large scale, you’re likely to run into this kind of trouble.
Can we admit that this is a major problem with the "AI" search algorithms operated by Google, Amazon, and others?
They are assigning "value" to content, or books, or whatever based on an incomplete understanding of the market. It's made even worse because so many owners are able to game the system.
Can we admit that this is a major problem with the "AI" search algorithms operated by Google, Amazon, and others?
They are assigning "value" to content, or books, or whatever based on an incomplete understanding of the market. It's made even worse because so many owners are able to game the system.
I thought the Zillow webpage was simply to guesstimate the cost of houses. This whole scenario sounds like they were totally out of their core competency zone.
I wonder how this would have ended up if they just dealt in options instead of taking on the inventory. For those that don't know, a real estate option gives the holder the right to buy the property at a fixed price within a certain timeframe, in exchange for a premium. This would have been a much better way to learn the market than diving straight into home purchases.
Most people who are selling their house are doing so in order to buy another one. That is to say they need the money from the sale to close on their other house. Selling an option on a house you live in is a pretty terrible idea since if the market takes off, your option gets called, you're out of a house and into a market that's skyrocketing.
I don't think there's enough benefit to sellers to make buying options feasible.
I don't think there's enough benefit to sellers to make buying options feasible.
Now I want to sell puts on over priced houses.
I will buy your put on an overpriced house!
The Zillow properties in my area were all overpriced, they were paying too much. People were happy to sell to Zillow at a premium.
It definitely feels like market making is something all parties involved in a real estate transaction would like. The article lays out the problems of applying the concept to real estate pretty clearly.
Personally, I think the physical cost of holding inventory and the lack of commodity status (commoditization?) for houses is manageable, if not outright surmountable. I think the condition that simply must change for this business model to work is the velocity of buying and selling residential real estate. Until you can go from “I want this” to “I bought this” or “I want to sell this” to “I sold this” in a scale of days if not hours, any market maker in residential real estate is going to end up a market risk taker implicitly betting on the future price of the property. Even if Zillow could move directly from closing on the house from the seller to initiating a sell to another buyer in less than 24 hours, there’s still several weeks involved. If the market is volatile, that’s a substantial risk exposure.
Simply put, it needs to be possible to move the title twice in 24 hours along with some way to finance a buyer on a very accelerated timescale. Both of these things will need reforms at all levels of government: municipal, state, and federal. I just don’t see that happening for a very long time, to be honest.
Personally, I think the physical cost of holding inventory and the lack of commodity status (commoditization?) for houses is manageable, if not outright surmountable. I think the condition that simply must change for this business model to work is the velocity of buying and selling residential real estate. Until you can go from “I want this” to “I bought this” or “I want to sell this” to “I sold this” in a scale of days if not hours, any market maker in residential real estate is going to end up a market risk taker implicitly betting on the future price of the property. Even if Zillow could move directly from closing on the house from the seller to initiating a sell to another buyer in less than 24 hours, there’s still several weeks involved. If the market is volatile, that’s a substantial risk exposure.
Simply put, it needs to be possible to move the title twice in 24 hours along with some way to finance a buyer on a very accelerated timescale. Both of these things will need reforms at all levels of government: municipal, state, and federal. I just don’t see that happening for a very long time, to be honest.
Just saw this article today:
https://nypost.com/2022/03/18/firebird-grove-scoops-up-entir...
https://nypost.com/2022/03/18/firebird-grove-scoops-up-entir...
Why could this not be run as an actual service. Zillow fronts say 75% of the estimated purchase price, then sells it and takes a cut of the premium, the rest going to the original seller. It's an estate agent with financing.
Because very often the reason you're selling a house is that you're buying a house, and so you need 100% of the value of the sale to go towards your new deposit. It's no good having 75% of the cash now, you need it all as a deposit and the mortgage company isn't going to take the risk that that 25% turns up eventually.
This is a brilliant idea, and if I ever sold my house I would want to do it this way.
Unfortunately most homeowners are debt-leveraged out the wazoo as a result of the artificially low interest rates we've had for the past decade. Once you filter out people who aren't looking to move the remaining cohort is homedebtors. Although something like 1/3rd of homeowners own their house outright those tend not to be the ones looking to move or flip.
Unfortunately most homeowners are debt-leveraged out the wazoo as a result of the artificially low interest rates we've had for the past decade. Once you filter out people who aren't looking to move the remaining cohort is homedebtors. Although something like 1/3rd of homeowners own their house outright those tend not to be the ones looking to move or flip.
How many homes did they buy? wow.
<Quickly searches to answer question for myself>
Oh, ~5,000/month.
<Quickly searches to answer question for myself>
Oh, ~5,000/month.
What gets me is even if the number was significantly smaller the fallout effect is massive. A common argument I've heard defending the practice is "well they didn't buy that many homes, it was just a small portion of total sales" ...implying that its not a big deal.
Lets no argue the truthiness of that statement but look at it as stated. They buy one house within a 10-20 mile radius away from you and they do so aggressively paying 20-30%+ over the pre-bubble price (think early pandemic times when prices were more realistic then they are now)
Well now thats the anchor price on comps for the next guy just looking to sell his house. Rinse and repeat a few times with anchored expectations on an inflated value and we have runaway prices.
Lets no argue the truthiness of that statement but look at it as stated. They buy one house within a 10-20 mile radius away from you and they do so aggressively paying 20-30%+ over the pre-bubble price (think early pandemic times when prices were more realistic then they are now)
Well now thats the anchor price on comps for the next guy just looking to sell his house. Rinse and repeat a few times with anchored expectations on an inflated value and we have runaway prices.
It at least gives me hope that if regulation and profit margins push corporate buyers OUT of the market, we can return to sanity and I can someday own a home.
But given this country's history of regulating giant corporations... more likely we'll just do nothing until homelessness balloons even more and the vast majority of homes are corporate owned. Then we'll have to wait for a VC bubble burst before they start selling all of the homes and tank the market.
But given this country's history of regulating giant corporations... more likely we'll just do nothing until homelessness balloons even more and the vast majority of homes are corporate owned. Then we'll have to wait for a VC bubble burst before they start selling all of the homes and tank the market.
That's because real estate pricing is fixed to nearby inventory. Zillow doesn't have to buy many homes in a neighborhood to inflate the prices of all the homes, it just needs to buy 1 or 2.
Reminds me of an old guy in knew back in the early 90's. His (quite nice) house was on a lot shaped like "well, that was the leftovers, after we gave all the other houses reasonable lots". Every year, the City tried to raise his property's assessed value by ~10% more than the neighborhood's average increase. And every time that his house sold (he had decades of records, to support his appeals of their over-assessments), it sold for ~50% of what the City wanted it to be worth. Now if he could have gotten the City to buy him out, for what their Assessment rulebook said his house was worth...
Edit: Added seemed-obvious final sentence.
Edit: Added seemed-obvious final sentence.
I've often wished that one avenue of appeal of a city assessment was an option given to the property owner to force the city to buy the property for 90% of what they assessed it. You could either go through the current appeals process or just sell them the house if they were way off.
And the same for the reverse: You can claim your house is only worth $40k, but then the city is allowed to buy it for $48k.
I'd be OK with that, but would probably design it to allow the homeowner to "fold" and withdraw their petition to reduce the assessment. (Otherwise, you'd see crap like "Oh, nikanj's kid is a senior next year; let's jack up their assessment because they're not going to want to move and so won't contest it...")
Where I live the assessed value is a complex formula only somewhat related to real estate values. My house might be say $500k, but it should assess for about $380k. So I'm losing long before it would be worth a buyout
I feel this is happening in the automotive space. Companies like carlots and carvana have been completely swallowing up all supply and driving prices up well beyond fair value.
It's definitely happening, also compounded by chip shortages and supply chain issues. I've leased the last six years but only in the 8 months have I had dealerships calling me with offers to buy out my lease just to get the car back early.
We need to stop corporations from buying single family homes.
How do you lose money in a market where homes only went up?
The point of the article is the answer to this: they were systematically overpaying because the offers where they overestimate value were disproportionately taken up by sellers.
But also there's the cost of inspection, property insurance, title insurance, escrow fees, labour costs of making the sale etc. As the article says, trading houses is not like trading stocks.
But also there's the cost of inspection, property insurance, title insurance, escrow fees, labour costs of making the sale etc. As the article says, trading houses is not like trading stocks.
They pretty much lay it out in the article. Essentially they end up with the "lemons" and then have to pay to hold them until they sell.
The only offers they made that were accepted were the ones on shitty houses that their algorithm mispriced.
How much money did this cost everyone else?
I think that "everyone else" actually made money from this. Zillow overpaid for houses and then was forced to sell them for the actual market value, so this $881M was basically free money given directly to the people Zillow bought from.
Likely some stressed out buyers paid for overpriced homes given the sharply rising prices across the market (although completely by their choice), and the sellers probably loved it - but that's already par for the course with the housing market at the moment. Zillow probably didn't help but isn't the sole contributor by any means.
As a current residential real estate appraiser, and coming from being a developer for a large corporation that is very active in this space, this has been eye opening yet unsurprising to watch from where I sit with access to all the transactions in my area (I service the Phoenix-Metro and outlying areas).
In appraisal after appraisal after appraisal within the last 6-7 months, I have watched Zillow, Opendoor, and OfferUp getting cleaned out to the tune of losing $30,000 - $60,000 on home after home in some neighborhoods. And in AZ, Zillow and Opendoor have been buying and selling in this market pretty healthily the past few years, and we’re it not for themselves and the buying frenzy of last Spring and Summer, they probably would not have gotten as hurt here in the Valley. They got suckered into paying top dollar in a market that was at its peak, and their algos were not trained to deal with the human factors causing this.
When I was working as a developer for a real estate tech company, it was made very clear that this company, along with any other iBuyer are able to show homes and come up with estimates is because they have local access just like realtors, appraisers, and developers to a Multiple Listing Service (MLS). In fact, the company I worked for had access to every MLS in the US; They would use the data from any of these MLSs to populate their front end product, which would then be influenced by their data science team to give the “estimate” based on whatever factors they deemed appropriate.
As someone whose job is predicated on objectively using primarily historical (for the past year) MLS/County data to asses what the market will allow a home to be valued at, it pains me to see people being taken advantage of by companies like Zillow who want to be “market makers” while not thinking through the implications of their strategies past making money on “easy” flips.
All this at the cost of local communities home values losing touch with the realities of the people who are living in an area to live, not invest. And here in Phoenix, it’s only gotten worse for anyone who doesn’t already have generational or attained wealth to find affordable housing.
The median price as of the past few months has cooled down to $350,000 - $400,000 for what would be considered normal for a less-than 2,000 square foot home. But, in some areas of the valley, it’s gotten so ridiculous that a sub 2,000 sf house is able to sell for $610,000.
On the one hand, I can appreciate these types of companies and business practices because they will keep me in a job making sense of the messes they make in the micro. On the other hand in a macro view, I hope this shakes some sense into the C-suite and product teams of these platforms that they need to approach this less as a “move fast, break things” type enterprise, for themselves and the communities they impact with their choices.
In appraisal after appraisal after appraisal within the last 6-7 months, I have watched Zillow, Opendoor, and OfferUp getting cleaned out to the tune of losing $30,000 - $60,000 on home after home in some neighborhoods. And in AZ, Zillow and Opendoor have been buying and selling in this market pretty healthily the past few years, and we’re it not for themselves and the buying frenzy of last Spring and Summer, they probably would not have gotten as hurt here in the Valley. They got suckered into paying top dollar in a market that was at its peak, and their algos were not trained to deal with the human factors causing this.
When I was working as a developer for a real estate tech company, it was made very clear that this company, along with any other iBuyer are able to show homes and come up with estimates is because they have local access just like realtors, appraisers, and developers to a Multiple Listing Service (MLS). In fact, the company I worked for had access to every MLS in the US; They would use the data from any of these MLSs to populate their front end product, which would then be influenced by their data science team to give the “estimate” based on whatever factors they deemed appropriate.
As someone whose job is predicated on objectively using primarily historical (for the past year) MLS/County data to asses what the market will allow a home to be valued at, it pains me to see people being taken advantage of by companies like Zillow who want to be “market makers” while not thinking through the implications of their strategies past making money on “easy” flips.
All this at the cost of local communities home values losing touch with the realities of the people who are living in an area to live, not invest. And here in Phoenix, it’s only gotten worse for anyone who doesn’t already have generational or attained wealth to find affordable housing.
The median price as of the past few months has cooled down to $350,000 - $400,000 for what would be considered normal for a less-than 2,000 square foot home. But, in some areas of the valley, it’s gotten so ridiculous that a sub 2,000 sf house is able to sell for $610,000.
On the one hand, I can appreciate these types of companies and business practices because they will keep me in a job making sense of the messes they make in the micro. On the other hand in a macro view, I hope this shakes some sense into the C-suite and product teams of these platforms that they need to approach this less as a “move fast, break things” type enterprise, for themselves and the communities they impact with their choices.
And a solution is exponential taxation for properties not being lived in by the buyer.
I'm done and tired of vulture capitalists and all sorts trying to make bank on where to live. I'm sick of landlords looking for shitty almost-passive income while I build them equity.
Fuck'em all. I want this "industry" to die in a pit of firey death.
I'm done and tired of vulture capitalists and all sorts trying to make bank on where to live. I'm sick of landlords looking for shitty almost-passive income while I build them equity.
Fuck'em all. I want this "industry" to die in a pit of firey death.
Can start with people who aren't citizens (overseas "investors"), and then people who may be citizens, but don't have the country as their primary residence. And then beyond a certain number / distance (discourage absentee landlords).
That’s what happens when you get involved in a business you really know not much about I.e. market-making and risk-taking.
Guess Zillow didn't have the brilliant insider information as to what the market would do that everybody thought.
"In the real estate industry, this service is called iBuying, "
Also, 'flipping.'
Also, 'flipping.'
I dont really think anyone would call the business models of Opendoor, Offerpad, and formerly Zillow "flipping." Yes, they did buy a house with the intent to sell it but imo the term flipping refers to a much, much smaller scale business that also includes fixing up the property in some way. That is not what iBuyers do.
Buying a house to make a short-term profit on the resale is flipping. You can cover it up with some marketing tech-biz baloney, but it is still flipping flipping.
Agreed.
In my local Multiple Listing Service, it can show you all deed history for a given property, it is most certainly labeled as a flip if anyone – iBuyer or no – buys and then sells within a short period of time, even if they don’t make profit. The intention is understood by all market participants.
In my local Multiple Listing Service, it can show you all deed history for a given property, it is most certainly labeled as a flip if anyone – iBuyer or no – buys and then sells within a short period of time, even if they don’t make profit. The intention is understood by all market participants.
The funny thing is that while that number sounds like a lot, it would only be about 900 houses in places like Cali and NY.
Tangentially related, I talked to a friend who works on geospatial data for one of the big vacation rental companies, and he was remarking how many homes in many desirable areas are now rentals. It's not that uncommon to see nearly entire neighborhoods converted to short term rentals now in some areas where they're still legal. Hearing that really depressed me.
We often talk about automation in terms of replacing various types of labor, but I've become really interested in automation creating adverse market incentives for smaller market participants because that's exactly what buying real estate right now feels like.
It's honestly quite scary how I'm in the top 2% of income earners in my generation and yet I could barely afford to buy a small place in a semi-desirable area. I can easily see myself not being able to compete in algorithmically dominated markets flush with venture cash in the future and I earn more than just about everybody I know today.