patrick.net

Lol. They got burned.

#fuckingmorons

Nice stock graph for Zillow:



Nice for anyone who's short that is.

This is richly ironic.
So many semi-educated and non-educated think they have discovered a clever way to make money; real estate!
But, evidently it’s not always so easy.

House flipping is the last place I want to be in 2021.

clambo says

This is richly ironic.
So many semi-educated and non-educated think they have discovered a clever way to make money; real estate!
But, evidently it’s not always so easy.

But they were using MACHINE LEARNING!!!!!

BayArea says

House flipping is the last place I want to be in 2021.

RE is a long game is what I've discovered. Flipping is kind of stupid unless you're doing 1031's. Basically not taking income unless you're a broker yourself.

If you flip within a year, you're paying short term cap gains at a higher percentage. Which if you're flipping time is of the essence. If you're using a broker, attorney, title, survey, etc. you're already 20% at minimum under water when you close on the purchase when you factor in capital gains at the end. That's not including labor and materials. You'd basically have to steal a house in this market to have a profitable operation.

You can bird dog it and do that, but it can get shady depending on who you're buying from. If you know a house could be worth $500k and you buy it for $100k, there can be consequences depending how you handled yourself. You do that with an old lady and the family finds out you may get sued. Also most flippers cheap out on materials and labor. I'd never buy a house freshly flipped, ever. I'd buy a fixer upper for myself or build, but I don't trust most humans to do things right.

WookieMan says

RE is a long game is what I've discovered. Flipping is kind of stupid unless you're doing 1031's. Basically not taking income unless you're a broker yourself.

+100.

I bought work-needed houses in nice neighborhoods or good houses in a downturn. But I held on to them for years as rentals before selling them. I also did the majority of rehab work myself.

Factoid from SFGate:
A 328 square foot house in Santa Cruz was sold for $1 million.
Welcome to property taxes, someone.
Gotta pay the healthcare for illegals, the school for their spawn, cop and firemen pensions, County goldbricks salaries and pensions, etc.
I’m curious which neighborhood it was, I’ll take a look at the article.

clambo says

A 328 square foot house in Santa Cruz was sold for $1 million.

328 sq ft is the size of a small garage.

HeadSet says

I bought work-needed houses in nice neighborhoods or good houses in a downturn. But I held on to them for years as rentals before selling them. I also did the majority of rehab work myself.

Could you could live in the place for a year and then claim owner-occupied for the $250k or $500k capital gains deduction? Out here in 94087 renting out a place makes little sense due to the imbalance in home price verses rental income.

HunterTits says

Yeah, we know. We've been covering this for over a week now here

It's nice to have a fresh thread for the specific topic of the Zillow crash.

Is anyone thinking that Zillow stock will recover and so be a buying opportunity? I really like Zillow's website for browsing houses. A decade ago I used their refinancing section very successfully. Unfortunately, even if they go back to what made their company popular among consumers, I don't think that would justify the still-inflated market cap.

SunnyvaleCA says

Could you could live in the place for a year and then claim owner-occupied for the $250k or $500k capital gains deduction?

It's two years out of five. So two minimum to claim owner occupied cap gains exemption of the $250k single and $500k married. Your best bet is to get a vacation rental if you're into real estate. Sell your primary or bounce back every other year and document your ass that you lived there 2 of 5 years. Sell both and buy a place that's modest, paid off, in a super desirable spot.

Also, for some reason, tax advisors aren't that intelligent. If you have a rapidly appreciating property, DOCUMENT EVERYTHING you spend on improvement. Say I'm single. I buy a house for $100k and sell it for $375k five years down the road while I live there. I owe on the $25k over the $250k cap gain. But wait. I spent $50k improving the house, even primary. I would still owe no cap gains taxes. It's not just investment properties.

It's rare but does happen. Old boss got a place for $150k and sold it for $900k in about 5 years. Married. He documented everything to the tune of about $200k in expenses. I think he got the full $500k exemption on the sale. Aka spent $200k for a total of $350k all in and paid almost zero taxes on that massive gain.

SunnyvaleCA says

Could you could live in the place for a year and then claim owner-occupied for the $250k or $500k capital gains deduction?

Yes, as WookieMan explained above. I had considered that, but my homes were always rented out and I liked where I was living. When I moved from my house in Hampton to a bigger house in Williamsburg, I had considered that if the Hampton house did not sell right away, I would rent it out for 2 years and try again, However, I had a full price offer within 3 days (in 2014).

House next door to me went on sale last week. Old guy who was my neighbor passed away a couple months ago and his heirs fixed it up for a couple months. It’s an expanded ranch, basically a 4/2 with an added family room. Not a bad house but not the best in the neighborhood. Listed for $950k, pending sale already. Housing is still hot, apparently. At least for good areas.

Patrick says

Nice stock graph for Zillow:



Nice for anyone who's short that is.

Is it too late to short it?

Shorting is dangerous, but it might be worth buying puts on Zillow.

The p/e is very high, so it seems unstable to me.

Holding puts is OK though. You lose only your purchase price.

HunterTits says

Why Did So Many Homeowners Sell to Zillow? Because It Overpaid.

I've been saying for years every time a "zestimate" would come up that I'd pay attention to it if Zillow itself would pay what they say the house is worth. When they actually started doing exactly that my wife was triumphant and I lost my favorite rebuke. I guess now I've got even better one: "even fucking Zillow has fucking got into money trouble because they fucking believed fucking zestimate was real" =))

Patrick says

Shorting is dangerous, but it might be worth buying puts on Zillow.

The p/e is very high, so it seems unstable to me.

Zillow has no P/E. The company is still losing money.

Inside the Collapse of Zillow: How Zillow grossly overpaid for Orlando Homes based on their Algo.

https://www.youtube.com/watch?v=2vnLDHidMds

Print article summary:

The East Harding Street home was originally listed by its owner for $285,000, neighbor John Miller recalled. Miller had looked at the property when moving to the Orlando area, but decided the layout wasn’t ideal. He bought the property next door.

The chatter in his community began after the Zillow sign appeared at the end of the driveway. The website listed the price of the sale: $445,000, 56% above the asking price.

“The house was still pretty much the same as when I looked at it online,” Miller said.

He remembered crews coming in to touch up the paint and replace a few ceiling fans after the sale went through, but nothing major. Then, Zillow relisted the house for $510,000.

“It’s also kind of disgusting,” Miller said. “For them to buy a property at the price that they did and not really do anything in the way to increase the value of the home, and then list it for that price.”

The process worked, though, because of the market frenzy. With homes getting 10 or more offers on their first day and prices increasing 12% annually, the company could afford to pay, knowing it would make it back and push nearby comparisons higher.

Until it didn’t.

...

Lopez’s data shows Zillow listed 994 Orlando-area homes over the past year. They sold 331 of those properties, and another 356 have offers pending. Including the home at East Harding Street, 299 are still on the market, accounting for almost 10% of all homes available to buyers this month.

Lopez and other agents believe that’s just the tip of the iceberg. The common estimation is that the company has another 500 or so homes in its inventory that are not currently listed. Many of those homes are expected to be sold at a loss when the company offloads them.

However, he said Zillow is expected to hold onto them until the seasonal market begins picking up in early 2022 to cut its losses. That, and the continued low inventory of available homes, means prices for buyers won’t fall dramatically as some would hope as Zillow dumps its stock.

https://www.msn.com/en-us/money/realestate/inside-the-collapse-of-zillow-hundreds-of-homes-to-hit-orlando-market/ar-AAQnywF

The Trend is your friend... until it ends. But the algo will keep going.

Orlando prices are outrageous, what was going for $180k 5 years ago was going for $280k a few months ago (we're talking 1970s-early 80s homes with little to no updating)... however, it's nothing but price cuts here there and everywhere...

I often wonder if Zillow's Zestimates actually set the market price instead of merely being a reflection of the market price. Buyers in my area are all in the computer / electronics / software industry, so tend to pay attention to sites like Zillow. Also, Zestimates tend to be quite accurate, as houses in my area are worth a tiny fraction of what the land they sit on is worth — even if you did upgrade your bathrooms and kitchen, the $75k extra value that Zillow missed is a rounding error in the $2.1 MM Zestimate. So, Zillow sets the base price in the bidding war.

SunnyvaleCA says

I often wonder if Zillow's Zestimates actually set the market price instead of merely being a reflection of the market price. Buyers in my area are all in the computer / electronics / software industry, so tend to pay attention to sites like Zillow. Also, Zestimates tend to be quite accurate, as houses in my area are worth a tiny fraction of what the land they sit on is worth — even if you did upgrade your bathrooms and kitchen, the $75k extra value that Zillow missed is a rounding error in the $2.1 MM Zestimate. So, Zillow sets the base price in the bidding war.

No fucking doubt about that.

Eman says

Patrick says

Shorting is dangerous, but it might be worth buying puts on Zillow.

The p/e is very high, so it seems unstable to me.

Zillow has no P/E. The company is still losing money.

Lol, @Eman

You are right. Last time I looked they did have a p/e, but now they do not.

This strikes me as wrong. It's like saying Casey Serin didn't have the ability to move the housing market.
Despite the headlines they've garnered, iBuyers remain a small share of the overall housing market, although they're becoming more prolific. Market share for iBuyers in Q2 reached 1% of all U.S. home sales for the first time, according to Zillow research.iBuyers don't really have the ability to move the housing market, said Gilles Duranton, professor of real estate at the Wharton School of the University of Pennsylvania. They're also selective about where they buy homes. Duranton said, as an example, taxes associated with real estate transactions in some municipalities are really high, an added expense for a company buying and selling homes at scale.

In the same article, there's an update about one of the other large players, Redfin.
In its earnings call last week, Redfin CEO Glenn Kelman said revenue for RedfinNow, its iBuying program, grew 1,000% year over year, although he added the company went into Q3 2020 with almost no homes to sell. "RedfinNow could have grown to almost any size if we hadn't been disciplined in how much we pay for homes," Kelman said during the earnings call. "In March 2021, we began lowering RedfinNow offers, in anticipation of a summer deceleration in home-price increases." Kelman said, so far in Q4, the sales RedfinNow has booked have averaged 100% of the forecasted price. He added the biggest challenge with RedfinNow has been renovations: the time the company has needed to prepare a home for sale increased from 28 days in Q2 to 37 days in Q3.
The other two large iBuyers, Opendoor and Offerpad, are reporting this week as well.

Offerpad at least appears to be selling homes for more than they were bought. Still, losing money.

Mortgages: what could go wrong?
Offerpad Bundle Rewards allows customers to receive multiple discounts when both buying and selling a home with Offerpad and by obtaining a home loan through Offerpad Home Loans. Since launching in the third quarter, customers in 10 out of our 21 markets have utilized this program.

Opendoor stock was up 15% today. Opendoor flipped almost 6,000 homes last quarter. Contribution profit per home sold was $28,000. And, of course, they reported a loss this quarter.