Zillow in Crosshairs
Steve Eisman, the hedge-fund manager famous for betting against the US housing market in 2008 explains why he is shorting online real estate company Zillow.
“I would say Zillow has one of the most flawed business models I’ve seen in a very, very long time,” he said during an interview on CNBC.
“They had a good business which was their internet real estate platform. The growth in that has slowed dramatically so that now the growth is zero…
The most problematic is what they call their, I believe, iHome business, an internet buying business where they actually go out and buy homes and flip them. I actually think the company doesn’t understand the risk, the real risk of this business which are massive. And one of the ways you can see that as last night on the conference call the first words out of the CEOs mouth when he talked about this business, was the to how big the TAM was, the total addressable market. And of course, the real estate market, United States is very, very large. But it’s a miss application of the word TAM, to apply it to the real estate market, because there really is no TAM, and the way people think about in terms of the internet, there are thousands of many markets all over the United States. They’re all local, they’re all extremely different. They all have incredibly different risks…
Zillow Model Slammed by Steve Eisman: Watch Steve Eisman’s interview and commentary with Frank Garray below
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2016 CEO of Zillow house sold for 40% less that it’s Zestimate. What would 40% do to a typical buyer whether +/- or how about the overall maket for that matter? As I always say; Junk in Junk out! What do the lenders have to fear when the taxpayers will just keep bailing them out. Maybe I need to start a bank..lol
A quick Google search relating to this topic resulted in finding that 20% of the time their results are off by more than 20%. One in five are off by 20%, wow! What would happen if five out of five homes were allowed to close at the Zestimate price with typical financing for each (no appraisal)? The one in five problem would instantly taint the market data and would corrupt all/most future listings, and or appraisals. A one in five problem becomes a five out of five problem.
Seek the truth.
Can’t argue with logic! He’s right. Those thousands of unique, local markets coupled with the myriad differences not just in physical RE, but also in the ownership rights are wy Zillow and all other AVMS are such egregious failures.
From minor easement encroachments to legal non conforming to flat out illegal and costs to make something legal, automation just cannot do what the trained appraisal professional can.
Honestly think he’s dead wrong.
The Hedge fund he started in 2012 under performed and eventually FAILED
A blind monkey throwing darts at the stock market page did better than he did.
His lame excuse for under-performance was :
“Making investment decisions by looking solely at the fundamentals of individual companies is no longer a viable investment philosophy.”
Wall Street Inside Trading POSERS need to stop promoting themselves as predictors of he future and STAY THE F*CK OUT OF REAL ESTATE
Zillow gets 36 MILLION unique monthly website visitors per month.
Worst case scenario……. they are acquired by Amazon or Facebook.
No shit, Sherlock.
By the time this housing “correction” finishes up, we may be told that the bubble was brought on by the flawed “Zestimates”…the public bought the concept and I have heard some homeowners can’t help themselves; always checking the Zestimate on their property–sometimes 2-3 times per day!! It could work the other way too where the buyer, being ill- informed (by the false valuations of the Zesty Zestimates) of the value of real estate, willing went out and overpaid for the home they bought!
Now, they feel duped; especially since no one told them how much it costs to maintain a home. Landscaping costs are through the roof; you need to pay someone to clean gutters, etc. unless you like to do such a thing, and on and on.
Homeownership has become unaffordable and someone forgot to tell the buyers out there–until they figured it out the hard way! They now own the monster–and they have to feed it!– Or sell it!
If an appraiser holds him or herself out to the public as an expert there are (and should be) consequences relative to the impact of the error (when made). The same holds true with doctors, engineers, dentists, and even attorneys.
Internet-related start-ups are relatively new and still at a stage where they can lie and deceive regulators about what they do… until it hits a saturation point. Zillow can no longer pretend they are an internet novelty and therefore exempt from states appraisal laws. Their marketing created the impression (false or deceptive advertising?) that they are somehow experts and appraising or writing predictive software. Now let them face the consequences. ALL of them.
Frankly the same holds true with UBER. I like the service, but WHY should they have been allowed to bypass each cities taxi licensing laws; medallion requirements, or special location surcharges (like airports)?
Free Enterprise also includes an inherent assumption that we are all playing by the same rules.
Totally agree! Zillow is crap and has been from the beginning.