This may not be news to you, but Zillow got into the business of flipping homes in several larger metro areas. They recently stopped buying houses and are selling many of their homes for less than they paid for them.
If you read headlines or even worse, get on YouTube, you could conclude that the market is about to crash and Zillow knows it.
I don’t think that is why they are selling their homes for less than they paid for most of them.
I think they overpaid for them in the first place.
Zillow’s paper thin profit margins on these flipped homes was based on their data. I have always said you can’t argue with data. Data is always correct all the time. The conclusions drawn from data is not always correct though.
Their data told them what a house should be worth and they paid that for it. While I don’t know exactly what data they use, I imagine it is very similar to the data an appraiser would use such as general condition, square footage, features, etc. Once you have all that, you look at what houses have sold within a radius or within the same neighborhood, make adjustments for hard data differences and then whatever number is at the end of the equation is their Zestimate of value.
What Artificial Intelligence and computer algorithms cannot tell you though is what a buyer will like or dislike about a house. It cannot tell you that buyers tend to not like a backyard that slopes uphill. That they usually don’t like a steep driveway. That there are two Ball Home floor plans all over the Bluegrass that are same size and one of them always sells for more money. That there can be a huge value difference between two identical floor plans within the same neighborhood just due to where it is within the neighborhood. All of these things are subjective.
Zillow has been telling the public that they don’t need a Realtor any more. All you need is them. Sounds to me like Zillow could have used the local expertise that only an experienced realtor can provide.
Just gonna jump right into this:
Gen Z will have a harder time getting a house than the Millennials did. They are the biggest generation ever. They will be entering the real estate market at about the time Millennials are selling their starter homes. Great news if you own a 1300 square foot house in Masterson. Times will be tough for them, but they will keep the market going strong. Every seller of a starter home needs a first time buyer so they can move up. That first time buyer is the oil that lubricates the whole market.
The Millennials will be moving up to their 4 bedroom houses on a cul de sac in a good school district because that is just a natural progression once you start a family. This is great news for Gen X sellers who will be downsizing to medium sized houses in upscale neighborhoods.
What makes me think all this? It’s not really crystal ball as much as it is history. Everything I just described happens with every generation. You buy a smaller house you eventually outgrow, you move up at least once to the house you raise your family in, then you downsize.
So what does all this look like for Lexington? More gentrification as it becomes expensive to live anywhere in Fayette County. I know it sounds unheard of, but the neighborhoods that nobody wants to live in like Cardinal Valley and Winburn may become the budget choice as similar neighborhoods with better locations become too expensive. I know it sounds crazy, but when I was in high school, people didn’t want to live in Kenwick and now those houses equal Chevy Chase for price per square foot……yesterday’s bad neighborhood can easily become a tomorrow’s good location. Plus, it isn’t like we are ever going to see brand new starter homes ever again. All that can be done is update/remodel existing houses. The people that flip houses need some margin to do this so they will buy distressed houses in whatever neighborhoods are affordable, just like they are doing now in downtown, Melrose, The Meadows and all those streets that begin with D around Pasta Garage.
Before long, I don’t think there will be any new construction in Lexington. We are already filling in every spot big enough to stick a short row of townhouses. This means that being in Fayette County will be even more expensive, and people will go to surrounding towns like Nicholasville and Georgetown even more. One day, people will discover that Winchester is only 15 minutes from Hamburg and the interstate passes right through it. I’ve never understood why more people don’t move to Winchester?
Remodeling will be hot too. With not much new construction, people will start remodeling existing houses more and more.
Sort of some majorly huge economic melt down, I think housing is going to be strong for quite some time.
Okay Zillow. I can deal with you saying every house has a carport. I can deal with your inaccurate Zestimates. I can deal with you often messing up school districts.
What I can’t deal with though are the Pre-Foreclosure listings.
Why? Because they ARE NOT FOR SALE!
Zillow, people see a house on your site and think it is for sale. Why do you confuse the public and leave it to us agents to explain to our clients that the house you just posted is not for sale?
Here is what is going on with those Pre-Foreclosure listings. The person who owns the house is far enough behind on their mortgage payments that the lender has filed a lawsuit. As soon as that happens, Zillow posts it as a Pre-Foreclosure. Since the person who owns the house is not the bank, you cannot go see it since it has not been foreclosed yet.
If the lawsuit goes the way the lender wants, the house will eventually be sold at the Master Commissioner’s sale. The Master Commissioner is who is appointed by the court to sell the house. Anybody with 10% down and proof of the remaining funds can go bid on the house. You have to have the funds available. You can’t go down there with 10% down and a preapproval letter for a mortgage. You have to show proof that you have the balance of the money available. You also can’t see the house. You have to buy it without any type of inspection contingency.
There are two types of buyers at the Master Commissioner sale: Investors and the Lender for the house. Sometimes investors get the house. Most of the time the lender buys the house. Well, we call it a sale but in all reality what is happening is the money the lender pays for the house goes to settle the debt the seller owed them so they are getting it right back. Picture a dollar getting pulled out of your left pocket and going into your right pocket.
If an investor buys it, most of them either flip it or rent it. If the lender buys it, it eventually goes on the market for sale. This time when you see it on Zillow, it will really be for sale….and it will probably say it has a carport. And the Zestimate will be inaccurate.