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Comment by JKCalhoun | Hacker News Reader

> At a high level, the story of Zillow Offers is a story of our industry at its best.

Not in my book. All I see is the price of real estate being driven up by corporate greed and the individual home-buyer being shut out of the market.

Is it wrong of me to hate "flippers" (be they corporate or private)? Pure capitalists will tell me that every property sold went to the highest bidder — in the case of a flipper winning they were willing (able) to risk the capital to hopefully turn a profit on the flip.

I suspect if you dig deeper you might find sales going to flippers because they had 100% cash offers, because they are better at "the game". I see no reason to punish prospective first-time home owners in this sort of market.

But I don't know what the answer is either.

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The answer is to build houses and print money to buy them with.

If houses were a (much) smaller bet for the buyer, there would be more flexibility to build houses where demand exists and a faster, lower-drama exit for people who don't like the changing nature of their in-demand neighborhood.

The inertia created when people have their life savings tied up in their house perpetuates the problem of affordability, by making the areas that have the most mismatched supply vs demand the least likely to deal with the problem.

People would probably suggest regulation or taxes to “fix” the problem but I think the root of the issue is artificially low interest rates, freewheeling lenders (again), and the fact that there are few other places to deploy your money and get some yield. There is also the tax benefits of owning income properties which should probably be looked at.

The answer is to reduce regulation.

The process of building new structures is filled with so much regulatory friction that it is impossible for the average person to even consider building their own home.

Which regulations would you relax? Surely there is some unnecessary red tape, but it's not as if building regulations have been developed for fun, it's largely in response to safety issues and so on.

Quite a lot of regulations have nothing to do with safety. Minimum set-backs, minimum parking requirements, maximum building heights, etc. All of these add cost and reduce density.

Single-family zoning is another local government policy that is absolutely intended to constrain development, not improve safety.

Well as someone who lives in a fairly regulated housing market (Berlin) I'm happy about all the regulations you've mentioned as they prevent negative externalities which would benefit real-estate developers at the cost of everyone else. Imo targeting a specific population density is within the mandate of local government, as too-high density causes all sorts of issues from traffic to health and everything in between. If you want to unchain developers on density, I invite you to take a 10km drive in Delhi or Bangkok and tell me if the cost generated on a daily basis in terms of time and stress is worth it.

I am in favor of finding ways to encourage more housing, but what you're calling for is essentially to invite favela housing in the developed world.

Seriously? Berlin's tower blocks are the favelas of the developed world.

Also, the reason why Berlin hasn't had the same pressure is because it is one of the few cities in the developed world that has actually shrunk over a multi-decade period. It is very easy to limit population density when there is no pressure on housing. And, ofc, the historical division of the city meant that it had to develop more than one centre. These factors aside, afaik, the development of Berlin hasn't been exceptional...they built suburbs when there was pressure on housing in the early 20th century, built public transport, those suburbs eventually integrated into the city...very few cities have grown through greater intensity in the centre because cost is prohibitive, regardless of regulations.

Nothing to do with regulations, everything to do with historical circumstance (also, the guy you replying to is quite correct...if you actually look at housing regulations in the US, they have been a tool for racial/economic segregation...being real, that is why the limit on multi-family housing exists, the US has very low population density, saying they will become Delhi if they reduce regulations is hysterical).

You've proven my point exactly. Many of the the Plattenbauten (GDR-era block housing) could not be built in Berlin today because of current regulations. Berlin is targeting a moderate population density with mixed-use neighbourhood, which is the recommendation of subject-matter experts and makes it in general a very nice place to live. There's a huge desire by developers to increase density within Berlin and I have no doubt it would increase massively if there was no check against this.

Nobody is arguing that the entire US would become like Delhi, but can you seriously hold the opinion that housing deregulation would not result in mass production of low-quality housing near major population centers?

There are problems with extremes on both ends. For instance the NIMBY-driven housing policy in SF is not what is needed to create sustainable housing. But is a somewhat unique case, and it doesn't mean an extreme swing in the other direction towards deregulation would lead to a good outcome. Sensible housing regulation is undoubtedly a requirement for sustainable urbanization.

You originally claimed that these regulations were for safety:

> it's not as if building regulations have been developed for fun, it's largely in response to safety issues and so on.

But they're not. As you (now) say, they're for reducing development. The original statement about safety was substantially incorrect.

Surely you can grasp that "and so on" implies other reasons than the one explicitly stated. Negative externalities are another example of a valid target of regulation.

It's not about safety, it's also about amenity and suitability and sustainability. In some areas, density is important given the population, in others its not.

Parking requirements are about local traffic management as well. Set backs are about ensuring natural light. Some local regulation is about NIMBYism or HOAism, that sort of thing is where reform might be better addressed.

Lack of set-back rules do not prevent building houses with set-back. Lack of parking law does not prevent building parking. Developers will not build density if it isn't a profitable use of the land -- i.e., important given the population. Rezoning to permit density does not immediately replace all existing structures.

Mandating these things is some of that "local regulation tied into NIMBYism" you mention.

Profitability isn't the only important metric here. It might be profitable for developers to increase density well beyond the point where it causes measurable negative externalities towards everyone occupying an over-crowded place.

Cosmetic stuff, square footage requirements, height requirements, parking requirements. Basic structural engineering, fire safety, etc. requirements of course would stay but if local code is more stringent than national you might take a look at it (e.g. things like a local code requiring copper pipes when PVC is acceptable and much cheaper).

(Straight) PVC is not acceptable for hot water supply lines.

What are those red and blue plastic lines made of?

PEX (cross-linked polyethylene).

Those are suitable for hot and cold supply.

GP obviously meant PEX, which is another plastic. (For people not familiar with modern plumbing: PEX is used for supply; PVC is used for drainage to the sewer.)

Maybe that’s what they meant, but PVC is also used for water distribution, cold water supply, and sprinkler piping (obviously all cold water but still pressurized supply applications), so it’s not at all clear that when they said PVC they meant PEX. CPVC is rated for domestic hot water supply, so they could have meant that as well. I’d say PEX was an underdog rather than the obvious alternative meaning.

Unless there's a need to build to a higher standard with longer maintenance periods, so that housing stock can have a longer life. Houses exist for decades, better to build for that without needing maintenance but perhaps costing more initially.

Developers will always attempt to skimp on quality to save/make more money. Even people building their own home will sometimes try to avoid compliance. That's why the regulations are there.

The Florida buildig collapse showed whqt happrns when regulation is "reduced".

Because there's a societal need to ensure that the housing stock is safe and effective. We invest (or should) a lot of our taxes into local amenities to ensure that housing is provided the best environment. Transport, schooling, roads, etc.

That housing should also be up to a similar standard in terms of its externalities like pollution and energy efficiency etc.

We have regulations for air travel, for car emissions and efficiency, why should housing be any different?

> Because there's a societal need to ensure that the housing stock is safe and effective.

And this is accomplished via building codes, which are rigorous and applied almost uniformly in the U.S.

> We invest (or should) a lot of our taxes into local amenities to ensure that housing is provided the best environment. Transport, schooling, roads, etc.

And this is the model that has made blue cities unaffordable for the poor. They're not environmentally friendly either, their schools are awful, amenities poor, and transportation lacking. It would be hard to find one single issue where there is even parity of centrally planned quality-of-life concerns in blue cities vs red cities.

The question is not "regulations" persay. There is no magical regulation slider bar that can be adjusted to optimal result. It's what those regulations seek to accomplish. In many U.S. urban metros, those regulations are targeted to what city policy thinks the owners should do with their property, and not what they want to do with it. It's not clear those regulations have had their intended effect.

We have regulations for air travel, and that raises the price for air travel, which means some people can't afford air travel.

We have regulations for car emissions, and that raises the price for cars, which means some people can't afford cars.

We have regulations for housing, and that raises the price for housing, which means some people can't afford housing.

How many people should not be able to afford housing? Is the number of people who currently can't afford housing too low, or too high? Should we increase regulations for housing, or decrease them? Are we making the right trade-offs?

Yes, you are wrong to hate flippers. You are wrong to hate anyone who is working hard to make an honest living. Yes, flipping is hard work.

All successful work probably displaces someone else in some way. If you're good at your job, you're "denying" that job to someone less skilled. If you work in software, you're automating things that would require more labor if done manually. Fortunately, humans can pivot.

Either hate everyone, or hate no-one. You can't just hate flippers.

I think there are ways to make money that are socially negative value -- e.g., theft is a pretty obvious one, or bitcoin mining.

House flipping isn't a social negative. They're doing a productive activity and producing value. They aren't long-term speculators removing housing stock from the market. It's essentially home renovation, done by a 3rd party owner.

Bitcoin people believe it is a moral good (myself included), and have extremely strong arguments in favor of that view, which are rooted in morality and economics. Thus, when you make a snide anti-bitcoin remark without actual content, you come across as trying to invalidate bitcoin through mere peer pressure, which we all know is juvenile.

It's like Trump voters who criticize "libtards." We all know it's not a valid way to discuss something.

In fact, the expansion of the fiat money supply enriches the wealthy through the Cantillon effect. Then, because the value of money is going down, they pile into assets like housing. For instance, the US is becoming a nation of renters due to this effect. The stock market is similarly distorted. We need bitcoin because we need an objective form of money. That would allow stocks and houses to stop being stores of wealth and reflect their true economic value, which would be a huge boon to everybody.

I'm guessing the energy thing is what you think your anti-bitcoin argument would be. Bitcoin mining is also such an efficient market that in the long run, only the most efficient forms of energy--such as nuclear and geothermal--will be viable for it. Bitcoin is already helping to advance "green" energy. This is abundantly clear to people involved in the mining industry.

That's a pretty binary take on an activity that exists on a ethical gradient.

Ethics is what we decide it is. How about not condemning practically everybody as some kind of sinner, the way you are? That's a counterproductive view that reeks of Christianity.

Sorry, my sibling comment came across as a little too harsh and accusatory (too late to edit now).

It doesn’t even matter if it’s hard work. Flippers take advantage of a market inefficiency, and just like everyone who does that, they make the market less inefficient. That’s a good thing even when it’s easy.

All I see is the price of real estate being driven up

Who is doing the selling? "Wall St Fat cat Co" or the average Joe who saw his house value go up by a LOT?

When Conglomocorp sells one of their houses, they just get the cash and can realize profits.

When average homeowner Joe sells their house they still have to live somewhere. They must immediately use that money for another house, which is also inflated. The higher sale price doesn’t matter.

Average non-homeowner Joe trying to buy a first house is SOL.

flippers make the real estate market more liquid, in the same way high-frequency trading does for stocks.

Flippers take the risk of the market falling while they're flipping - that's the price they pay for their profits.

You'll have to educate me then: is more liquid better for the buyers or sellers?

Both. In an illiquid market, it takes a long time to find buyers or sellers. You are incentivized to overprice (if selling) or underprice (if buying) and wait a long time to see if someone will match you. A liquid housing market means people can buy or sell the house at the "right" price without waiting many months or years.

As a seller, would you rather wait a year to make a bit more money? That wouldn't be good. That would be crappy.

Sure, but the more important point is that the market represents housing. Having housing empty is pointless, so market speculation is that is not about the rent from the asset but only its capital growth leads to that exact outcome, empty housing has lower expenses and depreciation in reality, which helps maintain the asset's value better than if someone was living in it.

I haven't heard of housing sitting empty. Even if there is a flipper in the chain of possession, houses end up getting acquired by long-term investors who rent them out or people who actually live in them. As far as I'm aware.

Here’s a thought experiment: if I told you the market was going to be less liquid and you may not be able to easily sell the house you’re about to buy, wouldn’t that change your behavior?

I think you’ve bought into the tik tok narrative that somehow it’s zillows fault that houses are expensive.

I'm buying housing for myself. It would be a potential relevant thing to take into account between choices, but I still need a house.

I'm buying a long term asset, so the liquidity of the housing market is not relevant to me, unless I'm actually buying for a specific short term, like a planned work period.

Liquidity of the housing market is only important to the agents and the loan originators because they make money on the flow.

> if I told you the market was going to be less liquid and you may not be able to easily sell the house you’re about to buy, wouldn’t that change your behavior?

No. Like a normal person, I bought my house to live in and to improve and to stay in for a long period of time. It isn't a speculative investment vehicle.

It seems like you’re presenting a straw man. Being able to sell your house and not be tied to one home for life is a reasonable desire that has nothing to do with speculative investment.

No, it's that if I need to sell it I've structured my finances and my life to be able to take time to do it--because I've intentionally made decisions with the remodeling in my home to be suboptimal for selling anyway. I'd have to put up a wall and reroute a bunch of plumbing for my laundry room off my master bedroom so I could turn it back into a bedroom because that's what the dollar-signs-for-eyes crew values, so why would I be worried about selling it in 48 hours?

This is an industry I actually know a teensy bit about. Normal people don't need to sell a house in two weeks. That is an abnormal condition brought on by stupid, disinterested money flooding the market and the idea that everyone must be hyper-mobile all the time is one brought on by the more deranged, "humans exclusively acting as work producing automatons" part of a market economy. Solidity and permanence are valuable. I'd go so far as to say that when you take into account the benefits of long-term residence and ownership--and they are benefits you will not see in your ML model, such as a cohesive neighborhood where you actually know and maybe even interact with the people who live around you--that it might even be a positive to discourage market thrash. You know. For humans, and not investors.

It’s clear your approach to housing is consistent with your life choices. I think maybe you are just thinking your approach is “normal” and the right way to do things.

A lot of people buy starter homes, or homes in areas they do not plan to stay 10+ years, or homes they outgrow. That’s all normal too.

> structured my finances and my life to be able to take time to do it

so you do agree that it takes time to buy and sell real estate. The reason liquidity is better for market efficiency is that liquidity allows the price of the asset to move towards the "true" price, where either party of the transaction doesn't feel they've been cheated.

If you claim that house flippers are "cheating" the long term buyers, then you must also agree that the market is currently inefficient, and that the long term buyers is paying above the "true" price. Liquidity would actually alleviate that problem!

if you don't agree that flippers are cheating their price higher, then you must also agree that the long term buyers are getting a better deal.

So either way, liquidity makes the market more efficient, and results in the "true" price of the asset to be revealed sooner and easier.

> if I told you the market was going to be less liquid and you may not be able to easily sell the house you’re about to buy, wouldn’t that change your behavior?

It would not change my physiological need for shelter, no

“Oh I might not be able to sell this for a profit in two years, guess I’ll die in the street”

Liquidity is good for both buyers and sellers.

Arguably, it's good for both. Buyers have more quality inventory to choose from and can purchase a home with lower risk of getting trapped in it permanently. Sellers get faster sales with a higher floor on prices.

What's even arguable about it? Liquidity is good for market participants, period.

Liquidity is NOT good in a dire-necessity supply-constrained market like housing, because it invites capital which could've been spent elsewhere to lock up unnecessary housing units (houses are empty while being flipped), further constraining supply of a critical resource.

Imagine if drinking water was treated as a speculative asset, with large percentages of a countries water supply being stored in tanks and sold back-and-forth on paper between capital-rich investors instead of actually being pumped to where it was needed through pipes.

> Imagine if drinking water was treated as a speculative asset, with large percentages of a countries water supply being stored in tanks

then you'd see people not waste any water at all, and fix any pipe leakage, and conserve water, and use water efficient agriculture methods etc.

The price of a commodity determines how much and how easily it is available. The fact that water is so liquid (both in terms of the price, as well as being an actual liquid) is because of the high amount of investments made into obtaining it over the past centuries. Liquidity of any asset (or commodity) is a good feature to have imho.

You'd also have people die of thirst, just like the homelessness problem in expensive cities in the US right now.

Flippers also reduce the supply of housing units for the time they are unoccupied, which could be months or years, especially when sold to other flippers. More liquidity is not necessarily a good thing for the housing market, as it tends to increase the number of speculators on the market, contributing to a vicious cycle where more homes are being flipped between speculators than actually occupied by people who need them.

It pains me to watch people apply simplistic theoretical laws of supply and demand to something as complicated as housing. The map is not the territory. There are massive costs to increasing supply, as well as psychological/community costs to moving homes, which are not cleanly captured in any Economics 101 textbook.

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