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Comment by piker | Hacker News Reader

Yes if the market is for rice, but illiquid assets are an entirely different market which can be crazy warped by a few important participants.

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How so, could you explain that a bit? I could see them causing a price dip or spike in purchase prices if they bought or sold all at the same time, but that would affect their own prices that they pay or receive, right? What is the market manipulation with 4% of housing stock?

Houses are unique and have irreducible transaction costs which makes the market for them very inefficient and slow relative to a commodity. For one example, if you are in the market for a 3-bedroom house with a garage, the market is already segmented much more narrowly than can be the case in an efficient market like that for a commodity. If you have to move into one as soon as possible for a new job, and you know closing will take a minimum of 3 months, the market for your prospective houses is going to be extremely small without even factoring in other distinctive characteristics like driving distance and schools. 4% of the aggregate market may represent 25-30% of your “market” nonetheless.

Thanks for that! I guess I don't see how there could be market manipulation without also damaging the manipulator, especially in a market that is as transparent as housing, with nearly every sale being at a public price.

Rental manipulation is much much easier, and probably more prevalent. But unfortunately the price-gouging lawsuits from using software to share pricing information have been settled with the landlords paying peanuts.

Maybe if they keep buying the houses in the top school district of the entire city. Which I've never heard of anyone doing.

Maybe easier to just form a realtor cartel?

This assumes that the entire market is for sale at a given time, which is not true. If you have 3 kids and two parents who need to drive to work, there may be only a single digit number of viable houses for sale at a given time in your school district.

I'm not sure deliberate manipulation per se, but the market would be warped by a single participant that owned 4% of the aggregate market. This is especially true if that participant didn't adhere to the normal holding periods and purchasing rationale as the remainder of the market participants. Consider that market manipulation concerns are (some of) the reasons significant holders (>= 5%) of even extremely liquid public companies are required to publicly report ownership and ownership changes.

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