Zillow. Opendoor. Offerpad.
These are the Digital Pimps of Arizona Real Estate’s Mean Streets. Publicly traded corporations posing as Real Estate brokerages in order to gain access to the treasure chest formerly known as ” Our Real Estate Market “. They each serve a King, and that King is The Algorithm.
There is a method for turning The Algorithm’s wavelengths into windfalls. Today we will introduce you to the door to that rabbit hole. Will you go through it?
The Algorithm is 2021’s Best Actor in a Supporting Role for Real Estate Market Manipulation. The Algorithm is a finite set of unambiguous procedures and equations instructing The Big Three (Zillow, Opendoor, and Offerpad), on how to ‘control’ the housing market. What homes to buy, how many to buy, how much to spend, and how many thousands of homes to hold Off Market, out of reach of the public, in order to maintain market control.
Listen. Understand. The Algorithm is out there. It can’t be bargained with. It can’t be reasoned with. It doesn’t feel pity, or remorse, or fear. And it absolutely will not know what happened to it when we get done exploiting its hidden flaws.
Care to chance the rapids? Dare to dance the tide? Shall we play a game? Let’s Go:
Once Upon a Time…in mid-October our mass media announced an extinction level event for Zillow’s home purchasing program.
“Zillow slams the brakes” ~ CNN
“Zillow won’t be buying more homes” ~ NPR
“Zillow to stop buying homes” ~ MSN
OOPSIES! Now the truth comes out:
Zillow bought more homes in November than ANY other Buyer in our Phoenix Metro market. Who says quitters never win?
ZILLOW – 87 Homes Purchased in November
Opendoor – 83 Homes Purchased in November
Offerpad – 14 Homes Purchased in November
That news story was an obvious lie. The truth is right there above, accessible via public property records. Don’t expect any retractions from the press, Zillow is one of their largest sponsors. Zillow, Opendoor, and Offerpad are publicly traded corporations, with shares listed on the stock exchanges, which means these mechanical manipulation monsters of market mayhem answer to the SEC.
“At the Securities and Exchange Commission (SEC), we work together to make a positive impact on America’s economy, our capital markets, and people’s lives.”
That’s the shiny new product disclaimer tattooed upon the SEC’s website. Welcome to 2021. The SEC’s former introduction used scarier language, utilizing rough words regarding the vigorous enforcement of securities laws and holding wrongdoers accountable. Yikes! That’s Offensive! This year the SEC switched tone, adopting this softer message of “positive impact”, a term that’s harder to define than Charles Barkley’s six pack abs.
Pro Tip: There are no hands on the wheel at the SEC. There is no punishment for dishonesty at the stock exchange unless you count prostitutes, cocaine, and million-dollar bonuses as reprimands.
Publicly traded companies such as Zillow do not hold press conferences to tell you the truth. Just the opposite. This is a game, information is strategy and honesty’s been trampled under the wheels of “positive impact”. On the bright side we now know what the definition of “IS” is!
Is bullshit.
We live in a cynical world. We wade through a septic tank of lies from the moment we wake up and open the information spigot. Like an ill-fitting sweater, cynicism is easy to slip into, yet difficult to pull off. Cynicism is an umbrella we use to shield ourselves from the relentless downpour of disinformation, a safety measure of sorts. But it indulges a self-righteous attitude that can shadow our perspective, darken our outlook, and fashions a lens that focuses in on the worst in people. We must be careful with our cynicisms, lest they turn our vulnerability into a weapon against our own optimism.
WHAT’S THE GOOD NEWS STANLEY?
There were only 5,040 Home Sales recorded in the Arizona MLS last month. Our AZ housing market is in the midst of its longest ever inventory drought, so we find ourselves strangely celebrating such a slow sales month. A healthy housing market requires a healthy heaping of homes for sale. Re-establishing balance will require Miller Light style liquification, Less sales! More listings! Our Real Estate market is seasonal and cyclical. We must look backwards to understand our forward momentum’s sudden slowdown. SCREEECH!!!
Who wants to see a chart? Let’s see a chart! Chart! Chart! Chart!
The Listings charted below include those aforementioned home sales, plusLand and Lots, Commercial, and Multi-family properties listed on the Arizona Regional Multiple Listing Service (ARMLS)
Active Listings: How much total property inventory existed on market when the month ended
New Listings: How many NEW Listings were entered that month
SOLD Listings: How many Listings SOLD that month
Months Inventory: Healthy Supply and Demand is 5-7 months. Our Market is in crisis, year three.
We don’t make predictions, but we do point out repetitive patterns:
Every January gets cold and every July gets hot.
The volume of New Listings drops every December and rises every January.
December sees more Sales than New Listings
“Sold Listings” hit the charts when they close. Money’s exchanged, title transferred, champagne pops. SOLD! Real Estate closings can take days, weeks, even months, depending on the escrow’s length. Sold Listings are a reflection of earlier market activity. What you see closing in April may have gone under contract in January. Only a fool uses Sold Listings to track market momentum. Zillow’s algorithm, for instance, uses Sold Listings to track market momentum.
That’s as safe as driving forward while staring into the rear-view mirror.
A PAIR OF BUTTS IS AN ASSET:
It’s no company secret that January is our market’s biggest month for homes going Under Contract. Specifically, the January following a Presidential election has been the record setter, consistently, repetitively, remarkably since we started tracking the housing market in 2005. There is a psychological component unleashed by the finale of a Presidential election cycle. It’s like a pressure valve opens with the New Year, and it doesn’t matter who won, home sales explode. Savvy property investors know this and wait until the year after an election to SELL. 2021 has rewarded the savvy property investor.
2022 has a January scheduled as well. We expected to see The Big Three (Zillow, Opendoor, Offerpad) going ALL-IN with purchase volume in November, so they’d have cards to play when Buying Season rolls in. But alas, their November purchase volumes appear quite pedestrian. At first glance.
ZILLOW – 87 Homes Purchased in November
Opendoor – 83 Homes Purchased in November
Offerpad – 14 Homes Purchased in November
87, 83, 14. Those are surprisingly low sales volume numbers. Or are they?
ZILLOW
The company that quit buying houses, spent $36,815,722.00 last month Buying Houses in Phoenix Metro. Their sales volume looks pedestrian, until you add up how much they spent! THIRTY SIX MILLION DOLLARS! That’s $852 per minute. Zillow slams the brakes with diamonds on the soles of their shoes!
OPENDOOR
This was the first month all year that Zillow bought more homes than Opendoor. But never fear, Opendoor still managed to out-spend Zillow. Opendoor’s month end tab was $38,832,750.00. THIRTY-EIGHT MILLION DOLLARS! Which clocks in at $899 per minute.
OFFERPAD
Just 14 transactions, for $6,103,800. Go home Offerpad, your Six-Million Dollar Manhood must have been in the pool.
The Big Three…
Collectively managed to dump $81,752,272 into our housing market, in a month with a week missing due to Thanksgiving.
87, 83, 14. CHA-CHING!!
Our Housing Market reached a tipping point in July 2021 when The Big Three collectively owned more homes than the ARMLS system had Active For Sale. In an inventory starved housing market, this behavior could be labeled unethical, some might call it outright malfeasance. Not me! As a licensed Realtor I am not allowed to make such market manipulation accusations.
The Big Three have toned down their warehousing ways a tad in the months since:
ZILLOW – Currently Owns 1,113 Homes
169 are Active For Sale
OPEN DOOR – Currently Owns 2,564 Homes
803 are Active For Sale
OFFERPAD – Currently Owns 327 Homes
140 are Active For Sale
Which still leaves thousands of homes being warehoused by The Big Three, Not For Sale to the public. In a housing market starving for inventory, The Big Three have placed an armed guard in front of the pantry, and you can call him Al.
Al Gorithm
Algorithm is a word used by House Flippers when they don’t want to explain what they did with Wall Street’s money. We aren’t going to forensically examine every home purchase made by The Big Three in November, suffice to say they spent a lot more than necessary to acquire these homes. We don’t see a “good deal” anywhere in these purchases. Not a single bargain. We could beat these prices blindfolded.
$200 per ft in San Tan. $339 per ft in Mesa. $399 per ft in… Litchfield Park!?! YOU PAID WHAT!?!
“Hello, I’d like to report a murder.”
Market Makers
Market makers are high-volume traders that literally “make a market” for securities by always standing at the ready to buy or sell. The Big Three are the Market Makers of our Phoenix Metro housing market. Don’t like the high housing prices? Thank them. They built them by strangling your housing inventory while simultaneously raising prices via purchase and sale.
These “Special Purpose Acquisition Companies” (SPACs) are competing against each other for market share in a housing market with less inventory than normal, thanks to their nasty habit of warehousing the inventory. These companies are outbidding each other, whether they are aware of such or not. Their business model is predicated on the belief that the housing market will increase perpetually, so overspending today will be rewarded by tomorrow. It’s a Free Market, everyone gets to play, even those with cracked crystal balls named Al.
We see an Opportunity to convert their blind foresight into your profitable hindsight. After a year of studying SPAC housing purchases, tracking their massive losses, it’s become obvious that there is no rhythm in their algorithms. They are buying less volume now, for more money, thanks to their own messy strategies. They’ve booked an Icarus flight pattern. These companies are doomed. GPS says, “continue straight ahead at the cliff”. But in the meantime, they can be useful tools for anyone with property to sell.
For the Remainder of this topic, you and I need to talk one on one. This is a limited time offer. There is a method for turning The Big Three’s appetite for destruction into windfalls. There is a model they use for purchases. It is specific. It is ripe for harvesting. There is a method for milking that we dare not share in print.
Considering The Big Three’s maniacal methods for spending money, while their stocks tank, we may not have this opportunity next season. If you have property to sell, we need to talk now. Call me. Let’s have a conversation. I fear the rear-view mirror will be unkind to those who miss this moment.
The opinions expressed in this article are those of the writer, subject only to self-editing, and boy you should see what got cut.
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