The interesting question is around their bonds. They were basically convertible bonds which likely triggered, but now they have to pay back the cash. How much of a liquidity crisis will this introduce to the company?

The more interesting thing is that this business crisis won't be reflected in their last quarter 10-Q which should be coming out soon. I'm assuming this is going to be talked about in that earning call, so that will be an interesting one to listen to.

I think Opendoor's model is a lot better, but I guess we will have to wait to see if there are any repercussions to their business.

Zillow, in many cases, just bought and instantly relisted the property on their own site.

This is the hard part. All the good contractors do this themselves, or they charge so much you don't make any money on the sale, or they're booked out 3 months in advance.

Flipping is low touch compared to that. To flip, all you need is a buyer willing to pay money, and it's a single transaction.

That's an odd way to say "I think you should probably consider renting right now" (which is absolutely what you should do if you think housing is likely to drop 20%).

Yes, they have to pay taxes. They have to maintain the property, and check on it against break-ins. There is a lot of cost to holding a property.

Hope those come from a different model than they used for buying.

There could also be the issue summed up as "thr market can stay irrational longer than I can stay solvent" issue. Even if your bet is right if you lack available capital for the temporal range and trajectory you can never capitalize on any theoretical gains. Even if you were right about Atari going bankrupt if you shorted at the very beginning of their existence in the late 70s and it took until the 90s for it to happen chances are you would default even though you were right.

Rising interest rates is absolutely going to have an impact on home values and mortgage rates. What it does to home transaction velocity is yet to be seen.

lol, there is zero chance that Opendoor stops iBuying in the short term.

They are indeed much better at systematically valuing houses than Zillow. This was already the case 5 years ago when I worked there, and they have relentlessly improved on their core model since.

Selling or shorting Opendoor due to Zillow’s flaws is akin to shorting Google due to Yahoo’s inability to monetize search well or return long tail queries properly.

https://twitter.com/rabois/status/1455564619494436870

https://fred.stlouisfed.org/series/MSPUS https://fred.stlouisfed.org/series/FEDFUNDS

The Fed is (likely) going to announce bond purchase tapering this week, they’re currently buying $80B of US Treasuries and $40B of MBS every month. I believe the plan is to taper buying completely before raising rates.

The lack of QE could see the long end of the yield curve start to rise, which would push home prices down. If and when they start hiking the FF rate, look out!

The aftermath when they decide to unwind their positions will be far-reaching. Probably not another 2008, but it'll certainly depress valuations across the country. Like you said, if you're buying now, buy because you need a nice place to live, not because you intend to flip.

Only for flipping. The real value was buying during the pandemic and holding as housing supplies starts tightening up.

All models are wrong, some are useful.

Zillows were wrong, and apparently not useful.

Extrapolate that out a hundred thousand times and you get a sense of what they were trying to manage. How did they predict remodel costs? Pre-pandemic material costs and back-of-the-napkin labor estimates?

Mobilizing professional contractors is very difficult unless you are the highest bidder. And even then, shit happens...a lot.