How is buying up all the housing stock and selling it for 20% more than you paid adding liquidity?? I think a more accurate term is “scalping”. Houses and 3000 series nvidia cards are in demand. We don’t want big players scalping the product back to us. Nothing is gained except inefficiency and grift.

To be clear, I said that it’s not clear whether or not we need market makers, not liquidity. Market makers can improve liquidity, but they are not one and the same, contrary to the protestations of the market makers themselves.

The housing market needs liquidity, but:

1) It’s far from clear that market making can fix this.

2) Market making has tradeoffs, especially in non-fungible items.

On the first, the housing market is illiquid for a variety of reasons, a desperate lack of housing stock and the high cost of switching being among them. No market maker is going to produce more housing, nor are they going to fix the fact that moving is slow and expensive and banks are not quick.

On the second, market makers extract value from each transaction. The more unique the transaction, the more market makers tend to make. Used car sales people charge a hefty premium to the buyer and seller, about $2k average each, for the convenience of them “making” a market. Given how expensive the American housing stock is, this is a convenience that Americans cannot afford.

And that’s being extremely generous in assuming that what Zillow is doing is trying to just provide liquidity, rather than speculating in the real estate market using their customers data.