The key is that market makers are doing large volumes at very small margins. The market maker just needs to guess the market movement direction for the next interval of time (stocks would be sub second timescale, homes could be daily/weekly, etc.) then they can adjust what they buy and sell very slightly to profit from this spread.

If the spread is a large percentage of the assets value then it doesn't work as well and public perception is more negative. The housing market is much more difficult to properly become a market maker in because the transaction costs are high. The seller's realtor is going to want their >=3% commission. There's other costs like title transfer fee/cost, inspections, etc.

Also scalping is typically more of product's that are impossible to otherwise obtain and are sold at a huge premium.

I think Zillow frequently tried to make the seller cover these costs (whether directly or via a lower offer amount) but it seems they didn't do this successfully. It's also possible that the seller's who accepted Zillow's offer tended to have some X factor that would make their house more difficult to sell but properly handling every possible X factor is very difficult.

Scalpers don't provide liquidity, market makers do

> They have unique information about demand for houses and even get to influence prices upward through Zestimates.

And that's the same shit booking.com tried to pull, that got them in trouble with the EU market authority. (If I remember correctly.)

The trading department should be separate from the affiliate department. Otherwise it's LIBOR scandal all over again. :|

> The same set of people who would move their price points up after a few months and get larger mortgages. This worked for all of 2020 and most of 2021 and only the past quarter did it fail as a strategy.

If they have a few months. Sitting on empty houses is not free.

Though the whole problem with Zillow seems to be that they disrupt the local markets, because due to their sheer volume they effectively corner each local market where they operate, which makes them able to set prices.

(But then why have they stopped? Probably they realized they'd need more money to do that effectively, or that they'd get a huge asswhoop eventually. Or that they were unable to hedge their risks.)

So they basically gave $550 million to UMC homeowners by overpaying for houses, while making it slightly harder for other UMC wanna-be homeowners to buy homes for a couple months. Not the worst outcome I can imagine

I don't think so. Market makers normally buy before having a specific seller in mind. I think eBay and Amazon's 3rd party sellers transact directly to customers, and just pay those sites a cut of each sale. eBay only is able to charge that fee (really, it's an economic rent) due to a monopoly enforced by network effects. A classic market failure. (I'm not as sure about Amazon but I wouldn't be surprised if a similar effect was at play.)

New car dealerships really don't many any sense and regulated into existence haha. I was referring to used car dealerships

The example was used car dealerships. You can always buy/sell your vehicle in a private sale without requiring a used car dealership.

You're not forced to buy a car from a dealer; manufacturers are forced to sell new cars through dealers in order to guarantee owners have somewhere to go for service and parts.

Back in the early days of the auto industry car companies sometimes existed just long enough to sell some crappy cars and fold before angry customers with defective cars came calling.

That's why the laws around manufacturers having dealers exist, no matter what Elon Musk tells you.

Ever notice that bodywork, parts, and repairs for Teslas are very expensive and difficult to come by? Plenty of Teslas with relatively minor body damage end up in limbo for months or more even though the insurance company is ready to pay for repairs. Why? Tesla's bodyshops have long backlogs because there are no parts, because Musk is desperate to get as many cars out of his factory as he can.

Lots of Teslas also get totaled because Tesla charges outrageous pricing for replacement parts. Musk is exploiting the insurance industry.

Insult to injury is that Tesla can decide one day that your vehicle is too damaged for their tastes, and refuse to sell you parts. No other manufacturer does that, not even Ferrari, and that's really saying something.

Your thinking is that there is a hierarchy of capital funds, each one willing to pay more than the last for the same house? And they all hold the houses, pay property tax, etc. despite the houses never generating any revenue due to no one living in them? That doesn't seem like a very realistic perspective on the housing market

Why would other investors buy an overpriced home? They are also looking for the deals that Zillow is hoping to find. Owners wanting to live in a home are the ones willing to buy a turnkey home above asking.

>intentionally trying to drive a trend of increasing home prices to profit

was that their goal? it's possible to be a market maker without cornering/manipulating the market. see: market makers on stock markets.

There is already a gigantic industry of people who buy houses, fix them up, and sell them. Doesn't seem very evil.

Real pain would be buying an overpriced house that was bid up by Zillow or other similar companies and then needing to move. Missing out on that overpriced sale would actually be great!