How Zillow And iBuyers Are Buying Houses At Scale, Affordability Consequences Highlighted. This Friday, Feb. 27, 2015 file photo shows a sign advertising a house for rent in Los Angeles. Real estate data firm Zillow releases its August data on rental prices around the country on Tuesday, Sept. 22, 2015. (AP Photo/Richard Vogel, File)
The U.S. housing market is becoming more and more difficult to navigate for the average American looking to purchase a home. The dream of homeownership is not as attainable as it once was with the skyrocketing cost and demand for real estate, along with limited supply. Some say iBuyers — instant-buyer companies that use algorithms and technology to buy and resell homes quickly — and companies like Zillow are making matters worse.
Tech companies are buying houses at scale, a business practice that some experts say will ultimately make homes even less affordable for the average American. When it comes to Black Americans, the situation is even more dire.
Zillow is making a $450 million bond deal to fund its massive home purchases and others real estate companies such as iBuyers, Opendoor and Rocket Homes are all competing to get the most inventory, according to Vice.
“There’s almost an arms race to get the most inventory possible,” Daren Blomquist, vice president of market economics at Auction.com, told Vice. He described the iBuyer market as “almost frenzied,” adding “It’s less about making money off that inventory, at least initially, and more about who can get the most inventory the fastest.”
In August, both Zillow and Opendoor said they wanted to “drive rapid growth” in the real estate market. In a recent viral TikTok video, Las Vegas real estate agent Sean Gotcher talked about the impact an unnamed company was having on housing affordability by buying homes at scale, then strategically raising the market rates.
“Let’s talk about the housing crisis and let’s talk about some what ifs,” Gotcher said. “What if there was a housing company that everybody used … everybody knew of to look for houses … and so that company they just sit back and they collect all the data. … And let’s say that billion-dollar company uses that information to go into that zip code and start purchasing houses.”
Gotcher’s video set off widespread backlash against Zillow, as the average American is continually being priced out of the market. Zillow replied to the backlash in a statement saying that it pays market rate for every home, Bloomberg reported.
Keeanga-Yamahtta Taylor, author of “Race For Profit,” explained why the housing crisis is even worse for Black Americans and always has been. She wrote about the historic role of the real estate industry and the banking industry in racial discrimination against African Americans in a Mother Jones article, “For Black Americans, It’s Not a Housing Crisis. It’s a Chronic Condition.”
Redlining may be a thing of the past legally, but systemic racism in the U.S. still makes it harder for Black Americans to achieve the dream of homeownership, according to Taylor. She said the government made a fatal mistake when it outsourced affordable housing to the private sector after passing the Fair Housing Act in 1968.
“The whole notion of housing value in the US is deeply connected to notions of race. In fact, the further housing is located away from African Americans, the more it accrues in value. And so federal policies yoking housing production to this type of industry, when Black people are disproportionately among the housing insecure, is a recipe for problems,” Taylor said.
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Public policy is another, more fundamental issue, Taylor said. “Public policy, in the best-case scenario, is intended to protect the public’s welfare. Private enterprise—their objective is to make a profit. So those are two opposing objectives.”
Zillow and iBuyers are examples of companies who say their mission is to make homeownership easier, but the opposite seems true. “This business model can generate immense profits even if the profit per home isn’t eye-popping to the casual investor or analyst,” a Zillow spokesperson told Vice.
A recent analysis by real estate tech strategist Mike DelPrete also stated that “iBuyers are reselling homes for more money than ever before.” This leaves many American families on the losing end of bidding wars, according to Professor Roberto G. Quercia, who teaches city and regional planning at the University of North Carolina at Chapel Hill.
“For some families, it may be difficult to compete, when they are trying to buy a house, with a company like that,” Quercia said. “So if this was a widespread practice in some neighborhoods, it may create some concerns about a lot of the housing stock being owned by investors from outside of the community as opposed to households and residents.”
