It definitely feels like market making is something all parties involved in a real estate transaction would like. The article lays out the problems of applying the concept to real estate pretty clearly.
Personally, I think the physical cost of holding inventory and the lack of commodity status (commoditization?) for houses is manageable, if not outright surmountable. I think the condition that simply must change for this business model to work is the velocity of buying and selling residential real estate. Until you can go from “I want this” to “I bought this” or “I want to sell this” to “I sold this” in a scale of days if not hours, any market maker in residential real estate is going to end up a market risk taker implicitly betting on the future price of the property. Even if Zillow could move directly from closing on the house from the seller to initiating a sell to another buyer in less than 24 hours, there’s still several weeks involved. If the market is volatile, that’s a substantial risk exposure.
Simply put, it needs to be possible to move the title twice in 24 hours along with some way to finance a buyer on a very accelerated timescale. Both of these things will need reforms at all levels of government: municipal, state, and federal. I just don’t see that happening for a very long time, to be honest.
Personally, I think the physical cost of holding inventory and the lack of commodity status (commoditization?) for houses is manageable, if not outright surmountable. I think the condition that simply must change for this business model to work is the velocity of buying and selling residential real estate. Until you can go from “I want this” to “I bought this” or “I want to sell this” to “I sold this” in a scale of days if not hours, any market maker in residential real estate is going to end up a market risk taker implicitly betting on the future price of the property. Even if Zillow could move directly from closing on the house from the seller to initiating a sell to another buyer in less than 24 hours, there’s still several weeks involved. If the market is volatile, that’s a substantial risk exposure.
Simply put, it needs to be possible to move the title twice in 24 hours along with some way to finance a buyer on a very accelerated timescale. Both of these things will need reforms at all levels of government: municipal, state, and federal. I just don’t see that happening for a very long time, to be honest.