Industry Newsriseandshred CEO slams iBuyers! Rents skyrocket! Leisure activities 😎

By October 1, 2021 No Comments CEO: Zillow and Opendoor “harm our customers”

Rise&Shred continually warns the mortgage lending market about the rise of the iBuyers. Now, we’ve gained a serious ally as the CEO of has called out Zillow and Opendoor as  “price-distorting entities.”

“They harm our customers,” said Vishal Garg, the founder and CEO of, a digital homeownership company, in an interview on Vice.

iBuyers say they primarily hope to make money through the convenience fees they charge when you sell. Here’s Rise&Shred’s take on the bad business model.

Zillow says its “modest fee” is typically around 5 percent nationally. Opendoor’s fee typically comes in around 5 to 8 percent. After you move, they make some light repairs and resell it on the market quickly, banking any appreciation.

Such a model costs too much, Garg said. “I don’t like it because it means that consumers are going to lose money,” Garg said. 

His company, Better, offers an alternative model, Vice claims.

Better buys homes on people’s behalf without charging a commission. Instead, Fannie Mae and Freddie Mac pay Better a premium of about 1.5 percent on the mortgage loans or based on the value of customers’ insurance policies.

Of course, Garg himself is a controversial figure. 

Articles in The Daily Beast and Forbes have detailed his “scorched-earth management style,” and Garg has been sued for fraud and misappropriation of funds, which a company spokesman has called “baseless.” 

Garg compares the iBuyer model to ticket scalping, noting that iBuyers tend to be most active in hot markets like Phoenix and Raleigh. 

“Should you be buying slices from somebody who just went to the pizzeria before you did?” Garg asked.

 iBuyers aggressively dispute the notion they are house-flippers, claiming any profit they earn on the resale is incidental. The companies target mid-level homes that do not require heavy repairs. But Garg argued the mere act of buying and selling homes could have a price-distorting effect. 

“They create both artificial surpluses and artificial deficiencies in housing supply,” Garg said. “That means that you have speculative behavior and speculative behavior in property markets usually ends up negatively impacting homeowners and the people who finance homes.”

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Rents are skyrocketing everywhere; it’s time to buy

National asking rents rose 10.3% in August, measured on an annual basis, according to Real Page, a rental-management software company, which analyzed more than 13 million professionally managed apartments. 

That marked the first double-digit increase in the more than 20 years this data has been collected, and in several hot cities, the rent increases were much greater than the national figure. (Bloomberg, paywall.)

“The rent growth that we’re seeing in places like Phoenix and Las Vegas and Tampa, it’s obviously unprecedented,” said Jay Parsons, deputy chief economist for Real Page. August rents rose more than 20% year over year in each of these cities. Monthly rents were up more than 20% in smaller markets like Boise, Idaho, and Naples, Fla., too. 

Fast-rising rents reflect several factors, analysts say. Younger adults who lived with family last year are now renting their own apartments, in many cases as they prepare to head back to the office. Middle-income workers who have been priced out of the scorching housing market have little choice but to pay higher rents. Limited growth in new apartment supply, meanwhile, can’t keep up with demand.

In all 30 of the top American metro areas, apartment rents were up year-over-year in August, according to a Yardi report. Bloomberg reports that the average rent in multifamily buildings rose by $25 last month, increasing the national average rent to $1,539, a 10.3 percent rise from a year ago.

While rent climbed across the country from last year, the increases varied widely. The biggest came in Phoenix, where rent was up 22.0 percent from a year ago. Tampa had the second largest rise at 20.2 percent, followed by Las Vegas at 19.2 percent. Miami also saw explosive growth as apartment rents shot up 17.5 percent over the 12 months.

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Hospitality is coming back, even stronger in states with higher vaccination rates

State coronavirus vaccination trends may be influencing job growth in the leisure and hospitality (L&H) sector, Fitch Ratings says. 

States with higher vaccination rates have shown much more robust job gains in the L&H sector relative to states with lower vaccination rates.

(Download Fitch report here.)

L&H industries still dominate employment losses, relative to other sectors, representing approximately 32% of all US job losses since February 2020, despite making up only about 11% of total employment before the coronavirus pandemic’s onset.

Fitch does not expect employment in this sector to regain pre-pandemic levels until 2024, two years behind expectations for total employment. Recovery in this sector will be an important component to overall employment growth in many states.

While vaccination rates show a notable relationship with the increase in L&H jobs, other factors including state and local coronavirus containment mandates and the supply of labor are likely to play a role in the pace of job growth in the L&H sector across states.

Research from Goldman Sachs points to the trend that “seeing the world” now beats “stay at home” activities, as leisure and travel are making a comeback. 

According to data from Goldman Sachs' Global Markets Division, companies that help you see the world are now outperforming those that help you stay at home. 

Equities with exposure to reopening themes are rising in the U.S. and E.U. compared to businesses that benefit from consumers spending more time and money around the house. In Asia, the trend is lagging, in part due to a slower vaccine rollout in Japan and Australia.

The GS reopening baskets consist of U.S., E.U. and APAC-listed equities predominantly in the leisure and travel industries, which are expected to outperform as more people begin to leave home and the vaccine rollout makes further progress. 

Stay-at-home baskets, meanwhile, consist of companies that benefit from at-home activities, including food delivery, internet marketing, streaming services and at-home fitness services.

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