If you are a real estate agent or investor and have found yourself competing against Zillow in your market, you may be encouraged by some recent news.
In a statement November 2, 2021 Chief Executive Rich Barton said Zillow had failed to predict the pace of home-price appreciation accurately, marking an end to a venture the company once said could generate $20 billion a year. Instead, the company said it now plans to cut 25% of its workforce. Zillow is exiting from the home-flipping business, saying that the algorithmic model to buy and sell homes rapidly doesn’t work as planned.
“We’ve determined the unpredictably in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance sheet volatility,” Mr. Barton said.
Zillow has an inventory of about 9,800 homes across the United States that it is currently shopping to investors. Additionally, there are another 8,200 homes in contract it has agreed to buy. The company expects to lose somewhere between 5% and 7% on these homes.
A wider look at Zillow’s national performance by analysts at KeyBanc Capital Markets found it had listed 66% of homes at prices below what it had paid for them, with an average discount of 4.5%.
Zillow said it expects that the wind down of its home flipping outfit will take several quarters.
Reported by Will Parker and Nicole Friedman, Wall Street Journal, November 2, 2021.
