The company lost hundreds of millions of dollars flipping houses

[Mike Mercury]

Zillow is moving out of the home-selling business

https://www.theverge.com/2021/11/2/2...ancial-results

Zillow has announced that it’s winding down the Zillows Offers program, a day after reports surfaced that it’s selling over 7,000 of the houses it purchased with the intent of flipping them to would-be home buyers. In a press release announcing its Q3 results, the company says that Zillow Offers only served “a small portion” of its customers. CEO Rich Barton now says that “We’ve determined the unpredictability 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.”

With the program shutting down, the company says it’s reducing the estimated value of the houses it’s purchased in Q3 or will purchase in Q4 by more than $500 million. Zillow also says that winding down the business in the coming months will mean having to let go of almost 25 percent of its employees — almost 2,000 workers, according to GeekWire.

In August, Zillow’s Q2 financial documents told a very different story — the company said that Offers was a particularly notable part of its business and that it had even secured a loan for around $450 million to “continue funding [its] Zillow Offers growth.” It also touted its mass acquisition of homes as proof that its “pricing models and automation” for making offers was good for people selling their houses. Vice reported that there was an “arms race” between tech companies to scoop up real estate to sell to home hopefuls.

Despite Zillow’s enthusiasm, what benefited sellers didn’t necessarily help out the company. Bloomberg reports that the company lost over $380 million on its Homes division, which ran Zillow Offers. In its Q3 shareholder letter, the company said that trying to grow Offers at the scale it hoped would be “risky” and said that it’d provided “too little opportunity for return on equity.”

There were signs that the program was in trouble — a report on Monday said that Zillow was looking to offload over 7,000 homes it had bought, not to individual buyers but investors. In October, the company announced that it was going to stop buying houses, citing labor shortages as the reason for its excess inventory.

Zillow says in its press release and shareholders letter that it plans on focusing on its “core business” of providing a place to browse houses for sale and provide pricing estimates. It even goes as far as saying that its Offers program disappointed 90 percent of the people who didn’t end up selling their homes to the company, possibly hurting that core business by turning people who were in the market off from Zillow. The company doesn’t provide details on how it disappointed those potential sellers when it was offering what it calls a “fair market price.”

[DAB]

1. Buy homes
2. Something happens
3. Profit!

[Mike Mercury]

We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated...

no schit; I wonder how many doctorate degrees they needed to figure this out?

[Loco Vette]

Originally Posted by Mike Mercury

no schit; I wonder how many doctorate degrees they needed to figure this out?

Brought to you by the same people who said "The value of your home will never go down" in Q2 2007.

[BayouCountry]

Five homes sold over the years for huge profits. Like stocks, buy low and sell high. Now back to my stock trading.

[Mike Mercury]

Originally Posted by Loco Vette

Brought to you by the same people who said "The value of your home will never go down" in Q2 2007.

National home sales and prices both fell dramatically in March 2007 — the steepest plunge since the 1989 Savings and Loan crisis. According to NAR data, sales were down 13% to 482,000 from the peak of 554,000 in March 2006, and the national median price fell nearly 6% to $217,000 from a peak of $230,200 in July 2006.

[73sbVert]

Originally Posted by Mike Mercury

Yah. I bought a condo (750 sqft, 2BR, 1/5BA, 2-car detached garage) in Ventura (at the time, the lowest cost property in the entire county) for $350,000 mid-2006.

Feb 2010, sold it on a short sale due to moving to AZ for a new job, for $140,000!!

Lost ~ 60% of the value in those 4 yrs.

[Rodnok1]

Originally Posted by 73sbVert

Yah. I bought a condo (750 sqft, 2BR, 1/5BA, 2-car detached garage) in Ventura (at the time, the lowest cost property in the entire county) for $350,000 mid-2006.

Feb 2010, sold it on a short sale due to moving to AZ for a new job, for $140,000!!

Lost ~ 60% of the value in those 4 yrs.

Ouch...

[Dan47]

Fingers crossed prices plummet. Unless someone is selling and moving into a tent or other alternative housing, higher prices only benefit flippers, tax authorities and possibly other minority interests.

For those using housing as housing, higher prices mean higher taxes, insurance, etc. and less disposable income for other consumption or savings. This nonsense is actually impoverishing our Nation and is a result of ongoing fiscal and monetary fraud, not wealth creation.

Big difference between "price" and "value". Price is what you pay value is what you get. - Warren Buffett

Unless homes can magically grow additional living space or other amenities, the "value" hasn't changed, only the "price".

[mrvette]

Hoping for my wife's sake and my kids across the nation, and grandkids that somehow Floriduh prices hang in there or even gain more, with inflation....it MAY just work out to my hopes.....due to the continuing yankee invasion.....

[Rodnok1]

Originally Posted by Dan47

Fingers crossed prices plummet. Unless someone is selling and moving into a tent or other alternative housing, higher prices only benefit flippers, tax authorities and possibly other minority interests.

For those using housing as housing, higher prices mean higher taxes, insurance, etc. and less disposable income for other consumption or savings. This nonsense is actually impoverishing our Nation and is a result of ongoing fiscal and monetary fraud, not wealth creation.

Big difference between "price" and "value". Price is what you pay value is what you get. - Warren Buffett

Unless homes can magically grow additional living space or other amenities, the "value" hasn't changed, only the "price".

Yep putting people in binds already, taxes and insurance went up significantly for a friend who could barely afford them before. If it wouldn't have ruined his disability aka wouldn't get any for years then go through process that takes years he would have sold his house and moved in with me as it was valued for so much.
Trying to find him some additional relief from both but his state and county don't discount much at all.

[Aerovette]

I now understand why Zillow values are always high. They are pumping their own market value on their properties by inflating surrounding area values. I have always used the average of the tax value and Zillow as the realistic value.

[ratflinger]

Originally Posted by aerovette

I now understand why Zillow values are always high. They are pumping their own market value on their properties by inflating surrounding area values. I have always used the average of the tax value and Zillow as the realistic value.

Pfft... They wouldn't do that

[8Up]

We bought our house on a short sale, I went to the auction where the bank was 'trying' to sell it. The bank rep started at $50k I said $51he said $75, I said $76 (you get the picture). We got to my limit and I said $1k over what he said and he raised it $25k again and I said no. So there was no sale on that day. FF a couple months and the house is back on the market for about what the bank rep had asked for in court. I called on it and offered 25k lower than what I had bid in the auction, and I got it. The bank lost about $50k because they wouldn't take my very reasonable bid. I knew then that banks don't really know how to deal in real estate.

[DAB]

Originally Posted by 8Up

We bought our house on a short sale, I went to the auction where the bank was 'trying' to sell it. The bank rep started at $50k I said $51he said $75, I said $76 (you get the picture). We got to my limit and I said $1k over what he said and he raised it $25k again and I said no. So there was no sale on that day. FF a couple months and the house is back on the market for about what the bank rep had asked for in court. I called on it and offered 25k lower than what I had bid in the auction, and I got it. The bank lost about $50k because they wouldn't take my very reasonable bid. I knew then that banks don't really know how to deal in real estate.

most likely, they gave a reserve number to the auction house, and they were trying to hit that first time thru.

"sorry boss, didn't get your number"

time passes, they see the light, sell it finally.

[z06psi]

Gained 200k of equity in 2 years.


Dumb

[corvettecoke]

I saw that as well and a few guys from work were talking about it. I wonder if it will cool off the housing market a bit. In some areas it just doesn't make a bit of sense with the sort of YOY increase we've seen.