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Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

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Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#11

Post by muttantt »

Crazy. I recently sold a condo to Opendoor for significantly more than I would have even thought to list it for. When I negotiated with Opendoor after their initial offer, I pointed out a recently sold condo (days before, in similar condition, layout and finishes) in the same complex that sold for much higher than Opendoor offered. Within hours Opendoor came back matching that same selling price. The kicker? It was a unit that Zillow bought.

The algorithms are fooling themselves... Opendoor matches Zillow who matches Opendoor and that's how you get ever increasing offers.

Edit: oh, and now Zillow has that unit on the market, priced 14% lower than they paid for it, after 3 price cuts so far.

Edit 2: Phoenix/Scottsdale AZ market

Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#12

Post by d136o »

Sigh… It’s interesting that they blame the ML models, on the one hand it seems like a perfect example of ML gone wrong, on the other hand losses at this scale (hundreds of millions) don’t just signal that some data scientist’s model was not accurate enough… who’s running the ship over there? The ML model?

Also I’m really curious about the geographic distribution of their inventory… let’s do some Data Science on this blow up!

Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#14

Post by tppiotrowski »

"The surprising exit, announced with pedestrian quarterly profits, thrashed shares in another rough trading session Tuesday, a day after an analyst said two-thirds of the homes it bought are underwater."

https://fred.stlouisfed.org/series/MSPUS

The fed chart shows almost hockey stick growth in housing prices this year. How can the Zillow properties be underwater, did they just massively overpay up-front?

Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#15

Post by jahabrewer »

woeirua wrote: post #7

This is kind of a big deal in the real estate sector. The only reason that Zillow would sell everything right now is if they believed that the carrying costs of the properties until they (eventually) sell would eat all of their profits. They must be seeing flashing red signs across the board that there's a slowdown in the market and that scenario is exactly what will play out if they don't exit quickly. There's no wa…

> They must be seeing flashing red signs

Hope those come from a different model than they used for buying.

Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#16

Post by AareyBaba »

muttantt wrote: post #11

Crazy. I recently sold a condo to Opendoor for significantly more than I would have even thought to list it for. When I negotiated with Opendoor after their initial offer, I pointed out a recently sold condo (days before, in similar condition, layout and finishes) in the same complex that sold for much higher than Opendoor offered. Within hours Opendoor came back matching that same selling price. The kicker? It was a…

I suspect the 'AI software' running these companies is using linear regression to predict housing prices and one of the inputs is the price of similar houses nearby.

Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#17

Post by bombcar »

muttantt wrote: post #11

Crazy. I recently sold a condo to Opendoor for significantly more than I would have even thought to list it for. When I negotiated with Opendoor after their initial offer, I pointed out a recently sold condo (days before, in similar condition, layout and finishes) in the same complex that sold for much higher than Opendoor offered. Within hours Opendoor came back matching that same selling price. The kicker? It was a…

I've been noticing lots of "new lower price" emails from Zillow; I think the market has cooled off - but how much of it being hot was this investor competition?

Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#18

Post by davewritescode »

woeirua wrote: post #7

This is kind of a big deal in the real estate sector. The only reason that Zillow would sell everything right now is if they believed that the carrying costs of the properties until they (eventually) sell would eat all of their profits. They must be seeing flashing red signs across the board that there's a slowdown in the market and that scenario is exactly what will play out if they don't exit quickly. There's no wa…

You don’t need ML algorithms to know that interest rates in the medium term will be rising which puts downward pressure on home prices.

Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#19

Post by yalogin »

beamatronic wrote: post #8
woeirua wrote: post #7

This is kind of a big deal in the real estate sector. The only reason that Zillow would sell everything right now is if they believed that the carrying costs of the properties until they (eventually) sell would eat all of their profits. They must be seeing flashing red signs across the board that there's a slowdown in the market and that scenario is exactly what will play out if they don't exit quickly. There's no wa…

Agree 100%... I'm astonished that a large corporation trying to get into this business, would "bite off more than they could chew". Don't they have MBAs and financial models to assess this sort of thing?

If MBAs and financial models can predict slowdowns, we won't have them at all. If anything ML models will exacerbate the situation IMO and they probably relied on them too much and bought more than they should. Of course what I said is also a projection (without even an ML model), so that is not accurate either :)

Re: Zillow to stop flipping homes, loses more than $550M, lays off 25% of staff

#20

Post by lancemurdock »

Everyone in big tech knows product direction comes top down with tons of product reviews along the way. There is no way you have this big of a screw up without major culture issues or more likely, leadership wanted to gamble and didn't think it would be this bad.

The workforce gets the consequences for leaderships decisions

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