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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

#21

Post by edrxty »

tppiotrowski wrote: post #14

"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?

Yes, yes they did. The vertical part of the hockey stick is EVERYWHERE. Homework: go on zillow and find the most depressing row house in urban Detroit/Cleveland/wherever with enough pricing history to have a graph. You will see that exact same line shape. Literally everything has doubled since around 2014. Completely bombed out crackhouses were a 300-500% ROI in that period. You couldn't lose money even if you set the structure on fire. The past year has eclipsed that though. Everything has gone up massively and for seemingly no reason.

For comparison, since 2014 the US population has increased 4%.

Also, people aren't moving from somewhere to fill up your town, go on a random city subreddit and you'll see a different local mythology to explain the prices. It's happening everywhere though. There's literally no significant area that's seeing an exodus with decreasing prices. Not California, not libruhl lockdown states, not Texas, it's happening everywhere.

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

#22

Post by vineyardmike »

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…

> the carrying costs of the properties until they (eventually) sell would eat all of their profits.

Yes, they have to pay taxes. They have to maintain the property, and check on it against break-ins. There is a lot of cost to holding a property.

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

#23

Post by vineyardmike »

seanmcdirmid wrote: post #10
beamatronic wrote: post #8

Earlier quoted context omitted.

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?

Isn't Zillow more like a post-IPO startup than a bigcorp? If so, it makes complete sense that they might "bite off more than they could chew," (e.g. Pets.com) a lot of startups end that way.

They're not amazon/google big but they're not small. They have tons of employees and billions in cash.

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

#24

Post by crackercrews »

bombcar wrote: post #17
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?

It's also the last rush of sales before things slow down for the holidays. There's also a chance that interest rates will be higher next year. That would bring home prices down.

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

#25

Post by latchkey »

tppiotrowski wrote: post #14

"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?

That is a good chart, but this one answers your question:

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

Supply is going up.

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

#26

Post by onlyrealcuzzo »

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…

TBF - wasn't the Phoenix metro up almost 40% in one year?

After a 14% cut, that would still be an absurd YoY increase (I think still the largest single year increase in a major metro in the US on record?).

I get that Zillow is losing 14% - but the market is not yet even back to normal appreciation - let alone "crashing".

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

#27

Post by onlyrealcuzzo »

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…

Well - if the Fed stops buying MBSes and interest rates go up - flippers in highly speculative markets (almost everywhere ATM) are likely to have a bad time.

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

#28

Post by dredmorbius »

Numerous other submissions / articles:

https://www.wsj.com/articles/zillow-quits-home-flipping-busi...

https://finance.yahoo.com/news/zillow-shuts-down-home-flippi...

https://www.businessinsider.com/zillow-homebuying-unit-shutt...

https://www.cnbc.com/2021/11/02/zillow-shares-plunge-after-a...

https://www.seattletimes.com/business/real-estate/zillow-to-...

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

#29

Post by nradov »

d136o wrote: post #12

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…

It's not really ML gone wrong, more like a misapplication of the technology. No one who understands ML ever claimed it could produce accurate forecasts of chaotic systems.

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

#30

Post by edrxty »

latchkey wrote: post #25
tppiotrowski wrote: post #14

"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?

That is a good chart, but this one answers your question: https://fred.stlouisfed.org/series/MSACSR Supply is going up.

Similarly housing starts are increasing drastically now that lumber has stabilized

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

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