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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

#31

Post by toomuchtodo »

onlyrealcuzzo wrote: post #27
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.

Right. This is Zillow getting out before the Fed tapers, interest rates go up, and real estate sales and values go down.

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

#32

Post by sbierwagen »

onlyrealcuzzo wrote: post #27
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.

That's exactly what the Fed is expected to do: https://www.reuters.com/business/wall-street-banks-step-up-p...

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

#33

Post by onlyrealcuzzo »

seanmcdirmid wrote: post #3

For some reason I can't reply to dang's comment, but this is Zillow basically saying they are giving up completely on flipping, whereas the article this morning said that they were pulling back and delaying buying more houses to flip (not giving up, but in trouble). So this is pretty big additional news from the context of this morning's article.

7k homes isn't going to move the national market remotely.

There were rumors that Zillow was trying to test if they could manipulate small markets - and they were trying to buy a significant portion of listings in those markets. If true - in those areas - they could get completely destroyed if they list a lot of places at once. And if true - I hope they get a huge fine for trying to manipulate the housing market.

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

#34

Post by pezzana »

> ‘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,’ CEO tells investors.

That's quite a statement. The head of a company with a privileged view of the US residential real estate sector says that the market is "unpredictable." Not the good kind of unpredictable where you can't figure out how heavy the money bags that get dropped at your door will be. No, it's the bad kind of unpredictability where you can... lose money.

Reading between the lines, I conclude that Zillow sees a major shakeout in real estate on the horizon. They've already been hit with losses and see a lot more where that came from. In an effort to get ahead of whatever is approaching, the company is making an abrupt exit from the home flipping business.

Zillow was founded in 2006, as the last US housing market bubble was furiously inflating. It has seen a complete cycle of boom/bust. If anybody knows the US residential real estate sector, it is Zillow.

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

#35

Post by roland35 »

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…

You think Zillow would have one person take 15 minutes to do a quick look at the offer prices first!

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

#36

Post by Nasrudith »

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 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 could also be the issue summed up as "thr market can stay irrational longer than I can stay solvent" issue. Even if your bet is right if you lack available capital for the temporal range and trajectory you can never capitalize on any theoretical gains. Even if you were right about Atari going bankrupt if you shorted at the very beginning of their existence in the late 70s and it took until the 90s for it to happen chances are you would default even though you were right.

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

#37

Post by monksy »

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…

Oh the new REITs playing the algro game. This is cute.

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

#38

Post by missedthecue »

Big ups to hedge fund short seller Jim Chanos for calling this one way back in 2019.

https://twitter.com/WallStCynic/status/1192663938720292864

Steve Eisman, the short seller who was Mark Baum in 'The Big Short' also predicted this in 2019.

https://www.cnbc.com/2019/08/08/big-short-investor-steve-eis...

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

#39

Post by rafale »

edrxty wrote: post #21
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 th…

I wonder if Black Rock will fare better than Zillow. My understanding is that they are not planning to sell/flip, rather rent then and hold on them forever.

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

#40

Post by topspin »

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?

> did they just massively overpay up-front?

That's the only possibility available as far as I can see. I recall seeing the housing stock they favored were all in the hottest US markets, so they're exposed to small fluctuations at the extreme end of the histogram. Otherwise the US median home price curve still looks like a boost phase ballistic missile track as of Q3 2021.

Zillow only got into this flipping game in 2018. They've never seen anything but rapid price growth. I will not be surprised when we learn the place was off the hook with buyers snapping up properties with no adults at the table.

There is always someone caught way over extended when markets move. This time one of them is named 'Zillow.' Expect a bunch of tedious 'insider' stories from Wired et al; wrecked hotel suites and orgies and $2e6 super cars. All the usual.

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