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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

#81

Post by matmatmatmat »

pezzana wrote: post #34

> ‘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 yo…

It's unclear to me how much visibility Zillow really had, since, AFAIK, they don't have access to MLSs in the areas where they buy and sell.

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

#82

Post by nitwit005 »

AareyBaba wrote: post #16
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.

I recall in one of the previous crashes it turned out a firm had a model that couldn't handle homes going down in value. A linear model is superior to that.

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

#83

Post by jitl »

AareyBaba wrote: post #16
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.

This is basically how human-lead appraisals work in most markets.

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

#85

Post by djanogo »

Sold my house at the peek few months back to Zillow, they then sold it about 8% loss last month. The $/sqft price Zillow paid us is THE highest for our city EVER under Didn't make any sense to us at the time on why Zillow (and also Opendoor) was making such a high offer, the process was very smooth AND fast. Too bad they won't be around.

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

#86

Post by pezzana »

andromeda-brain wrote: post #64
pezzana wrote: post #34

> ‘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 yo…

I’d be more inclined to believe this if it wasn’t painfully obvious how much Z was overpaying for homes in the last half year, especially when all the other iBuyers saw the market slow down and reduced their offers accordingly. Seems much more likely that we can take them at face value and Zillow’s forecasts were just bad. Zillow hasn’t ever bought and sold homes (until now). That’s not their business.

According to Forbes, Zillow has been buying homes since 2018:

> In April 2018, the company entered the fledgling on-demand home buying market (often referred to as ibuying) with a service called Zillow Offers. Prospective sellers in 11 markets (and growing) can go to the Zillow listing for their own home and ask for an offer. Within two days they’ll be sent a price derived from the Zestimate and other algorithms. Two local experts also provide input on each house, and if the seller likes the initial offer, a Zillow employee comes to inspect the property. (If a home is in poor condition the offer may be withdrawn or lowered.)

https://www.forbes.com/sites/samanthasharf/2019/07/01/rich-b...

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

#87

Post by filmgirlcw »

A friend of mine had a really bizarre experience with Zillow’s ibuy. First, he sold right his condo through them right before the pandemic (Jan. 2020), but then, literally a week before his 90 day closing period was up, they pulled out, blaming public health orders [1] even though they would never be in his house and it was literally a matter of paperwork. They did this as a way to get out of their contracts and hedge their bets.

Flash forward eight or nine months, the housing market explodes and they triple down on their iBuys. My friend sells his home again, again with Zillow (I couldn’t believe he chose them either), and they offer him more than they did in Jan. 2020 (he sold sometime in 2021). Even with the extra mortgage payments he had to make, he still ended up making some money on the deal. Clearly, these companies were in over their heads, making bad decisions on algorithms and not doing real due diligence. The fact that they had an out 18 months ago and stopped doing this, only to triple down and lose $550m in a quarter is just staggering.

[1]: https://www.forbes.com/sites/brendarichardson/2020/03/28/zil...

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

#88

Post by _fat_santa »

silisili wrote: post #49

I don't get Zillow's play here. They were for a long time the de facto neutral party everyone used to look at houses. Great. Then they got into doing contracts apparently, still OK. Then they started competing against people and overbidding everyone, at the height of what appears to be the biggest housing boom of my lifetime. This was not only apparently financially dangerous, but an act that puts them in a bad light…

I think Zillow saw the numbers going up in the housing market and got FOMO.

It's crazy to think an institution like this would get FOMO, but I think what happened is in 2020 they saw housing prices go through the roof, thought to themselves "hey we have all of this data, we can make a quick buck here" and piled in only to now get burned.

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

#89

Post by toomuchtodo »

datavirtue wrote: post #67
toomuchtodo wrote: post #31

Earlier quoted context omitted.

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

Zillow paid too much. Tapering isn't going to have a material effect on new mortgages or home sales.

Yes, they did, but they could’ve still come out ahead if monetary policy wasn’t about to significantly shift and the carrying costs were reasonable.

Rising interest rates is absolutely going to have an impact on home values and mortgage rates. What it does to home transaction velocity is yet to be seen.

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