Zillow to stop flipping homes; Losing more than $550 million

[tay1]

Zillow Group Inc. is calling it quits on the home-flipping business, while disclosing losses of more than $550 million on homes purchased in the second half of this year for which the company admits it paid too much.

The real-estate giant on Tuesday blamed a faulty algorithmic model for ditching its iBuying business of buying and selling homes quickly, and said it will lay off about a quarter of its staff. 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.

Zillow to stop flipping homes for good as it stands to lose more than $550 million, will lay off a quarter of staff

Zillow Group Inc. is calling it quits on the home-flipping business, while disclosing losses of more than $550 million on homes purchased in the second half...

www.marketwatch.com

 

[tay1]

Is this a sign that the housing bubble is over ?

 

[(*Fin)]

Is this a sign that the housing bubble is over ?

Nope.

 

[tay1]

Nope.

Why do you think this ?

 

[kingkoopa]

Why do you think this ?

Probably because of all the new houses going up, rent going up, and the wealth disparity.

Real-estate has us by the balls

 

[blastercombo]

Naw. They covering up money for tax reasons I’m guessing. The rich have so many loopholes

 

[tay1]

Naw. They covering up money for tax reasons I’m guessing. The rich have so many loopholes

Yeah I feel like they lying. I also didn’t know that they openly admitted to buying up houses. That should be illegal in itself .

 

[sneakaprince]

Yeah I don't trust it.

Zillow has so much housing data and the money to buy up/ develop so many communities.

Their Zestimate almost allows them to dictate current market prices as well. I just don't see how they can miss when they essentially could set the price for any community.

 

[blastercombo]

They’re looking for PPP part 2 or something and cashing out.

 

[dunks318ti]

Yeah I feel like they lying. I also didn’t know that they openly admitted to buying up houses. That should be illegal in itself .

It's not illegal. They try to get in and cut out the middle man.

It's the same thing like when you're checking your car value on kelly blue book and you get an automatic offer for them to buy your car instead of going through the hassle of selling it privately or getting punked by the dealership as far as trade in as they play games with your trade in with back end adjustments on the purchase of another car.

I think the problem with zillow is the over estimate of value. The "zestimate" is alway ridiculously high for any property. They probably had their formula to take off say 20% off the "zestimate" with an instant offer with them as is. The thing with that is, they're definitely overpaying for their houses and a majority of home owners who sold to zillow knew their house was falling apart and rather sell as is.

 

[(*Fin)]

Why do you think this ?

Think this is just an isolated ****up on Zillow relying on their algorithm to overbuy and overpay for homes. They discounted the opportunity cost and all other factors and expenditures that come with flipping real estate, especially at the level they were buying at. I’m sure the algorithm factored in time and cost but sometimes your projections miss and don’t account for certain things outside your control. I don’t believe it has any effect on real estate prices on the national level. There’s still a supply and demand issue.

 

[dunks318ti]

Either way the housing market isn't gonna crash. What's gonna make it crash?

No one got no bad loans or dumb ARM loans. Everyone who owns homes right now got at least 15-20% equity at minimum (and that's the worst case scenario with little to nothing down). If they're financially in trouble, they can sell their houses at market value. Aint no foreclosures or short sales happening.

Broke boys moving out of state and rich folk moving in to replace. Everything is being gentrified. In turn the broke boys moving out of state will make that market move up in terms of buying or renting from buyers.

Just my opinion.

 

[dunks318ti]

There’s still a supply and demand issue.

This. When you got 50+ bids on a house, hot homes with like hundreds of favorites, houses selling in a day not including inside deals, there's no way it's gonna crash. Those 50 bidders on that one house, you still got 49 buyers waiting their turn to get their offer accepted.

In Southern California, it's ridiculous. I recently sold my house for 30k over asking. I thought that was stupid dumb so I accepted the offer on the first day of listing. Then we started looking for our next home and houses are being bidded up 25k-75k over asking. Those same houses gets sold quick af.

 

[tay1]

Either way the housing market isn't gonna crash. What's gonna make it crash?

No one got no bad loans or dumb ARM loans. Everyone who owns homes right now got at least 15-20% equity at minimum (and that's the worst case scenario with little to nothing down). If they're financially in trouble, they can sell their houses at market value. Aint no foreclosures or short sales happening.

Broke boys moving out of state and rich folk moving in to replace. Everything is being gentrified. In turn the broke boys moving out of state will make that market move up in terms of buying or renting from buyers.

Just my opinion.

This is facts. Everyone in the west coast wanna move to Texas or Arizona thinking they got it made but not knowing that the cost of living will increase shortly after their arrival

 

[Mark Antony]

Why would they stop though why the boom still booming? Feels like a part of their story is missing.

 

[trillbanker]

I think part of Zillow leaving is due to it being a sellers market. I'm guessing most houses they are getting through their instant-offer algo is likely one that is a fixer-upper that they just don't have the time or resources to fix and it becomes a large capital constraint on their balance sheet. They're not structured like Blackrock or some of these other giant funds that have AUM allocated to real estate with 10-15year horizons

Using their AZ properties as an example, they are listing a lot of properties at $400k range despite purchasing it for closer to $420-430k. It's not really a crash in that context

 

[dunks318ti]

Why would they stop though why the boom still booming? Feels like a part of their story is missing.

I'm sure the only ppl that sold to them knew they were getting wayyy above market value due to their "zestimate." I'm also sure that the ppl that sold straight up to zillow on their instant as is offer was because they knew their house needed like 50k or more in work.

Like...should I sell conventionally and have my agent and the buying agent get a piece of the commission, negotiate a ton of stuff, repair or fix a bunch of stuff? Or should I take this zillow offer knowing damn well that the roof is leaking and needs replacing years ago, I got a mad termite problem, my foundation is ******, etc...

 

[Mark Antony]

"zestimate"

 

[dunks318ti]

Using their AZ properties as an example, they are listing a lot of properties at $400k range despite purchasing it for closer to $420-430k. It's not really a crash in that context

This right here. It's not a crash at all. Them listing it for $400k, knowing damn well buyers will bid it up to at LEAST $420-430k minimum already lol.

 

[kvsm23vs24]

Either way the housing market isn't gonna crash. What's gonna make it crash?

No one got no bad loans or dumb ARM loans. Everyone who owns homes right now got at least 15-20% equity at minimum (and that's the worst case scenario with little to nothing down). If they're financially in trouble, they can sell their houses at market value. Aint no foreclosures or short sales happening.

Broke boys moving out of state and rich folk moving in to replace. Everything is being gentrified. In turn the broke boys moving out of state will make that market move up in terms of buying or renting from buyers.

Just my opinion.

this is so true my guy. Took me a while to get a house with people offering up the butt. I’m in Cali as well but bought in Palmdale. Not a sought part at all. But I check my comparables (through Zillow no less ) and already looks like I can get 30k over what I bought it easy. That’s not even including the work I put in it already.

 

[AEA18]

Breaks down how Zillow played themselves

 

[sneakaprince]

Breaks down how Zillow played themselves

Is this playing themselves though? If anything I think he was trying to argue the opposite.

In his first example Zillow essentially controls the market. They turn 300k purchases into 340k purchases just by controlling the comps.

If that was zillows play I can't imagine how they would be down 550M

 

[Mark Antony]

That vid is from months ago.

 

[lovehateself]

Either way the housing market isn't gonna crash. What's gonna make it crash?

No one got no bad loans or dumb ARM loans. Everyone who owns homes right now got at least 15-20% equity at minimum (and that's the worst case scenario with little to nothing down). If they're financially in trouble, they can sell their houses at market value. Aint no foreclosures or short sales happening.

Broke boys moving out of state and rich folk moving in to replace. Everything is being gentrified. In turn the broke boys moving out of state will make that market move up in terms of buying or renting from buyers.

Just my opinion.

This is facts. Everyone in the west coast wanna move to Texas or Arizona thinking they got it made but not knowing that the cost of living will increase shortly after their arrival

non-brokeboi over here
just bought a home here in SoCal

 

[dunks318ti]

non-brokeboi over here
just bought a home here in SoCal

Yoooooo. I've been scoping the Real Estate thread and I was almost certain to a point that you bought my house. Apparently it was just a coincidence. I say that because you posted you got an offer accepted on the same day I accepted an offer. And it was in Lakewood. Then your final walk through was on the same day of my final walk through, but in the end I suppose it wasn't due to other stuff you mentioned.

I got 30k over asking and was honestly gonna sit on the sidelines with cash waiting for the market to crash, but my wife fell in love with this forever home that she wanted so we ended up buying again by the CSULB area. It worked out, but I ended up having to live in a hotel for about 3 weeks until my new purchase closed.