Zillow Stops Buying Houses and Stock Tumbles

79 Replies

What are your thoughts on Zillow pausing their house buying and flipping business over growing inventory? The stuck has tumbled over the last few months. I think they will clear the inventory and figure out how to make the business model work. I also thing Zillow is so much more than it's flipping business. Nobody aggregates real estate data like Zillow does. 

It seems they simply set out to buy as many houses as possible without a ton of informed effort put toward legitimate strategy. I heard of a certain instance where they purchased a property, didn't rehab it, then relisted for $20k more than they bought it for. They ended up selling it for less than they bought it for. Does this increase their market share? Certainly. Is this a smart long term business model? Absolutely not. They'll likely fine tune their model before starting up again next year.

@Alex Uman I agree, it seems they were just acquiring inventory without being careful on values. That being said, with house values expected to rise over the coming months, they should be able to make money off the inventory. That assumes they make wise choices in rehab and selling. 

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In my market they've been paying $30k+ over the highest sold comps in the neighborhood, so that sellers would NET several thousand above the next highest sold comp for a model match house in the exact same complex. That's not a flipping business. More like a race to buy enough property to get a monopoly on the real estate market. Isn't that the SOP for every bigcorp? Operate at a loss until they own enough of a market to take control of it. What other purpose would they have for buying so much and overpaying so much? I assume if they are pausing, it's not because "flipping isn't working out". There has to be some other explanation.

The way I had understood it was that they were simply running into the same supply chain crunch for the materials and renovations of these houses that the entire industry is feeling right now. Their business model is to try and find newish homes that really do in fact only need paint and carpet, do quick rehabs and then get them to list. Margins are slim as printer paper on the flips but they're shooting for volume as well as the fact that its a great interlocking income stream for agents fees and commissions as well as for their lending and closing lines of business.

I guess it's good to know that I'm not the only one who can't find two sticks to rub together at the lumber yard.

Looks like a nosedive over time vs a tumble--It's why stocks are a gamble (just like Roulette in Las Vegas).

Real Estate holds it's value over time, and you can "fix it up"--you have some control over it.

The US Government manipulates these stock prices, so maybe they just failed to pay off "The Correct" people or something (or maybe they did and it's way worse then we know).

https://www.businessinsider.com/does-the-government-actually-manipulate-the-stock-market-2010-2

Zillow bought the house across the alley from my rental for $241,800, held it for 2.5 months and lowered the price several times, finally selling it for $249,900... not exactly a winning strategy. $8,100 isn't an outrageous return.   

Originally posted by @Scott Mac :

Looks like a nosedive over time vs a tumble--It's why stocks are a gamble (just like Roulette in Las Vegas).

Real Estate holds it's value over time, and you can "fix it up"--you have some control over it.

The US Government manipulates these stock prices, so maybe they just failed to pay off "The Correct" people or something (or maybe they did and it's way worse then we know).

https://www.businessinsider.com/does-the-government-actually-manipulate-the-stock-market-2010-2

No doubt, it has been down over time, but it dropped 9.5% yesterday. That is a pretty big single day loss and it was directly related to the house buying news. Stock market is emotional. I don't see how an inventory of houses makes Zillow a "sell" stock suddenly. Other headlines complain there isn't enough inventory. They just need to turn the inventory and figure out their long term business model. I agree the government manipulates stocks,  but the market is also manipulated by hedge funds, probably even more so.

It makes me think of when the SoftBank whale stopped buying call options last September and the whole stock market - especially the NASDAQ - corrected sharply.  It recovered and continued to climb higher, but the removal of a massively-distorting force (the whale) sent a shockwave through the market.   All markets are simply supply & demand + price discovery; a major player just moved to only one side of the market. There will be an effect, and in a place like Phoenix metro I think it will mean a sharp decline in both over-list closings and buyers significantly paying up over appraisals. On the other hand, Zillow is just one player in this space. We have many iBuyers in PHX. And shifts in the real estate market are much slower to see than the stock market   

As for Zillow’s stock, that’s an expected reaction.  No different than if GM said “we’re going to stop making cars for a while.” Even if they have plenty of cars already made to sell, it’s a signal that management doesn’t see value in creating more inventory.  Inventory drives sales, sales drives valuation. Hence the sharp reprice yesterday, though it is definitely part of a deep long-term drop in valuation across 2021. 

Originally posted by @Joe Splitrock :
Originally posted by @Scott Mac:

Looks like a nosedive over time vs a tumble--It's why stocks are a gamble (just like Roulette in Las Vegas).

Real Estate holds it's value over time, and you can "fix it up"--you have some control over it.

The US Government manipulates these stock prices, so maybe they just failed to pay off "The Correct" people or something (or maybe they did and it's way worse then we know).

https://www.businessinsider.com/does-the-government-actually-manipulate-the-stock-market-2010-2

No doubt, it has been down over time, but it dropped 9.5% yesterday. That is a pretty big single day loss and it was directly related to the house buying news. Stock market is emotional. I don't see how an inventory of houses makes Zillow a "sell" stock suddenly. Other headlines complain there isn't enough inventory. They just need to turn the inventory and figure out their long term business model. I agree the government manipulates stocks,  but the market is also manipulated by hedge funds, probably even more so.

I personally have never had zillow offer on anything i own.. I would have sold in a heart beat if they offer way over market  everything is for sale for the right price.

However on the few Vegas props we have I have had offers from think it was I pad and its was no different than all the wholesalers that low ball me constantly..  the I pad offers were 100k under market. 

Originally posted by @Jason Brown :

The way I had understood it was that they were simply running into the same supply chain crunch for the materials and renovations of these houses that the entire industry is feeling right now. Their business model is to try and find newish homes that really do in fact only need paint and carpet, do quick rehabs and then get them to list. Margins are slim as printer paper on the flips but they're shooting for volume as well as the fact that its a great interlocking income stream for agents fees and commissions as well as for their lending and closing lines of business.

I guess it's good to know that I'm not the only one who can't find two sticks to rub together at the lumber yard.

Boy out here on the west coast our lumber yards are stacked with inventory and the mills are running full steam there is no shortage at least here just lumber broker manipulation and extreme profit taking..  

Originally posted by @Jay Hinrichs :
Originally posted by @Joe Splitrock:
Originally posted by @Scott Mac:

Looks like a nosedive over time vs a tumble--It's why stocks are a gamble (just like Roulette in Las Vegas).

Real Estate holds it's value over time, and you can "fix it up"--you have some control over it.

The US Government manipulates these stock prices, so maybe they just failed to pay off "The Correct" people or something (or maybe they did and it's way worse then we know).

https://www.businessinsider.com/does-the-government-actually-manipulate-the-stock-market-2010-2

No doubt, it has been down over time, but it dropped 9.5% yesterday. That is a pretty big single day loss and it was directly related to the house buying news. Stock market is emotional. I don't see how an inventory of houses makes Zillow a "sell" stock suddenly. Other headlines complain there isn't enough inventory. They just need to turn the inventory and figure out their long term business model. I agree the government manipulates stocks,  but the market is also manipulated by hedge funds, probably even more so.

I personally have never had zillow offer on anything i own.. I would have sold in a heart beat if they offer way over market  everything is for sale for the right price.

However on the few Vegas props we have I have had offers from think it was I pad and its was no different than all the wholesalers that low ball me constantly..  the I pad offers were 100k under market. 

 I don't understand why Zillow has been paying market value for properties. Really any successful buy/resale model requires under market purchase. Same with car buyers or anyone "flipping" something for profit. I am wondering was that a mistake that Zillow was overpaying or was it intentional to build up inventory? I agree anything is for sale if the price is right. 

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Originally posted by @Joe Splitrock :
Originally posted by @Jay Hinrichs:
Originally posted by @Joe Splitrock:
Originally posted by @Scott Mac:

Looks like a nosedive over time vs a tumble--It's why stocks are a gamble (just like Roulette in Las Vegas).

Real Estate holds it's value over time, and you can "fix it up"--you have some control over it.

The US Government manipulates these stock prices, so maybe they just failed to pay off "The Correct" people or something (or maybe they did and it's way worse then we know).

https://www.businessinsider.com/does-the-government-actually-manipulate-the-stock-market-2010-2

No doubt, it has been down over time, but it dropped 9.5% yesterday. That is a pretty big single day loss and it was directly related to the house buying news. Stock market is emotional. I don't see how an inventory of houses makes Zillow a "sell" stock suddenly. Other headlines complain there isn't enough inventory. They just need to turn the inventory and figure out their long term business model. I agree the government manipulates stocks,  but the market is also manipulated by hedge funds, probably even more so.

I personally have never had zillow offer on anything i own.. I would have sold in a heart beat if they offer way over market  everything is for sale for the right price.

However on the few Vegas props we have I have had offers from think it was I pad and its was no different than all the wholesalers that low ball me constantly..  the I pad offers were 100k under market. 

 I don't understand why Zillow has been paying market value for properties. Really any successful buy/resale model requires under market purchase. Same with car buyers or anyone "flipping" something for profit. I am wondering was that a mistake that Zillow was overpaying or was it intentional to build up inventory? I agree anything is for sale if the price is right. 

its been a head scratcher for me as well.

Its just like the new crop of Hedge funds buying for cash flow in what are C D markets that I have worked lending to flippers for 20 years. 

the same inventory is constantly cycled I have yet to see anyone make it long term that does not live and work them themselves in this C D inventory space.. Myself included.. when I got to 350 homes and got a decent offer I exited post haste.. And when I talk to the buyers that work for the hedge funds I asked him what are you doing what are you thinking..  

the answer We rehab better than most locals that was it..  I am like but the tenant base is the same your houses are going to get beat up just like anyone elses.. but that does not deter them  will see even if they buy hundreds of homes they still are not controlling the market by any means. 

@Joe Splitrock I only know of airbnb and vrbo for str renting. I only know of zillow/trulia/hotpads, realtor.com, craiglist and apartments.com for listing my rentals; and only use zillow because that is how I get responses. They seem to be the market in Austin even for people moving in. I will pay $10-$20 whatever they ask and consider it a relative bargain. Based on that, I'd buy stock on the dip but I have no idea how to read company financials so it would have to be for entertainment purposes and for entertainment I'd rather eat out.

Originally posted by @Jay Hinrichs :
Originally posted by @Jason Brown:

The way I had understood it was that they were simply running into the same supply chain crunch for the materials and renovations of these houses that the entire industry is feeling right now. Their business model is to try and find newish homes that really do in fact only need paint and carpet, do quick rehabs and then get them to list. Margins are slim as printer paper on the flips but they're shooting for volume as well as the fact that its a great interlocking income stream for agents fees and commissions as well as for their lending and closing lines of business.

I guess it's good to know that I'm not the only one who can't find two sticks to rub together at the lumber yard.

Boy out here on the west coast our lumber yards are stacked with inventory and the mills are running full steam there is no shortage at least here just lumber broker manipulation and extreme profit taking..  

I just don't understand. I spent a good 3 weeks calling lumber yards across all 3 counties here in south florida trying to get some red oak for a staircase. 3 weeks!

Originally posted by @Jason Brown :
Originally posted by @Jay Hinrichs:
Originally posted by @Jason Brown:

The way I had understood it was that they were simply running into the same supply chain crunch for the materials and renovations of these houses that the entire industry is feeling right now. Their business model is to try and find newish homes that really do in fact only need paint and carpet, do quick rehabs and then get them to list. Margins are slim as printer paper on the flips but they're shooting for volume as well as the fact that its a great interlocking income stream for agents fees and commissions as well as for their lending and closing lines of business.

I guess it's good to know that I'm not the only one who can't find two sticks to rub together at the lumber yard.

Boy out here on the west coast our lumber yards are stacked with inventory and the mills are running full steam there is no shortage at least here just lumber broker manipulation and extreme profit taking..  

I just don't understand. I spent a good 3 weeks calling lumber yards across all 3 counties here in south florida trying to get some red oak for a staircase. 3 weeks!

Red Oak is a specialty wood .. I am talking about douglas fir stud material.  You know what we use out here to frame the homes.

we are 16 weeks out to get Garage doors :)  

Originally posted by @Jay Hinrichs :

I personally have never had zillow offer on anything i own.. I would have sold in a heart beat if they offer way over market  everything is for sale for the right price.

However on the few Vegas props we have I have had offers from think it was I pad and its was no different than all the wholesalers that low ball me constantly..  the I pad offers were 100k under market. 

1029 Appaloosa Hills, North Las Vegas. Highest exact model match sold comp in that neighborhood was $292k in June and the next highest was $290k. Zillow bought it for $324k with $1500 repair credit + closing costs and Zillow fees —> net $304k to seller, closed first week of August. Of course they put on the public record they paid $308k. Ha

Right after sale and cleanup, Zillow listed it for $311k. Progress Residential bought it for $321k and now has it listed for rent at $1995. Highest rental comps in that neighborhood were about $1600. I have watched Progress Residential consistently rent homes for $200-300 above neighborhood leased comps. How they do it: they pretty it up a lil bit and don’t screen renters. According to someone I know who’s currently renting from them, they only wanted to see a most recent bank statement, no credit check. 

This is just one example. Zillow and Opendoor have been consistently overpaying for a while now. And the bigcorp rental owners have been significantly overcharging on rents for a while too, at least for 2 years since I’ve been watching them. 

Originally posted by @Casey Powers :
Originally posted by @Jay Hinrichs:

I personally have never had zillow offer on anything i own.. I would have sold in a heart beat if they offer way over market  everything is for sale for the right price.

However on the few Vegas props we have I have had offers from think it was I pad and its was no different than all the wholesalers that low ball me constantly..  the I pad offers were 100k under market. 

1029 Appaloosa Hills, North Las Vegas. Highest exact model match sold comp in that neighborhood was $292k in June and the next highest was $290k. Zillow bought it for $324k with $1500 repair credit + closing costs and Zillow fees —> net $304k to seller, closed first week of August. Of course they put on the public record they paid $308k. Ha

Right after sale and cleanup, Zillow listed it for $311k. Progress Residential bought it for $321k and now has it listed for rent at $1995. Highest rental comps in that neighborhood were about $1600. I have watched Progress Residential consistently rent homes for $200-300 above neighborhood leased comps. How they do it: they pretty it up a lil bit and don’t screen renters. According to someone I know who’s currently renting from them, they only wanted to see a most recent bank statement, no credit check. 

This is just one example. Zillow and Opendoor have been consistently overpaying for a while now. And the bigcorp rental owners have been significantly overcharging on rents for a while too, at least for 2 years since I’ve been watching them. 

well if market for a seller is 290k minus standard closing costs of say 6% all in thats a net of about 270k  so if the seller netted 304k I can see someone doing that.. I would 

Originally posted by @Jay Hinrichs :
Originally posted by @Casey Powers:
Originally posted by @Jay Hinrichs:

I personally have never had zillow offer on anything i own.. I would have sold in a heart beat if they offer way over market  everything is for sale for the right price.

However on the few Vegas props we have I have had offers from think it was I pad and its was no different than all the wholesalers that low ball me constantly..  the I pad offers were 100k under market. 

1029 Appaloosa Hills, North Las Vegas. Highest exact model match sold comp in that neighborhood was $292k in June and the next highest was $290k. Zillow bought it for $324k with $1500 repair credit + closing costs and Zillow fees —> net $304k to seller, closed first week of August. Of course they put on the public record they paid $308k. Ha

Right after sale and cleanup, Zillow listed it for $311k. Progress Residential bought it for $321k and now has it listed for rent at $1995. Highest rental comps in that neighborhood were about $1600. I have watched Progress Residential consistently rent homes for $200-300 above neighborhood leased comps. How they do it: they pretty it up a lil bit and don’t screen renters. According to someone I know who’s currently renting from them, they only wanted to see a most recent bank statement, no credit check. 

This is just one example. Zillow and Opendoor have been consistently overpaying for a while now. And the bigcorp rental owners have been significantly overcharging on rents for a while too, at least for 2 years since I’ve been watching them. 

well if market for a seller is 290k minus standard closing costs of say 6% all in thats a net of about 270k  so if the seller netted 304k I can see someone doing that.. I would 

Of course sellers will go for the bigger payout. Point I’m making is these companies are overpaying for houses and there has to be more to it than just “flipping in volume”. 1) Typical bigcorp strategy has been operate at a loss to gain enough market share to control it. 2) Overpaying for property cuts most other brokerages out of the deal, essentially undercutting Zillow’s competition as a real estate broker. Industry busting. 3) With lending too, Zillow can position itself as the only place most people may go for anything real estate related. That gives enormous control over the housing market. 

This does NOT bode well longer term for consumers or even many other investors IMO.

Originally posted by @Casey Powers :
Originally posted by @Jay Hinrichs:
Originally posted by @Casey Powers:
Originally posted by @Jay Hinrichs:

I personally have never had zillow offer on anything i own.. I would have sold in a heart beat if they offer way over market  everything is for sale for the right price.

However on the few Vegas props we have I have had offers from think it was I pad and its was no different than all the wholesalers that low ball me constantly..  the I pad offers were 100k under market. 

1029 Appaloosa Hills, North Las Vegas. Highest exact model match sold comp in that neighborhood was $292k in June and the next highest was $290k. Zillow bought it for $324k with $1500 repair credit + closing costs and Zillow fees —> net $304k to seller, closed first week of August. Of course they put on the public record they paid $308k. Ha

Right after sale and cleanup, Zillow listed it for $311k. Progress Residential bought it for $321k and now has it listed for rent at $1995. Highest rental comps in that neighborhood were about $1600. I have watched Progress Residential consistently rent homes for $200-300 above neighborhood leased comps. How they do it: they pretty it up a lil bit and don’t screen renters. According to someone I know who’s currently renting from them, they only wanted to see a most recent bank statement, no credit check. 

This is just one example. Zillow and Opendoor have been consistently overpaying for a while now. And the bigcorp rental owners have been significantly overcharging on rents for a while too, at least for 2 years since I’ve been watching them. 

well if market for a seller is 290k minus standard closing costs of say 6% all in thats a net of about 270k  so if the seller netted 304k I can see someone doing that.. I would 

Of course sellers will go for the bigger payout. Point I’m making is these companies are overpaying for houses and there has to be more to it than just “flipping in volume”. 1) Typical bigcorp strategy has been operate at a loss to gain enough market share to control it. 2) Overpaying for property cuts most other brokerages out of the deal, essentially undercutting Zillow’s competition as a real estate broker. Industry busting. 3) With lending too, Zillow can position itself as the only place most people may go for anything real estate related. That gives enormous control over the housing market. 

This does NOT bode well longer term for consumers or even many other investors IMO.

seems like fair market is taking care of it..  IE they are losing money losing stock value and their experiment it appears does not/did not work. 

When they got into this business I wondered how they would make any money at it.  I just figured they are smarter than I am.  In part, their buyers are not playing with their own money, but the company's, getting paid on making purchases, regardless of price.  There is a lot of management capability required, I wonder how qualified the management is to meet the many challenges.  The carrying costs and expenses are big, too.

Originally posted by @Jay Hinrichs :
Originally posted by @Casey Powers:
Originally posted by @Jay Hinrichs:
Originally posted by @Casey Powers:
Originally posted by @Jay Hinrichs:

I personally have never had zillow offer on anything i own.. I would have sold in a heart beat if they offer way over market  everything is for sale for the right price.

However on the few Vegas props we have I have had offers from think it was I pad and its was no different than all the wholesalers that low ball me constantly..  the I pad offers were 100k under market. 

1029 Appaloosa Hills, North Las Vegas. Highest exact model match sold comp in that neighborhood was $292k in June and the next highest was $290k. Zillow bought it for $324k with $1500 repair credit + closing costs and Zillow fees —> net $304k to seller, closed first week of August. Of course they put on the public record they paid $308k. Ha

Right after sale and cleanup, Zillow listed it for $311k. Progress Residential bought it for $321k and now has it listed for rent at $1995. Highest rental comps in that neighborhood were about $1600. I have watched Progress Residential consistently rent homes for $200-300 above neighborhood leased comps. How they do it: they pretty it up a lil bit and don’t screen renters. According to someone I know who’s currently renting from them, they only wanted to see a most recent bank statement, no credit check. 

This is just one example. Zillow and Opendoor have been consistently overpaying for a while now. And the bigcorp rental owners have been significantly overcharging on rents for a while too, at least for 2 years since I’ve been watching them. 

well if market for a seller is 290k minus standard closing costs of say 6% all in thats a net of about 270k  so if the seller netted 304k I can see someone doing that.. I would 

Of course sellers will go for the bigger payout. Point I’m making is these companies are overpaying for houses and there has to be more to it than just “flipping in volume”. 1) Typical bigcorp strategy has been operate at a loss to gain enough market share to control it. 2) Overpaying for property cuts most other brokerages out of the deal, essentially undercutting Zillow’s competition as a real estate broker. Industry busting. 3) With lending too, Zillow can position itself as the only place most people may go for anything real estate related. That gives enormous control over the housing market. 

This does NOT bode well longer term for consumers or even many other investors IMO.

seems like fair market is taking care of it..  IE they are losing money losing stock value and their experiment it appears does not/did not work. 

 LOL!!!!