Zillow stopped ibuying homes what does that mean for us?

Question

Zillow is getting hammered on it failure of it’s ibuying business. They are taking a $ 500 million dollar loss and laid off 25% of its work force.

What do we think this is telling us about the housing marking?

Or was this just a poor structured bussiness model they were not prepared for?

Just a discussion.

Eddie Ward · Answer

@Jody Sperling

Interesting thought.

But in most areas that I look at, the supply is still not keeping up with demand.

And from what days is telling us, the United States is 4 to 5 million houses behind. This alone will keep demand high.

Eddie Ward · Answer

@Jon Kelly I am very surprised as well with how fast they shut it down. That’s why it throws up a flag, to ask a question why? Do they expect something we are not seeing or could they not handle the amount of intense organization it would require to pull this off?

Jon Kelly · Answer

ibuying isn't a new concept and won't be going away. I'm mostly surprised how quickly Zillow shut down this business. They had $billions in capital backing the business and it shuts down within 3 years...

The news speaks to how important it is for investors/companies to focus on the fundamentals:

• Strategy: what markets will you focus on and what is your capacity?
• Valuation: what data and assumptions are you using to come up with offers?
• Relationships with people: what is your network of sellers, inspectors, contractors, etc.?
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Jody Sperling · Answer

I do think in markets where ibuying was active, there will be a small housing correction. That seems unavoidable since supply will be greater than demand for a time.

It could be a good moment for people who have cash to scoop up underpriced merchandise, but I also think the underlying strengths of lending at this point will prevent the larger panic crash we saw beginning in 2008.

Zillow stopped ibuying homes what does that mean for us?

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