Is Zillow’s home-flip fiasco a warning?
The company’s stock value is down by a third — or $9 billion
“Bubble Watch” digs into trends that may indicate economic and/or housing market troubles ahead.
BUZZ >> What in the world was Zillow thinking? SOURCE >> News broke last week that the real estate data firm’s house-flipping endeavor had failed.
The company says it’s stuck with roughly 7,000 homes it must sell below cost — a loss that might total a half-billion bucks. So Zillow will quit the buy-quick, sell-quick business, sell off its homes and cut a quarter of its staff.
Wall Street wasn’t happy. It slashed Zillow’s stock value by roughly one-third — around a $9 billion markdown.
More than a few marketmoving questions come to mind. For now, we’ll ignore the “how” behind Zillow’s stupidity.
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it just Zillow?
Zillow made a massive bet its fancy-pants computers could help it buy high and sell higher as an “iBuyer” — making thousands of quick cash offers on homes in hopes of profiting from fast resales.
Since Zillow’s a publicly owned company, the buying mistakes it made throughout 2021 had to be disclosed to its stockholders. Not every real estate investor — iBuyer or not — has similar obligations to admit to such transgressions, if committed.
Thankfully, nobody else in this quick-buck game has fessed up to any major mistakes. Yet.
Let’s assume Zillow’s an outlier, so why should I care?
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Do you wonder why home prices have soared in the pandemic era?
Zillow’s debacle offers another clue. Investors trying to make a swift buck may be badly overpaying for homes.
And while your favorite real estate agent may be chuckling at a competitor’s demise, please don’t celebrate with them.
At a minimum, Zillow — arguably the most aggressive homebuyer — has left the game. It’s a good bet other investors will learn from Zillow’s missteps and be more cautious.
That means fewer highly motivated buyers, which could cool housing’s feeding frenzy — both in how many bids are made for homes and how much money is in those bids.