Zillow Group has said that it can not buy any more homes to flip this year, blaming ‘labor and supply’ constraints in an announcement on Monday.
The company had 3,142 unsold homes worth a total of $1.17 billion in the second quarter of this year, according to earning reports seen by the .
Zillow – a firm founded in 2006 by ex-Microsoft executives which buys and sells homes via an online marketplace – said on Monday that it would not contract to buy any more houses in 2021, and instead will work through the backlog of homes it already owns.
The news prompted shares of Zillow Group Inc hit over a year’s low on Monday, as labor shortages and supply disruptions hamper timely sales of renovated properties.
‘We’re operating within a labor- and supply-constrained economy inside a competitive real estate market, especially in the construction, renovation and closing spaces,’ Zillow’s chief operating officer Jeremy Wacksman said in a statement.
‘Pausing new contracts will enable us to focus on sellers already under contract with us and our current home inventory,’ he said.
Zillow Group has said that it can not buy any more homes to flip this year, blaming ‘labor and supply’ constraints. Pictured: A person holds a phone up showing the Zilliow app (stock image)
Zillow was co-founded in 2006 by chairman Richard Barton, a former Microsoft executive who also founded travel company Expedia and workplace review platform Glassdoor
Zillow’s chief operating officer Jeremy Wacksman (pictured) said in a statement that the company is ‘operating within a labor- and supply-constrained economy’
In April 2018, Zillow entered the on-demand home buying market with Zillow Offers, a platform which purchases homes using the ‘iBuyer’ model.
‘iBuyer’ companies are able to make immediate offers to homeowners based on data about their property, dramatically speeding up the purchasing process.
After having purchased a property, the company can then perform light repairs and renovations working in tandem with inspectors and contractors. before listing the home for sale on its platform at a higher price.
Zillow made headlines earlier this year when it listed Elon Musk’s multi-million dollar mansion, which the tech mogul put up for sale just days after he pledged he would ‘own no house’.
However, Zillow has said that the current shortage in labor and materials means the company cannot close, renovate and sell the homes quickly enough.
Zillow shares fell as much as 11.4 percent to $93.54 in early trading, their lowest since September 2020.
‘We believe Zillow’s decision might be affected by slowing homes sales and the company’s inability to sell through at the same rate at which it is acquiring, as buyers take a step back’, BofA Securities said in a note.
The U.S. housing sector that earlier witnessed a boom has lost its momentum in recent months, hurt by a tight jobs market, supply chain issues and shortage of raw materials.
That has sent property rates soaring, with the median U.S. house price in August up nearly 15 percent from a year earlier.
Zillow made headlines earlier this year when it listed Elon Musk’s multi-million dollar mansion in Los Angeles, CA (pictured)
Elon Musk’s mansion on Crystal Springs Rd, Hillsborough, was listed on the platform for $37.5m and later slashed to $32m
Despite its high-profile listings and considerable market share, Zillow’s shares fell as much as 11.4 percent to $93.54 in early trading, their lowest since September 2020, after it announced on Monday it did not have the capacity to buy more houses this year
Zillow, which operates the popular home valuation model ‘Zestimates’, said it would clear a backlog of properties on its platform.
The company bought 3,805 homes in the second quarter – a record high for the company and more than double of what it purchased in the first quarter, according to notes to shareholders.
Analysts, however, said Zillow’s move might open the door to rivals such as Opendoor Technologies Inc to grab market share.
Opendoor can gain a significant share if it just generally operates more efficiently, Wedbush analyst Ygal Arounian said in a note.
The company, which went public through a merger with a blank-check firm led by venture investor Chamath Palihapitiya last year, bought 8,494 homes in the second quarter.
Opendoor shares were up 2.6 percent in afternoon trade, while Zillow shares were down 8.5 percent.
Zillow Offers accounted for more than half the company’s revenue last year, according to the Wall Street Journal, citing the company’s earning reports.
The division produced $772 million in revenue in the second quarter of alli diet pill coupon 2021 – 70 percent more than over the same time period in 2020 – its earning reports show.
By the end of the second quarter, Zillow had 3,142 unsold homes left, with a total value of around $1.17 billion.
iBuyers are appealing to sellers because closing can take place anywhere from 7 to 90 days after the contact is signed, and offers some certainty and control over the process without finding an agent and putting their house on the market.
According to a report from Zillow, iBuyers now account for about 1 percent of the market, but is higher in some specific cities like Phoenix, Atlanta or Charlotte, North Carolina, where it accounts for 5 percent.
Zillow was incorporated in 2004, but its web-based platform of buying and selling properties was officially launched in 2006 by Microsoft alumni Richard ‘Rich’ Barton and Lloyd Frink.
Barton, who has built his name on founding disruptive companies such as travel giant Expedia and workplace reviewing platform Glassdoor, set out to transform the real estate industry by building a web-based house flipping platform.