WASHINGTON — A booming pandemic housing market ended up costing a major real estate website. The market forced real estate web company Zillow to cut 25% of its workforce and close down its home buying company: Zillow Offers.
For years you may have known Zillow as a real estate portal. On the site, you can see estimated costs of homes and connect with a real estate agent to buy homes. In 2018, it expanded to a new business: iBuying. Which came to an end this month.
Here are your fast facts on Zillow offers.
What is an iBuyer?
According to Mike DelPrete, this is a recent phenomenon. Instead of selling your home through a real estate agent, online companies like Redfin and Opendoor take over the process.
“You just sell your home to a company that will buy it from you,” he said. “You can go online, get an offer within 24 hours, and you could get a check in the mail by the end of the week.”
DelPrete said the companies then update the homes and sell them quickly at a higher value. It’s a growing market and that’s why Zillow got into the game in 2018.
What was Zillow Offers?
In 2018, Zillow launched its own iBuyer: Zillow Offers.
“Zillow used lots of algorithms and machine learning and lots of data to look at housing prices now and in the future and in the past,” DelPrete said. “Zillow Offers was continually predicting what a home was worth.”
DelPrete said Zillow Offers began buying and selling thousands of houses a month. The idea was to quickly become competitive in the iBuyer market.
What ended Zillow Offers?
Zillow sent us this statement from the CEO:
“We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility.”
In other words, DelPrete said the pandemic housing market sent home values through the roof. Zillow and other iBuyers bought along with it.
But then, in the summer of 2021, the market started to slow down. However, Zillow Offers according to DelPrete didn’t slow down with the market.
“What happened is they ended up buying a lot of houses and overpaying for a lot of those houses because they didn't see those brake lights,” he said. “They didn't see the market start to cool.”
According to a Zillow earnings report, the company lost millions of dollars. A spokesperson said the company had to lay off 25% of its workforce when the decision was made to shut down Zillow Offers.
While the company will no longer buy homes, Zillow still owns thousands of homes. As the company winds down operations for Zillow Offers it will be selling those homes.