- Zillow has put home buying on hold for the remainder of 2021, which has led to questions about its turnaround activity.
- An insider has discovered that most of the homes Zillow sells in its top five markets are priced below what it paid.
- Bloomberg now reports that Zillow is looking to sell 7,000 homes for around $ 2.8 billion.
Zillow’s home buying unit is having a tough few weeks.
The $ 25 billion real estate giant has spent the past two years buying thousands of homes through Zillow Offers, its instant buyer’s arm, or iBuyer.
The bad news began to fall on October 17, when he announced he would stop buying homes for the remainder of 2021. Jeremy Wacksman, his chief operating officer, said it was because of ‘an “operational backlog of renovations and closures” which he blamed on “an economy limited by labor and supply in a competitive real estate market”.
The move sent the stock tumbling as investors bet on the Zillow offerings as the main driver of the company’s revenue.
Insider then reported on Oct. 28 that the majority of its homes in its five largest markets, in places like Atlanta, Phoenix and Houston, were listed for less than what Zillow paid to buy the homes. The numbers were particularly striking in Phoenix, where it lists over 90% of properties for less than what it paid for.
Wall Street responded, with analysts performing their own analysis to find similar results, and some predicting a large depreciation in Zillow’s income statement from November 2.
Brad Erickson, an RBC Capital Markets equity analyst who covers Zillow, estimated the company would recognize between $ 20 million and $ 30 million in impairment on the thousands of homes it owns.
“They are clearly losing money on homes, and margins will be worse this quarter,” Erickson told Insider’s Daniel Geiger. “They will have to write down part of their inventory.”
Zillow’s stock took another hit on November 1, ending the day down nearly 9%.
Today, Bloomberg’s Patrick Clark, Sridhar Natarajan and Heather Clark report that Zillow plans to sell around 7,000 homes he owns for around $ 2.8 billion. The sale would go to a multitude of buyers in the booming single-family rental space, according to Bloomberg, rather than to a single entity.
We’ll be monitoring Zillow’s income statement to shed some light on what’s going on.