Why did Zillow pause its home-buying program?

Zillow is pausing its iBuying program as home sales slow and a shortage of construction workers hamper its operation.

Zillow is seared into our brains as the go-to website for finding home prices (and snooping on the value of our friends’ real estate portfolios).

In 2018, the $22B technology firm launched a completely new business line: Zillow Offers, a home buying and selling platform (AKA iBuying).

It saw strong growth for years, accounting for more than half of its $3.3B of revenue in 2020.

Zillow is now pausing the home-buying program

Why? Per The Wall Street Journal, the company is being hit on both the demand and supply side:

  • Home sales are slowing, which hampers Zillow’s ability to collect flipping fees (ranging from 9.5%-22% of home sale price)
  • A shortage of construction workers prevents Zillow from renovating the homes it purchases

One analyst tells WSJ that Zillow may have over-purchased homes.

Zillow Offers is very cash intensive…

… because the company has to put the homes on its balance sheet. Even with the pause, Zillow has 3k+ homes (valued at ~$1.2B) to unload.

The change comes a few weeks after Zillow came under fire over a viral TikTok video accusing it of buying up blocks of homes and manipulating home prices.

To add insult to injury, its main competitor — Opendoor — says its iBuying business is trucking along with 8.2k new home purchases expected in Q3 2021.

As long as nothing happens to the “Zillow Gone Wild” Instagram account, we’re cool.

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