Zillow President Susan Daimler argues the hot housing market 'feels really sustainable' as pandemic 'reshuffling' continues and more millennial buyers age into the market.
Zillow Group Inc. shares plunged Wednesday after the company announced plans to exit its house-flipping business and eliminate 25% of its workforce.
The Seattle-based Zillow said labor and supply shortages resulted in a backlog of more than 9,800 homes that need to be sold. Another 8,200 homes are under contract for the company to buy.
Selling prices of those homes would likely be 5% to 7% below what Zillow paid for them, leading to a $304 million writedown in the third quarter. The company anticipates an additional loss of $240 million to $265 million on homes it expects to purchase in the current quarter.
ZILLOW QUITS HOME-FLIPPING BUSINESS, CITES INABILITY TO FORECAST PRICES
"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," said Zillow Group co-founder and CEO Rich Barton.
Zillow shares traded lower by 22% on Wednesday afternoon. They had fallen 67% since closing at a record high of $203.79 on Feb. 16.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| ZG | ZILLOW GROUP, INC. | 65.86 | -19.62 | -22.95% |
Zillow’s Homes unit used an algorithm to determine what a home should be worth.
The company would buy the home, many times sight unseen, and then freshen it up with new paint, carpeting and other minor repairs before attempting to resell at a higher price. The model is enticing as it gives companies like Zillow the chance to make 5% to 10% or more on a home in a short period of time.
However, there are downfalls as well.
The supply-chain and labor issues resulting from the pandemic produced unexpected delays in touching up the homes, which caused inventory to build.
The problems "demonstrate the pitfalls of a purely tech enabled algorithmic approach to home buying," said Marc Geredes, senior vice president of marketplace operations for Sundae, a residential marketplace that connects homeowners looking to sell their house as-is to the largest network of investors.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
Zillow on Tuesday evening reported a third-quarter loss of $328 million, or 95 cents per share, on revenue of $1.74 billion. Analysts surveyed by Refinitiv were expecting a profit of 16 cents per share on revenue of $2.01 billion.
Business - Latest - Google News
November 04, 2021 at 02:19AM
https://ift.tt/3pZBkvg
Zillow stock craters on plans to exit house-flipping business - Fox Business
Business - Latest - Google News
https://ift.tt/2Rx7A4Y
Bagikan Berita Ini
0 Response to "Zillow stock craters on plans to exit house-flipping business - Fox Business"
Post a Comment