Zillow Offers is no more — and the public doesn’t seem to be sad about it.
Across social media and especially Twitter on Tuesday, industry professionals and everyday Americans threw darts at the portal giant’s announcement that it would no longer be in the iBuying business, in part due to unforeseen challenges forecasting home prices, according to Zillow CEO Rich Barton.
That acknowledgement in particular set off a streak of conspiracies on social media, with users who pointed to Zillow’s Zestimate tool, which attempted to estimate home prices.
“‘We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated …'” wrote user @SuperRob, quoting Barton’s own words. “Are they basically admitting that the Zestimate is bullshit? I mean, isn’t that supposed to be their THING? Or were they using Zillow Offers to try to boost those Zestimates?”
“They have been manipulating the housing market so are we supposed to feel bad it didn’t work?” added Twitter user @JonathanOsman, a Realtor in the Carolinas. “I’m feeling for homebuyers that are stuck renting because they’re selling their overpriced inventory to investors instead of owner-occupant buyers.”
The iBuying platform’s demise comes only several weeks after Zillow announced it would pause its homebuying efforts due to issues with labor and supply chains. In a written statement on Oct. 18, Zillow Chief Operating Officer Jeremy Wacksman remained confident the company would work through its issues and reignite its buying efforts in 2022.
“We’re operating within a labor-and supply-constrained economy inside a competitive real estate market, especially in the construction, renovation and closing spaces,” Wacksman said. “We have not been exempt from these market and capacity issues and we now have an operational backlog for renovations and closings. Pausing new contracts will enable us to focus on sellers already under contract with us and our current home inventory.”
The portal remained relatively mum after its Oct. 18 announcement, but financial analysts and reports began ringing the alarm about the future of Zillow Offers. Bloomberg’s latest Zillow article published on Monday garnered the most attention, as they revealed the company needed to offload 7,000 homes — 66 percent of which the portal would be selling at a loss.
“I think they leaned into home-price appreciation at exactly the wrong moment,” KeyBanc analyst Ed Yruma told Bloomberg.
However, Zillow ended its silence on Tuesday with Zillow CEO Rich Barton dropping the bombshell announcement that Zillow Offers is done during an investor call.
“Today is a tough day at Zillow,” Barton tweeted moments after the company’s corporate account shared a link to its Q3 earnings. “We made the difficult, but necessary decision to wind down the Zillow Offers operations and lay off 25 percent of the workforce.”
Rich Barton
In the earnings report, Barton effectively echoed Yruma’s sentiments and said the Zillow Offers model became untenable in the midst of a red-hot sellers’ market where home prices exploded to never-seen-before levels.
“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,” he said. “Our observed error rate has been far more volatile than we thought possible. Fundamentally, we have been unable to predict future pricing of homes to a level of accuracy that makes this a safe business to be in.”
“While we built and learned a tremendous amount operating Zillow Offers, it served only a small portion of our customers,” he added. “Our core business and brand are strong, and we remain committed to creating an integrated and digital real estate transaction that solves the pain points of buyers and sellers while serving a wider audience.”
In the hours since the announcement about Zillow Offers closure, which will take several quarters to complete, social media has been in a roar with Zillow enthusiasts lauding Barton’s decision to stop now rather than save face, and detractors celebrating the end of an operation they saw as an affront to housing affordability.
“Kudos for making a tough decision (especially in a market that currently doesn’t value a focus on capital-efficiency),” venture capitalist Boris Wertz said under Barton’s announcement.
“Definitely a difficult decision, but central to the unique opportunities and advantages that Zillow is presented with. I’m in,” added user @GuyWithGolden.
While the replies to Barton’s tweet were relatively mild, the sentiment has been much harsher elsewhere with users questioning the validity of the portal’s Zestimates, which have been a thorn in the side of agents and consumers alike.
“It would really upset me to learn that Zillow altered its [algorithm] to show a depressed Zestimate(R) of my house, only to swoop in and nab it at a discount, then flip it for a profit at market value,” added user @HalSinger. “Seems like a structural prohibition on platform and speculator should be imposed here.”
Other users chimed in, calling the portal “vultures” and saying they have no sympathy for Zillow as it will undoubtedly take a financial hit.
“Good,” added user @LaCivilian. “Vultures willing to hurt other Americans with their greed deserve to lose their jobs.”
On Inman’s Coast to Coast Facebook page, readers were still taking in the full gravity of the news and what it means for the industry, as it navigates the competition between traditional real estate models and burgeoning digital-based proptech and fintech models.
“Ummmm yeah… since they have modeled their entire strategy around it for the past couple of years,” wrote realtor.com executive and former Inman contributor Marci James. “And 25 percent of their workforce will be laid off. MAJOR pivot. Wonder what is next?”
Other commenters echoed James’ sentiments, saying they weren’t surprised by today’s announcement and the portal simply needs to divert its efforts elsewhere.
“I’m not really surprised,” Better Homes and Gardens broker-owner Greg Fox said. “Predicting the market, knowing the holding costs, trying to control the market — tough to do. And it’s not exactly a new idea. Been happening over and over for decades. Just another attempt by a bigger entity.”
Zillow Offers iBuying competitors Opendoor and RedfinNow sent written comments to Inman, saying they’re committed to the iBuying model and will focus on providing seamless and effective service to homebuyers and homesellers.
“We are in the midst of a generational shift towards a fully digital experience, with a large, unmet need for a seamless experience in real estate,” an Opendoor spokesperson told Inman. “With our track record of executional excellence and many years of investment in consumer experience, technology, pricing, and operations, we are well-positioned to meet consumer demand with a best-in-class product and service.”
“Opendoor is open for business,” they added.
Redfin CEO Glenn Kelman said the company is “committed to iBuying, and will keep methodically and carefully expanding that service” as a secondary choice to its brokerage services.
“We want to give every homeowner a choice but we’ve always said that the choice most homeowners will prefer is a brokered sale, especially when we charge a listing fee as low as 1 percent,” he said after noting he’ll reveal more about RedfinNow’s future during the company’s Q3 earnings call on Thursday. “The iBuying business is what we’ve always thought it is, an attractive option for homeowners who are willing to pay more for convenience and peace of mind.”
