Zillow Puts a Halt to House Flipping Business After Accumulating Losses
Zillow, best known for its online real estate listings have recently announced that they will no longer be buying and renovating homes. A once very successful online real estate company is now receiving major backlash from digital protestors due to the overwhelming backstock of homes through the Zillow Offers Program.
What is the Zillow Offers Program?
The company is widely used by people looking to sell their homes, without having to put in the extra work. The Zillow Offers program purchases homes directly from sellers, upgrades and renovates them, and then lists the homes for sale. Zillow collected data over time from the app to forecast buying and selling prices, which, unfortunately, inaccurately calculated future prices. The inaccurate “Zestimates” left the company with less income than it had originally predicted.
The soaring popularity in Zillow’s Offers program has left the company in a bind. Zillow currently owns more properties than they have the capacity to renovate, leaving them with a heaping backlog of homes, not yet ready to be sold. The labor shortage, as well as a nationwide supply shortage due to the pandemic, has had a major impact on the housing market as a whole.
“We’re operating within a labor- and supply-constrained economy inside a competitive real estate market, especially in the construction, renovation, and closing spaces,” said Jeremy Wacksman, chief operating officer, Zillow.
The Zillow Offers program has become more successful than the company had predicted, with about 10,000 homes currently sitting in inventory. The initial plan was to rapidly purchase, flip and resell homes, but the labor shortage has left many properties unfinished.
What Does This Mean for the Housing Market?
As they recently announced, Zillow will be pausing the purchase of new homes, to continue renovating the backlogged purchases. The homes currently owned by Zillow are estimated to be worth about $3.8 Billion, about 8 times more than the previous year. As Zillow parts ways with the house flipping business, they are trying to sell backlogged homes as quickly as possible to replace lost revenue.
Unfortunately for prospecting homebuyers, Zillow plans to sell a majority of their homes to large investment firms, which will then flip the homes and rent them out to families. Since single-family home values have been skyrocketing, many buyers will have no choice but to rent.
Looking to Buy a Home? Choose Regency Properties!
The housing market has already been struggling to keep up with consumer demand leading to increased pricing, and now Zillow’s misfortune has created an even larger dent in the market. Luckily, the Southeast is known for lower pricing and a quieter, more steady quality of life. If you are looking to buy a home, we invite you to check out our beautiful properties all over North Carolina! Reach out to Regency Properties at (336) 246-2307 for more information.