Zillow house flipping hits snag as hot housing market cools – Orange County Register
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By Patrick Clark | Bloomberg
The Zillow Group is taking a hiatus from buying homes in the United States after the online real estate giant’s hub in the tech-fueled home turnaround encountered a problem.
Zillow, which acquired more than 3,800 homes in the second quarter, will stop pursuing new purchases for the remainder of the year as it works on a backlog of properties already in its pipeline.
âWe operate in an economy constrained by labor and supply within a competitive real estate market, particularly in the construction, renovation and closure of spaces,â said Jeremy Wacksman, director of Zillow’s operation, in a statement. “We have not been exempt from these market and capacity issues and we now have an operational backlog for renovations and closures.”
Zillow shares fell 11.4% to $ 83.54 in New York City, the largest intraday decline in more than seven months. The stock had fallen 31% this year until Friday’s close after nearly tripling in 2020.
Shares of Opendoor, one of Zillow’s competitors, jumped 7.9% to $ 25.27 after the company said it was “open for business.”
Zillow is best known for posting real estate listings online and calculating estimated home values ââ- known as Zestimates – which allow users to track their home’s value. The popularity of the company’s apps and websites is fueling profits from Zillow’s online marketing activities.
But more recently he has bought and sold thousands of homes in the United States. In 2018, the company launched the Zillow offerings, joining a small group of tech home pinball machines known as iBuyers. In the new business, Zillow invites homeowners to bid on their home and uses algorithms to generate a price. If an owner agrees, Zillow buys the property, makes minor repairs, and puts it back on the market.
With the pandemic triggering a real estate frenzy marked by cash offers and quick closings, Zillow’s speed and convenience has started to resonate with consumers who want to sell their homes quickly as they attempt to purchase a new property.
Zillow said he would continue to market and sell homes during the break in new acquisitions and make deals on contracted homes.
âSuspending new contracts will allow us to focus on sellers already under contract with us and our current home inventory,â Wacksman said.
The iBuying process is powered by algorithms and large pools of capital, but it also depends on humans. Before Zillow signs a contract to buy a home, he sends an inspector to make sure the property doesn’t need costly repairs. After buying a home, contractors replace rugs and repaint interiors.
Finding workers for these tasks has been difficult during a pandemic that has stretched the workforce across all industries. Staff shortages have been exacerbated by Zillow’s willingness to let clients set a closing date months into the future, meaning he could agree to buy a house in August and start renovating it in November. .
“Given unexpectedly strong demand, Zillow Offers has reached its home buying capacity for the remainder of the year,” wrote an employee who works in the company’s home buying operations in two. States in an email to a business partner viewed by Bloomberg. .
This is not the first time that the company has suspended its purchases. Zillow stopped buying homes at the start of the pandemic, as did its main competitor, Opendoor Technologies Inc.As businesses finally capitalized on the housing boom that began when the first economic lockdowns were lifted, it took several months in Zillow to resume home buying at its pre-pandemic pace.
In recent months, Zillow has fought off online controversy and laid the groundwork for speeding up purchases. The company borrowed $ 450 million in a bond offering in August, the first of its kind, and priced a second $ 700 million offering in September.
For now, the company plans to refer potential clients to traditional real estate agents. While the break should help Zillow overcome the backlog, it could lose customers to its competitors, including its main rival.
âOpendoor is open for business and continues to serve its customers with a simple, safe, fast and reliable move,â a company spokesperson said in an email.
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