So Much For That
He likened the move to Netflix’s decision to start making its own shows, rather than relying on Hollywood studios for its content.
Capital Thinking · Issue #966 · View online
Anyone who’s bought a house even once knows it can be a stressful experience. Spare a thought, then, for Zillow, which over the past couple of years has been buying up thousands of homes at a time, hoping to make a quick buck by flipping the homes.
Zillow Abandons Home Buying Operations In Abrupt U-Turn
On Tuesday, after losing hundreds of millions of dollars on the business, Zillow called it quits. “The unpredictability in forecasting home prices far exceeds what we anticipated,” said Zillow co-founder and CEO Rich Barton.
What an embarrassment for Barton, a veteran tech founder (he co-founded Expedia and Glassdoor, as well as Zillow) who ran Zillow for the first several years of its life before stepping back to be executive chairman in 2010. He took back the reins in 2019 to oversee the expansion into what is called “instant buying,” a market pioneered by Opendoor.
At the time, Zillow was primarily known as the web site that showed people estimates of what their homes were worth, making money by selling advertising to real estate professionals.
Barton saw that existence threatened by Opendoor’s home buying. “If it works and we don’t do it, we get displaced as a marketplace,” Barton told The Information in 2019.
He likened the move to Netflix’s decision to start making its own shows, rather than relying on Hollywood studios for its content.
At the time Barton faced skepticism on Wall Street, as he acknowledged on a conference call with analysts in mid-2019, when he said, “We must show you that we are not just buying dollars for $0.95,” adding that the “economics show promise.”
So much for that.Zillow lost about $750 million from its instant buying business between 2019 and the middle of this year. It expects to lose another $550 million or so on homes it is holding that aren’t worth what the company paid.
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