Zillow Out of iBuying – This Means little to Charlottesville Real Estate Consumers

Zillow are out the home buying business, while their current Zestimates are often more accurate than ever. Sometimes, the Zestimates are completely wrong. Right now, the human algorithm is more accurate than Zestimates. But for how long?

Good for them for trying, failing relatively quickly, and recognizing that failure and cutting their losses quickly. I feel terrible for the 25% of their workforce getting laid off.

What now?

At least in the Charlottesville – Albemarle area market, Zillow Offers weren’t a thing. Neither are the many other iBuying companies, but I’m sure they will be sooner rather than later. I think this is a statement that at least for now, the real estate market is not yet a homogeneous product to be capitalized on, but a market with sufficient variances and idiosyncrasies that the algorithms are at this point in time, insufficient. From Fortune:

“We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated,” Zillow CEO Rich Barton said in a statement on Tuesday. The real estate listing site also reported third-quarter earnings in which it said it had lost a massive $339.2 million during the quarter, largely due to the faltering iBuyer program. During the same quarter a year ago, it posted a $39.6 million profit.

“Zillow quitting its iBuyer business shouldn’t necessarily come as a surprise to those familiar with the flipping industry. Most successful flipping is done by local flippers using intimate knowledge of existing home conditions, renovation costs, and market idiosyncrasies, which is something that is very difficult to obtain purely through an automated home value estimate,” Ralph McLaughlin, chief economist at Kukun, a real estate analytics firm, tells Fortune. “In addition, flipping at scale is very difficult, if impossible, to do across many markets because of challenges associated with securing labor, materials, and expertise. But Zillow has surely learned a lot from this experiment, and I wouldn’t count them out for making a return to iBuyer in some form in the future.”

 

Or … do Zillow know something about the 2022+ real estate market that we don’t?

Focusing on what Zillow are doing risks losing sight of the proverbial forest for the trees.

More (most?) of my buyer clients reference the Zestimate. Most of my sellers do see it as a bellwether that they reference when discussing motivation for selling and pricing. I wrote about Zestimates in mid-2021.
But Zillow buying my clients’ houses? That was never a thing in Charlottesville.

A couple tweets on Zillow exiting the home buying business

  • David Charron
    • From Zillow “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.” Yikes!
  • Jonathan Miller
    • “I was thinking, ‘How are they making money?’” Flor said. “Maybe they know something I don’t.” @Zillow’s Zeal to Outbid for Homes Backfires in Flipping Fumble @pat_clark @NBuhayar @business Link to Bloomberg
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