my take on Zillow
Issue 57 - November 5th, 2021
Zillow has been a pioneer in the residential real estate industry since the day they launched in February 2006. They forever changed the game by letting consumers search homes directly without having to get information from a real estate agent, and the “Zestimate” has driven curious eyeballs to their website ever since.
Recently, Zillow entered the iBuying arena to start buying homes directly from sellers with the idea of relisting them for a profit post sale competing with the like of Opendoor who invented this segment of the market. This week, Zillow announced they are completely shutting down their iBuying operation essentially fire-selling about 7,000 homes currently on their books, and laying of 25% of their workforce. Zillow CEO Rich Barton has admitted defeat in a very public and embarrassing way.
I am personally a big fan of Zillow and Rich Barton, and I would never bet against founder-led companies with Barton still at the helm. The majority of Zillow’s revenue comes from lead generation services to agents and their mortgage business is gaining steam too. They have always been a technology platform, and they got out over their skis trying to flip homes at scale. On the ground operations is much different from scaling a software business, and they are learning this the hard way. Don’t sleep on Zillow, and I am excited to watch them make a big comeback from this low point in their business lifecycle.
Things I believe to be true:
Zillow exiting the iBuying segment does not mean this category is a dead segment.
Opendoor is proven operator in this iBuying segment, and I believe iBuying is a great option for some sellers to offload homes quickly and easily. Experienced operators like Opendoor will continue to gain market share in this segment.
Rich Barton and Zillow will bounce back in a major way by getting back to their core focus on agent services and consumer experiences. I would predict some big acquisitions coming soon by them in the technology related services segment, and I could see them launching their own brokerage at some point in the future.
The Zestimate as a source of pricing truth has taken a hit, but consumers will still love to argue with their real estate agents and buyers about their Ze$timates!
Keith Rabois who was a co-founder of Opendoor called this back in the day - this is very insightful and entertaining with this week’s news:
Newsworthy Links To Share
'eBay for residential real estate investors': Local Dallas realtor launches new investment marketplace (Dallas Business Journal)
15% of Investors Are New and Should Own REITs (Millionacres)
Zillow completely shuts down iBuying nationwide. Losses mount: Insider examined Zillow's listings in five key markets and found the company has listed more than 50% of the homes it owns for less than it originally paid for them. The most shocking discounts come from Phoenix, where 93% of listings were below Zillow's purchase prices. If the company were to
liquidate all its Phoenix homes right now, it would lose $6.3 million. Phoenix is currently Zillow Offers' second-largest market, after Atlanta.Zillow Seeks to Sell 7,000 Homes for $2.8 Billion After Flipping Halt (Bloomberg)
Opendoor co-founder slams Zillow, calls portal's tech 'horrible' (Inman)
Drive-thru real estate properties are in the spotlight in a post-pandemic world. Demand for convenience has turbocharged drive-thru real estate assets throughout the pandemic. Retail stores and restaurants are shifting gears, and the distinction between locations that work best as a “stop-and-shop” verses a “grab-and-go” has somewhat dissolved. No matter what the business sells — be it pizza or prescription medicine — property owners need to think about how to optimize for convenience. (Loopnet.com)