Real-estate tech giant Zillow announced on Tuesday that it will be exiting its home-flipping business, saying its business model to buy and sell homes rapidly did not work out as planned.
Just two weeks ago, Zillow announced it was halting all new home purchases for the rest of the year, but did not give further details. Its home-flipping business “iBuying” was a venture built on the idea of buying and selling homes quickly after renovation, using the large swaths of data they already held on housing markets throughout the country.
Even Zillow was not not immune to the labor and supply shortages that resulted after the pandemic, which they cited as the reason for their inability to renovate and flip the homes fast enough.
The housing market in particular overall was hit hard by raw material supply chain blockages over the past year. Lumber was one of the most difficult raw materials for anyone from high street developers to your neighbor redoing his kitchen to get their hands on. Disruptions in the supply chain plus an overwhelming demand for raw materials caused by surging housing markets created a shortage of supply so great that companies who sought to begin new ventures, like Zillow, simply could not keep up.
In a statement made on Tuesday, Chief Executive Rich Barton said Zillow had failed to predict the pace of home-price appreciation accurately, marking an end to a venture the company once said could generate $20 billion a year. Instead, the company said it now plans to cut 25% of its workforce, The Wall Street Journal reported.
Although other companies have been, and are, continuing to be successful with the iBuying model, Zillow was simply loving money too quickly and failed to time the market appropriately to turn a profit.
At the time of writing, Zillow’s stock is down nearly 25% after two consecutive trading sessions of declines following the announcement.
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Last updated: November 3, 2021