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Zillow Stock Falls After It Halts Buying Houses To Flip

David Krechevsky
Oct 19, 2021
Zillow Logo

Zillow’s stock fell nearly 10% Monday after the company announced its Zillow Offers division would stop buying homes.

KEY TAKEAWAYS
  • Company cites labor & supply shortages for pause in buying homes to flip.

While Zillow is best known for its listings of homes for sale and for offering potential buyers an idea of what their home is worth on the market, its Zillow Offers unit has bought and sold houses in dozens of markets nationwise over the past three years.

In the second quarter of this year alone, the company bought 3,800 homes.

Monday, however, the company announced it will not sign any new contracts to buy homes through the end of the year, citing a backlog in renovations and “operational capacity constraints.” 

Zillow said it will focus solely on closing sales of houses with contracts that are already signed, which will help reduce the backlog in renovations. It said it will continue to market and sell those homes while pausing purchases.

Zillow Chief Operating Officer Jeremy Wacksman said labor and supply shortages were behind the decision.

"We're operating within a labor- and supply-constrained economy inside a competitive real estate market, especially in the construction, renovation and closing spaces," he said. "We have not been exempt from these market and capacity issues and we now have an operational backlog for renovations and closings. Pausing new contracts will enable us to focus on sellers already under contract with us and our current home inventory."

For homeowners still looking to sell, Zillow Offers will connect them with a local real estate agent, the company said.

Zillow Offers is a mostly automated online service for homeowners looking to sell without having to coordinate repairs or host open houses or showings. After buying a home, Zillow prepares it for sale by doing the repairs or upgrades, then lists it on the open market.

Following Monday's announcement, Zillow’s stock fell 9.4%; it has slipped more than 30% this year.

 

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