A Zillow home evaluator, Claudia Teyssandier, evaluating a home in Lauderhill, Florida in August 2019.
Photo: Joe Raedle (Getty Images)
Digital real estate marketplace Zillow has been hemorrhaging cash in the home-buying arms race in certain markets, Bloomberg reported on Tuesday, after the company tweaked its algorithm to jack up the bids it offered on real estate.
One of the more ominous movements in both real estate and tech during the current phase of the covid-19 pandemic has corporate house-buying sprees in response to resurgent demand, using predictive algorithms that try to divine the future of the housing market. The aim is generally to flip the homes for a profit, or in some cases convert them to timeshares or rental units, with unknown long-term effects for the housing market. Throughout the summer and fall, Zillow was urgently pursuing these potential buys via an “iBuying” program called Zillow Offers, which advertise homeowners’ offers in as little as a few days.
As Motherboard observed back in August, companies like Zillow have been more interested in growing as rapidly as possible than making money, with its iBuying program losing money on net since its launch in 2018. Concerns about the whole thing go both ways; actual families trying to buy homes are increasingly having to compete with deep-pocketed tech firms, but Motherboard reported that some studies have concluded Zillow’s instant offers are less generous than claimed.
In August, Zillow raised $450 million from a bond backed by houses it had hired but not yet sold, and CEO Rich Barton said the company was on track to buy 5,000 houses a month by 2024. In its second-quarter earnings call, Zillow blew away revenue expectations, yet raised concerns the company’s laser focus on explosive growth was coming at the cost of actual profit. According to Bloomberg, Barton said the company would be making higher offers to keep up with the pace of the housing market, and it bought more homes than ever in the third quarter.
“Of particular note, our iBuying …….
Source: https://gizmodo.com/zillows-flips-are-now-flops-1847940901