Sources: Zillow is pitching institutional investors on the sale of 7K homes for ~$2.8B to recover from buying too many, which it blames on its bidding algorithm
- Online listing giant has been buying thousands of homes — Zillow Group Inc. is looking to sell about 7,000 homes as it seeks …
Bloomberg
Context & Ripple Effects
Zillow moved from testing home flipping to buying and selling homes itself in its 2018 expansion into direct home buying, then joined algorithm-driven iBuyers using granular price predictions. The proposed portfolio sale shows the cost of applying that model at inventory scale rather than remaining a listings-and-advertising business.
Institutional investors are being offered roughly 7,000 Zillow-owned homes, while Zillow seeks to convert excess inventory into cash after purchases tied to its bidding algorithm.
Zillow's home-buying unit faces an immediate reset: the company is reducing the inventory accumulated through its direct-purchase model.
Second-order effects
Other algorithmic iBuyers face sharper scrutiny of whether their pricing models can manage inventory risk at scale, not merely generate home-value estimates.
Institutional homebuyers gain an opportunity to acquire a large, concentrated portfolio from Zillow rather than competing property by property for those homes.
Third-order effects
Zillow's subsequent exit suggests that algorithmic valuation is easier to deploy as an information product than as a principal-risk business holding thousands of homes on its own balance sheet.
If similar inventory failures recur, the iBuying market may favor firms that limit ownership exposure or shift more housing risk to institutional capital.
The trend: The iBuying experiment is exposing the divide between using pricing algorithms to inform real-estate transactions and using them to underwrite large on-balance-sheet housing inventories.
Zillow uses costumer data to purchase homes in hot user-demanded areas to flip them later. Talk about a mercenary market that is deep need of strict pricing regulation. Idk man, I don't feel that families need to compete against these predators for a home. https://twitter.com/...
Zillow unloading a bunch of homes it hoped to flip is a reminder that the TikTok real estate agent with the Zillow conspiracy theory was probably just not that good at his job. https://www.bloomberg.com/...
The Zillow situation is quite the disaster of epic proportions. ✅incontrovertible proof that Zestimates are too high. ✅ confirms rumor Zillow is contributing to the housing crisis by flipping at scale. ✅plans to sell homes to investors not home buyers. https://www.bloomberg.com/.…
Honestly I hope Zillow gets burned on this BS. Zillow buying houses has driven up prices artificially, hope they have to fire sale them. Such BS ! https://twitter.com/...
is Zillow's PR team terrible on this or are executives trying to knock down the prices on new stock options? https://www.bloomberg.com/... “it seeks to recover from a fumble” = not a good look
Losing my mind at this. It seems as though they're not even going to offer any of these 7,000 homes to individuals looking for housing. Looks like they're going to sell them in blocks to investors and landlords. https://twitter.com/...
The most satisfying headline I've read in a long time. Imagine losing money in real estate in 2021. These are the great innovators of our time people. https://twitter.com/...