Zillow, facing big losses, stops toppling houses and will lay off a quarter of his staff.

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Zillow, the real estate website known for estimating home values, said on Tuesday it would pull out of the fast-paced home buying and selling business amid heavy losses and plans to lay off nearly 25 % of its employees.

The announcement was a major strategic retreat and a black eye for Richard Barton, CEO of Zillow, who founded the company 16 years ago and has long spoken of the popular Zillow website’s transition to a market. Last year, Barton predicted that Zillow Offers, which made instant deals on homes in a practice known as iBuying, could generate $ 20 billion a year.

On Tuesday, Zillow, who said he had 8,000 employees, said the division caused huge losses and made the company’s overall bottom line unpredictable. Zillow Offers lost over $ 420 million in the three months ending September, roughly the same amount the company had made in total over the previous 12 months.

“We have determined that the unpredictability of home price forecasts far exceeds what we expected,” Barton said in a statement accompanying his quarterly financial statements.

Mr Barton, speaking on a conference call with analysts Tuesday afternoon, said the decision had “weighed heavily” on him. “We could attribute the current losses to exogenous market events,” Barton said. “But it would be naïve to predict that unforeseeable events will not happen in the future.”

In total, the company lost nearly $ 330 million in the third quarter, which was far worse than what Wall Street analysts had predicted. The company made a profit of $ 40 million in the same period a year ago.

Zillow shares fell more than 50% from a high of nearly $ 200 in February, when she was still the darling of investors as the housing market heated up. The stock fell 11.5% Tuesday to about $ 85.50 before its financial data was released, and a further 7.5% after-market. (Even so, Zillow’s shares are worth double what they were at the start of the pandemic.)

Three years ago, the company announced plans to use its price estimates to buy and sell homes. Now Zillow is sitting on thousands of homes worth less than what the company paid for them. Last month, Zillow announced that it would temporarily stop buying new homes. At the time, he blamed the lack of workers to repair and sell the houses he had bought. But on Tuesday, Barton said using his algorithm to buy and sell homes failed to generate predictable profits. He is now looking to unload his remaining 7,000 houses.

It appears the company underestimated the risk of owning homes between trades, which was a break from low-risk, high-margin advertising business. And he tried to quickly increase his home turnaround business to 5,000 transactions per month, which Mr. Barton set himself a goal of, in a housing market that was already running out of inventory and starting to calm down. .

Zillow’s stumble also raises questions about its core product, which is built around its value estimates. Aaron Edelheit, who started buying homes following the Great Recession, tweeted his thanks to Zillow for paying “an extremely high price” for one of his properties this summer. “It seemed like they were buying in panic,” said Mr. Edelheit, who is leaving the real estate market to focus on cannabis, told the New York Times newsletter DealBook. ” I did not understand. I should have sold the stock short.


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