Zillow is planning to sell roughly 18,000 homes it already owns or is under contract to purchase. Zillow owns all these homes through their home flipping business. In a letter to shareholders Zillow is estimating they are going to lose 5–7% ventured revenue.
Experts say that the downfalls for Zillow and quick turn around selling homes was their own algorithm. When Zillow was buying homes sight unseen they couldn’t smell the 20 cat smell meaning they wouldn’t know what they are buying besides the pictures that were available.
Even though Zillow bought up thousands of homes during this inflationary period it is unlikely everyday consumers will be getting a bargain on these homes.
There are a few reasons why the everyday consumer may not get a bargain. The first reason why is because of the so-called HGTV house flipping where you buy a run down home and make it a wonderful gem. This method of home flipping is becoming less profitable due to supply chain shortages and labor shortages. Due to these issues the timeline of flipping a distressed home into a gem is not as ideal anymore causing the total cost to flip a house is much more expensive.
House flipping is still a hot market for the month of June house flips accounted for 1–20 home sales. Even though flipped sales were still high, profitability is at its lowest in 10 years.
The other reason why ordinary Joe the consumer may not get a bargain is because Zillow may opt to sell to corporate buyers. Zillow agreed to sell about 2,000 of its homes to Pretium Partners, according to the Wall Street Journal. Earlier this week, the paper noted that institutional investors were already appraising Zillow’s property portfolio. Suitors also include American Homes 4 Rent, and Invitation Homes, the Journal reported.
Zillow says they still plan on marketing their homes to the public as well. “We are continuing to sell our remaining inventory the same way we always have. We sell our homes to buyers of all types, which includes individuals, families, individual investors, institutional investors and nonprofits,” a Zillow spokesman said in a memo.
Zillow says they are going to continue to invest heavily in the current contracts obligations. Experts say this should be a warning sign to smaller investors to be careful in todays market.
