On Tuesday, November 2nd, US Eastern Time, Richard Rich, co-founder and CEO of Zillow, an American online real estate service company
Barton stated that Zillow will withdraw from the “real estate” business (buy at a low price, refurbish and then sell) business and lay off 25% of its staff. As of the close, Zillow closed down
11.52%, after the market continued to fall by more than 10% to 77.05, and has fallen 43.62% year-to-date.
Zillow, with its boundless scenery during the epidemic, ended dismal in the third quarter
According to the financial report, Zillow’s main financial indicators for the third quarter were less than expected. In the third quarter, earnings per share adjusted for a loss of 95 cents, compared to the 16 cents per share expected by analysts surveyed by Refinitiv; third-quarter revenue was US$1.74 billion, which was lower than the US$2.01 billion forecast.
Zillow’s Offers business revenue climbed from US$185.9 million a year ago to US$1.17 billion in this quarter. At that time, there were almost no transactions during the epidemic. However, the House business unit lost US$421.6 million in the quarter, resulting in a net loss for the company as a whole.
Previously, thanks to the new crown epidemic, people browsing online listings became more prevalent. At the beginning of this year, when Zillow announced its brilliant 2020 fourth-quarter results, its stock price had risen by 270% in the past 12 months. At the same time, Zillow expects 2021. Home sales will increase by 21%, and house prices will record double-digit percentage increases.
Zillow launched the Offers business in December 2019. This product allows homeowners to sell their homes to Zillow in cash, eliminating lengthy bidding, sales, and closing processes without worrying about expensive repairs before putting them on the market . Then Zillow will be responsible for the necessary maintenance work, and cooperate with local contractors to complete some projects, such as repainting, repairsair conditionerEquipment and other typical homeowners’ work to prepare the house for sale.
However, it turns out that for a company that helps home buyers and sellers connect online, the business of buying and selling home renovations is a drag. The company said on Monday that it will stop buying houses before the end of the year due to tight labor and supply markets.
At the beginning of October, after 93% of the houses in its Phoenix portfolio were under water (loss), Zillow Group has “stopped” its artificial intelligence algorithm house renovation business, and is eager to sell for US$2.8 billion 7,000 houses.
A spokesperson said that the Offers business has exceeded its operational capabilities and is currently matching up with local intermediary partners for homeowners who wish to sell their houses.
Co-founder and CEO Barton stated in the press release:
We have determined that the unpredictability of housing prices far exceeds our expectations. Continuing to expand the scale of Zillow Offers will result in excessive earnings and balance sheet fluctuations.
Jeremy Wacksman, Zillow’s director of operations, added in a statement:
We operate in a highly competitive real estate market, in an economy with limited labor and supply, especially in areas such as building renovations (lack of labor).
Has the U.S. housing market peaked signal appeared?
Since the epidemic, US housing prices have been on the rocket, and the median sale price of existing homes has exceeded US$360,000. In the United States, the increase in new home sales in September was the largest in the past six months, indicating that the demand for (home purchases) is stable. According to the latest data from the US government, the sales of single-family homes in the United States increased by 14% annually to 800,000 in September, and economists expect an increase of 756,000.
The data shows that demand for home purchases is stabilizing. Previously, high housing prices and lack of inventory have made the number of home purchase contracts signed in recent months lower than the level before the new crown pneumonia epidemic. Even so, due to prolonged supply chain issues and labor shortages, slow housing construction and rising mortgage interest rates suppress the affordability of home buyers, all of which continue to challenge the US housing market.
This round of real estate boom driven by low interest rates peaked in January this year. The main manifestation was that the volume of existing home sales continued to shrink from the previous month, existing homes were no longer available on the market, and the median price of new homes and second-hand homes fell to a record low. According to a survey conducted by a macro-research institution, in the context of the overall cooling of the real estate market, the polarization is very serious. Since the beginning of this year, the sales volume of new homes with a total price of more than US$500,000 has continued to rise, but the sales volume of new homes with a total price of between US$300,000 and US$500,000 and less than US$300,000 has continued to fall, especially those with a low price of less than US$300,000. The total price of new houses is in a negative growth trend. In 2020, low-to-medium price new houses accounted for 80% of sales, but the corresponding demand has continued to decline since 2021.
In addition to the polarization of the U.S. housing market, the U.S. real estate tax as a pillar of local taxes is also worthy of attention. The relatively low tax rate, stable tax base, and the scarcity of real estate as an asset continue to strengthen the expectation of rising housing prices.