The decision comes as the company’s third-quarter financial results indicate that it lost more than $380 million in its home-flipping program, called Zillow Offers
Zillow has announced plans to lay off a quarter of its staff after its algorithm model to buy and sell houses, which helped drive up property prices in markets such as Atlanta and Houston, was a flop.
The real estate company also plans to take write-off as much as $569 million as it reduces its operations in coming months, according to a statement Tuesday.
Zillow shares plummeted 11 percent to $76.22 during late trading hours before regaining some of its losses.
The decision comes as the company’s third-quarter financial results indicate that it lost more than $380 million in its home-flipping program, called Zillow Offers.
The program’s revenue income stalled in recent months as Zillow’s algorithms caused it to sell houses for less than the prices that they were being bought for, just when the U.S. market began to slightly cool-off.
We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated, and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility, Chief Executive Officer Rich Barton said in the company’s earnings statement on Tuesday morning.
The wind-down on staff and operations is expected to take several quarters, possibly going into 2023.
The most difficult part of this decision is that it will impact many of our colleagues, Barton added. This is not something we take lightly. We are grateful for their efforts, and we are committed to providing a smooth transition.
Last month hasn’t been kind to Zillow, to say the least.
The company confirmed a news report from Bloomberg on October 18, saying that it would no longer look into making any new offers on houses for the rest of the year as it struggled to find home-flipping professionals to fix the listings it had under contract.
The news prompted shares of Zillow Group Inc hit over a year’s low on that day, as labour shortages and supply disruptions hamper timely sales of renovated properties.
We’re operating within a labour- and supply-constrained economy inside a competitive real estate market, especially in the construction, renovation and closing spaces, Zillow’s chief operating officer Jeremy Wacksman said in a statement at the time.
Pausing new contracts will enable us to focus on sellers already under contract with us and our current home inventory, he said.
Zillow Offers, launched in 2019, used tech-based pricing algorithms to buy homes from owners, make light repairs, and then list them for sale on the market. At the time, Barton set a lofty goal, striving to buy 5,000 homes per month by 2024.
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