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The stock plunged 25% on November 3, after the company announced plans to exit the home-flipping business because of an inability to predict housing prices accurately. “We determined that further scaling up Zillow Offers is too risky, too volatile to our earnings and operations, too low of a return on equity opportunity, and too narrow in its ability to serve our customers,” CEO Rich Barton said. Furthermore, supply chain bottlenecks and the high costs have chipped away Z’s margins.
The company reported a $328.17 million third-quarter net loss, attributable mainly to its iBuying unit. The iBuying, or instant buying, unit allowed homeowners to sell their homes to Z for cash, eliminating the lengthy processes typically associated with such sales. The company further expects to incur losses of no more than $240 million, and $265 million in write-downs in the fourth quarter, tied to inventory it has already agreed to purchase. KeyBanc analyst Edward Yruma’s research note states that two-thirds of the homes owned by Z are currently worth less than what the company paid for them.
