LOS ANGELES, Zillow Group announced Tuesday that it will no longer buy or sell homes due to the "unpredictability of forecasting housing prices."
According to the Seattle-based realty information company, winding down Zillow Offers homebuying/selling unit will take place over several quarters. This will lead to about a 25% reduction of the company's workforce which currently stands at around 5,300.
This announcement comes two weeks after Zillow announced that it would cease buying homes until 2021. The company cited a backlog of renovations due to supply and labor constraints. It was intended to temporarily cease buying homes and instead focus on selling the ones it already owned.
The company has since decided to close down its home-flipping operation. Rich Barton, the CEO of Zillow Offers, announced Tuesday the company's third quarter results. He attributed the decision to close Zillow Offers to how difficult it was to forecast home prices.
Additionally, the company disclosed that it had to write down $340 million due to the fact that it purchased homes in the third quarter at prices higher than Zillow's future estimates.
Zillow Offers is one of a number of "iBuyers", which also includes Redfin, Opendoor and Opendoor. These companies purchase homes from sellers who are looking to quickly sell their homes and then place the homes on the market.
These companies compete with regular homebuyers because the housing market has been hot and there have been fewer properties for sale. Zillow's revenue has been boosted by the home-flipping industry. Zillow Offers' revenues increased 88% to $2.65 Billion in the nine months ending September compared to the same period in 2020.
Zillow stated that it expects to record additional losses of $240 million to $265 millions in the fourth quarter, primarily due to home transactions it anticipates it will close in this quarter.
Zillow shares fell 10.2% Tuesday morning before earnings were released. This was in response to published reports that the company plans to close its home-flipping business. After the announcement, the stock plunged another 12%.