November 3, 2021

ZILLOW RIDES BOOMING REAL ESTATE MARKET TO 70% REVENUE GROWTH
Zillow’s class C share price was down 10% on Tuesday, falling before the company announced after the market closed that it would end home flipping. Shares continued to slide in after-hours trading.

The move represents a big hit to Zillow’s top line. Home-flipping was the company’s largest source of revenue, but it has never turned a profit.

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Zillow, which released earnings Tuesday, said its home-flipping business, Zillow Offers, lost $381 million last quarter, as measured by adjusted earnings before interest, taxes, depreciation, and amortization. That resulted in a combined adjusted Ebitda loss of $169 million across all of Zillow.

It has an inventory of about 9,800 homes across the United States that it is currently shopping for to investors. Additionally, there are another 8,200 homes in a contract it has agreed to buy. The company expects to lose somewhere between 5% and 7% on these homes, the company said. Zillow also paid significantly more than those competitors for each home it purchased, buying homes priced $65,000 above the median on average, according to DelPrete’s analysis. By October, the company had listed 250 Phoenix homes at a median-price discount of 6.2% below what it had paid for them. DelPrete called Zillow’s price blunder a catastrophic failure.

A wider look at Zillow’s national performance by analysts at KeyBanc Capital Markets found it had listed 66% of homes at prices below what it had paid for them, with an average discount of 4.5%.

Zillow said it expects that the wind-down of its home-flipping outfit will take several quarters.
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