Zillow Group says it is making good progress unloading homes it owns, announcing today that it has sold or is under contract to sell more than 50% of the homes that it planned to sell as part of its decision to shut down its Zillow Offers business unit. The Seattle-based real estate company also announced that the board authorized the purchase of up to $750 million worth of Zillow stock.
Shares of Zillow — which have been hammered in the past six months, dropping 51% — rose in after-hours trading. The company’s market value now stands at $13.75 billion.
The update comes one month after Zillow Group made the surprise decision to shut down its iBuying real estate business, known as Zillow Offers.
“We are pleased with the progress of our wind-down efforts and recognize that no longer operating Zillow Offers will allow us to have a more capital-efficient balance sheet and business moving forward,” Zillow Group co-founder and CEO Rich Barton said in a press release on Thursday. “With that, we see today as an opportune time to announce a share repurchase program and reduce the cash balance we built up to support Zillow Offers.”
Given the rapidity of sales in its iBuying unit, Zillow also said it now expects fourth quarter revenue of $2.3 billion to $2.9 billion in its Offers business. That’s up from previously projected revenue of $1.7 billion to $2.1 billion.
The Wall Street Journal reported last month that Zillow intended to sell about 2,000 homes it owned to Pretium Partners, which intended to convert the properties into rental units. At the time, the Journal reported that Zillow was looking to sell 9,800 homes it owned, and another 8,200 properties it was in the process of buying. Those home sales were coming at a loss, estimated at between 5-7%.
While Zillow is walking away from iBuying — the process of using algorithms to quickly purchase and flip properties — other companies remain committed to the model. However, the values of Zillow’s rivals have fallen in the past month.
- Redfin’s stock is down 16%. Market value of $4.1 billion.
- Offerpad’s stock is down 6%. Market value of $1.6 billion.
- And Opendoor’s stock is down 30%. Market value of $8.9 billion.
Zillow is laying off 2,000 employees — or 25% of its workforce — as part of its retreat from iBuying. It’s also taking a $500 million write-down on the business.
Zillow encountered a host of problems with its iBuying business, including a lack of belief that its algorithms could accurately predict future home price movements, supply-chain issues and an inability to secure contractors to flip homes in a timely and economical fashion. A report by Insider earlier this week also suggested that Zillow pressed employees to find ways to reduce the renovations needed to flip the homes it owned, and also underpaid contractors compared to rivals.
Last month, Barton pulled the plug.
“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,” Barton said in a statement at the time.
The abrupt turnaround surprised investors, in part because the company had touted the prospects of iBuying just a few weeks prior to the shutdown. That change in course also has resulted in at least one class action lawsuit that claims that Zillow misled investors about the promise of its iBuying business.