Home flipper Zillow reported a nightmare today. In Q3, it bought 9,680 houses and sold only 3,032 of them, after having purchased 3,805 houses in Q2, and sold only 2,086 of them. In other words, it was very good at buying houses by overpaying for them, but now cannot sell them without losing bigly. Its inventory of unsold houses ballooned to $3.8 billion, up from $491 million in December 2020. It admitted it overpaid for those houses and blamed its AI-powered pricing genius. It outlined how much it expects to lose on those houses, threw in the towel on its entire house flipping business, and will lay off 25% of its staff.
In its Q3 net loss of $328 million that it reported today, Zillow included $304 million in write-downs of houses that it had paid too much for in Q3. For Q4, it expects additional losses of $240 million to $265 million on the houses it bought since the end of Q3. It stopped making offers on October 18 but will close the deals it made until then.
To lose $1.42 billion by flipping houses in the hottest, most inflated, most liquid housing market ever takes a real genius.Zillow Comes Unglued, Lost $1.4 Billion on Flipping Houses since 2019, Bails Out, Lays Off 25% of Staff, Stock Plunges Further | Wolf Street