Zillow To Expand Controversial Home-Buying Business To 20 Markets Including Los Angeles, Austin And Miami

Zillow To Expand Controversial Home-Buying Business To 20 Markets Including Los Angeles, Austin And Miami


In its first-quarter earnings report out Thursday, Zillow Group showed stronger-than-anticipated growth in the home-buying business it launched last year. The program, known as Zillow Offers, has been met with skepticism by Wall Street and housing economists, but the Seattle-based company clearly sees the model as its path forward.

Zillow purchased 898 homes and sold 414 in the first three months of 2019. Revenue from the homes segment was $128.5 million, with a pretax loss of $45.2 million. Zillow ended the quarter with 993 homes in inventory, worth approximately $325 million.

By comparison, from April 2018—when the home-buying program launched—through December 2018, Zillow purchased 686 homes and sold just 177, generating $52 million in revenue and losing $27.2 million.

 

"Zillow Offers is working, and we are leaning in," declared Rich Barton, Zillow cofounder and CEO, in an interview immediately following the earnings release. "We tapped the accelerator and the car moved. We’re out on the highway now." The company also said Thursday that it will expand Zillow Offers to 20 markets by the end the first quarter of 2020, up from 9 currently. Those include high prices and densely populated markets like Los Angeles and Miami, as well as up-and-coming markets like Austin.

Zillow shares have plummeted close to 40% in the last year, closing trading Thursday at $33.57 from a high of $65.42 last summer. Investors have struggled to digest the pivot from a low-cost ad business to an expensive home-flipping operation. A problematic update to its Premier Agent program, which in 2018 accounted for 67% of revenue, also led to higher-than-average ad churn and further spooked investors.

Overall revenue for the quarter was $454 million, up 51% from a year ago, but the net loss also expanded to $67.5 million from $18.6 million. In three to five years, Zillow anticipates turning the revenue mix upside down, bringing in around $20 billion a year from its homes segment and around $2 billion from its media business. Read more




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