Is a Zillow home selloff about to break the housing market? Recently someone sent me a viral post that talks about Zillow eliminating its iBuying program. This is the program where a user could go to their website, have Zillow make an offer, and then sell their house to Zillow without having to go through the complicated mess of putting it on the housing market. The post reads,
“So Zillow let a robot buy up thousands of properties, outbidding real buyers and artificially inflating the market, and now will be laying off a full quarter of its workforce and selling off the properties to rental corps like BlackRock at vastly discounted prices. That right?”
Well no, not really. Let’s look at this statement piece by piece. First, did Zillow let a robot buy up thousands of houses: Yes. People choose to sell off market to Zillow rather than put it on the market. Zillow would then make repairs to the house and try to sell it back at a higher price. This is known as house flipping and it is very common.
The next thing it says is that Zillow outbid real buyers. No again, it did not outbid anyone. It bought off market. That is how flippers get better deals. They buy at a discount and save the owner the effort of hiring an agent, listing their property, negotiating deals, etc. Now, I own investment properties and flippers regularly try to get me to sell my house off market to them. But I never do because I know better. However, flipping is also notoriously difficult to do and Zillow did end up overpaying for those houses. I have pointed out in past videos how Zillow entering this business was a bad idea because they are bad at pricing houses. Turns out I was right.
The next claim is that they artificially inflated the housing market. This is the most egregious misunderstanding of the situation. Zillow’s dip into the market did not influence the housing market. How do I know? Because Zillow was purchasing at what would amount to an annual rate of 20-25 thousand houses nationwide. The average house sales numbers nationwide is about 6.5 million, which would make Zillow’s numbers amount to about one third of one percent of the total market.
These numbers would never make an impact on the market. And even if they were doing way more than that, there are a lot of other factors that they would have to overcome, which I talked about in my previous videos on Zillow where I predicted their failure.
So no, Zillow is not a nefarious market manipulating corporation. They are incompetent at valuing homes, which is why you should always speak to a knowledge Real Estate agent in your area if you are trying to get a good idea about prices.
And as always, these videos are just me giving my opinion. You should always do your own research before following the advice of people on the internet. If you would like my opinion on something regarding investments and Real Estate, feel free to ask me in the comments. Either way I hope you have a great day!