Lost in the bonanza of home buying was this fact: Zillow itself was buying homes. The speculation was the company did this to resell homes at a higher value, thus manipulating house values. This would benefit the listings it shows on its website. As the market has cooled in the past months, Zillow decided to pump the brakes on their hair-brained scheme.
But due to a shortage of labor and supplies, Zillow can’t meet current demands to close, renovate, and resell the homes fast enough. CEO Jeremy Wacksman said the temporary pause on purchasing of new homes will allow Zillow to focus on purchasing homes with already-signed contracts that have yet to close, and reduce its renovation pipeline.SF Gate
“We’re operating within a labor- and supply-constrained economy inside a competitive real estate market, especially in the construction, renovation, and closing spaces,” Wacksman said.
The constraint out there is real. Anyone in construction right now will lament the higher cost of materials. Even so, Zillow purchased over 3,800 homes last quarter, according to SF Gate. That is a LOT of homes and accounts for 1% of all homes sold. I wish I could answer the following thought with a sentence that doesn’t include the word “profit”. I don’t understand why Zillow, who’s existence is to make home browsing easier, feels they need to own inventory. This makes as much sense as Uber owning its own fleet of cars or Amazon’s weird attempts to own brick & mortar stores. If you can answer any of those without talking about a company’s bottom line or shareholders, be my guest.