Big Zillow Makes Big Cuts

The big decision of Zillow to close down its iBuying business in November of 2021 may not only reveal a flawed business model but also the segue to a new real estate market climate. Inventories continue to contract, and interest rates for mortgages remain at or near historic lows, but the inability of Zillow to flip the homes it has bought for a profit may expose the surging price trajectories seen in 2020 and 2021 to be leveling off.

The decision to cut its losses shows Zillow CEO Rich Barton is willing to take the hit, and not pursue economic pipe dreams.

Certain businesses in a post-pandemic economic climate are going to change dramatically. The decision to close down the iBuying business will cut the number of Zillow employees by over 1,600. The company reported a net loss of $328 million for the third quarter of 2021, which is primarily the result of the $420 million loss attributable to Zillow offers.

Some of the strengths of Zillow is that it currently enjoys 220 million average monthly users. Second, the cost of capital is expected to remain low, and third, the ability of Zillow to monetize its primary lead-generating platform makes for a very bullish position to be in.