Tag Archives: zillow

Are iBuyer competitors an “existential threat” to Zillow? | Bedford Real Estate

Computer keyboard house for sale

The burgeoning iBuying industry is giving smaller companies a chance to challenge the housing market’s behemoth: Zillow Group.

That’s according to a new report by Mike DelPrete, a real estate strategist who compared companies like Opendoor, which purchased more than 10,000 homes to renovate and sell in 2018, with Zillow, which bought fewer than 1,000. The term iBuyer stands for “instant buyer,” meaning companies that make cash offers for homes.

“Zillow has been the clear market leader, and there was no credible threat that could unseat it from its powerful position. However, the entry of iBuyers with a service that made instant offers on a home – online – was novel and compelling, just like the Zestimate in 2006.”

DelPrete, a scholar-in-residence at the University of Colorado in Boulder, Colorado, said getting a cash offer from an iBuyer is even better than Zestimate.

“What better way to value your home than an actual offer?”

What DelPrete’s report overlooks is Zillow’s deep pockets and its five-year plan to dominate the iBuying space. The company bought 686 homes in seven markets last year after starting Zillow Offers in April 2018, according to regulatory filings. The company plans to double its footprint to 14 cities by the end of 2019, and in five years it plans to purchase 5,000 properties a month, according to its fourth quarter report.close dialogStay ahead of the market withDaily UpdateAround the clock coverage and information about the US mortgage and housing industrySign UpNo thanks

Most impressively, Zillow has $1 billion worth of firepower. It has expanded credit facilities to support growth in the iBuyer space.

“Zillow Group now has $1 billion of maximum borrowing capacity to support Zillow Offers’ rapid growth in 2019 and beyond,” the company said in its quarterly report.

Other iBuyers such as Opendoor and Offerpad also have plans to dominate. Last month, Opendoor raised $300 million while Offerpad announced a cash infusion that brought its total capital raise to nearly $1 billion. There are also aggregators like HomeLight and Offer Depot that collect and compare offers from iBuyers.

But Zillow remains the one to beat.

“We changed the way people shop for homes and now we’re transforming the transaction,” said Zillow spokesman Viet Shelton, when asked to comment on DelPrete’s report. “Zillow is already the starting point for most Americans’ home shopping experiences, and no matter how you end up selling your house, Zillow can help you.”

Last week, Zillow announced the launch of its own mortgage lender, Zillow Home Loans, a rebranding and expansion of Mortgage Lenders of America, a company it bought in November. In its February report to investors, it said it wants to originate more than 3,000 loans a month within three to five years, and have a 33% “attach rate” for people who sell their homes to Zillow. In other words, Zillow Offers, in addition to buying homes for cash, will funnel “move up” buyers to the company’s mortgage segment to fund their next home purchase.

Zillow founder and CEO Rich Barton said in a radio interview on April 1st that he sees Zillow Offers as an evolution of Zestimates. In fact, at some point in the future, a Zestimate and a cash offer may be the same thing, he said in an appearance on National Public Radio.

“Ideally, I would like to have the Zestimate be a live offer on every home in the country,” said Barton, adding, “It will take quite some time to get there.”

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Are iBuyer competitors an “existential threat” to Zillow?

Zillow Stock Plunges as a Cooling Housing Market Stymies Its Risky Expansion Plans | Pound Ridge Real Estate

Zillow’s stock plunged as much as 20% late Tuesday after the company warnedthat revenue this quarter would fall short of Wall Street expectations, exacerbating investor concerns about the prospects of online real-estate startups like Zillow and Redfin as the U.S. housing market is starting to slow down.

The news caused Zillow’s stock to fall as low as $32.40 a share in after-hours trading, or 20% below its official closing price of $41.04 a share. Redfin, another online real-estate company, fell as much as 6.5% in aftermarket trading.

After nearly a decade of recovery and slow growth, the U.S. housing market has been heading into a slowdown in 2018. Not only are mortgage rates rising, but housing prices have been climbing about twice as fast as average incomes. Sales of new homes as well as previously owned homes have been slowing from a year ago. Tax reform enacted late last year has also reduced tax incentives to buy homes.

Those trends have hurt the stock performance of Zillow and Redfin alike. At its low point late Tuesday, Zillow was down 51% from its 52-week high, while Redfin was down 53% from its high point in the past year.

Zillow started out as an online real-estate listings service that, once successful, began to seek out new business models. Like Redfin, it moved into buying and selling homes. In May, Zillow’s stock plunged on news that it would start buying and quickly flipping homes for resale. In August, its stock plunged on again on news it was buying an online-mortgage lender, Mortgage Lenders of America. Both represent traditionally risky markets that Zillow believed would pay off in the long term.

“Zillow Group is undergoing a period of transformational innovation,” Zillow CEO Spencer Rascoff said in the company’s earnings release. “We believe that these changes will have positive long-term effects for consumers, our industry partners and our business. It will take time for advertisers to adapt to these changes, but we are confident that they set us up for long-term growth.”

During that expansion, however, Zillow and Redfin have had to face dual headwinds in rising interest rates, which can deter home purchases, and in slowing home purchases.

While Zillow’s move into adjacent markets may hold some long-term promise, investors are concerned about their short-term outlook. “Zillow was in fantastic shape just six months ago,” CNBC’s Jim Cramer said last month. “We loved their attempts to corner the real estate advertising market. Then they decided to move into a totally new, totally risky business at what may be the worst possible time, and the stock has since cratered.”

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http://fortune.com/2018/11/06/zillow-stock-plunges-20-warns-disappointing-revenue-risky-expansion/