Just a few weeks after Zillow announced a temporary pause of their iBuying operations, a much more startling announcement was made this Tuesday: Zillow is shutting down their iBuying services altogether.
After 18 months of ultra-hot markets, is this an indicator of an impending market crash? Before defaulting to panic, let’s consider what we do and don’t know about Zillow shutting down their iBuying operations—and what the implications are for your title company.
Why the shut down?
Zillow's iBuying strategy + market unpredictability = major losses for the company. As in over $1 billion in losses in Zillow Offers' less-than-four-year lifespan.
“We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility," said Rich Barton, the company founder, in their earnings report.
As for Zillow's shareholders, they say “higher-than-anticipated conversion rates” and “unintentionally purchasing homes at higher prices” are to blame.
Key takeaway for title: Zillow's failure in the iBuying industry speaks more to internal company problems than issues pertaining to the market itself. No need for your title company to panic about an upcoming crash.
What happens next for Zillow?
Shutting down Zillow Offers will be a multi-quarter process, resulting in a 25% cut of their staff (about 2,000 jobs).
Key takeaway for title: If you're looking to recruit new tech-savvy talent in 2022, look out for some real estate minded talent looking for work, coming to a job market near you. It may take some clever marketing and recruitment tactics, but snatching up this talent could be huge in using tech to differentiate your title company.
What about other iBuyers?
If you're jumping for joy at the possibility of iBuyers and their in-house title services no longer competing with your title company...don't get too excited. Opendoor has released a statement saying they will continue to expand into new markets through the end of the quarter, and Offerpad continues to scale their operations. All eyes are on these two major players to see what happens next and if iBuying can truly succeed and take on a significant market share.
Key takeaway for title: Sorry, but iBuyers and their in-house title services aren't going anywhere.
What's coming in 2022?
With an increase in inventory and bidding wars dropping, the real estate market may be beginning to cool off. But ‘slowing down’ and ‘crashing’ are two entirely different things, and Zillow's shutdown of their iBuying services is unrelated to either and no cause for your title company to panic.