Opendoor shares were up 2.6% in afternoon trade, while Zillow shares were down 8.5%.
The company, which went public through a merger with a blank-check firm led by venture investor Chamath Palihapitiya last year, bought 8,494 homes in the second quarter. Opendoor can gain a significant share if it just generally operates more efficiently, Wedbush analyst Ygal Arounian said in a note. The company bought 3,805 homes in the second quarter.Īnalysts, however, said Zillow’s move might open the door to rivals such as Opendoor Technologies Inc to grab market share. Zillow Group Inc.s (Nasdaq: Z) stock took a tumble after the iBuyer announced it is pausing new home purchases. Zillow, which operates the popular home valuation model ‘Zestimates’, said it would clear a backlog of properties on its platform. Senior Reporter, Phoenix Business Journal. “We believe Zillow’s decision might be affected by slowing homes sales and the company’s inability to sell through at the same rate at which it is acquiring, as buyers take a step back,” BofA Securities said in a note.
house price in August up nearly 15% from a year earlier. That has sent property rates soaring, with the median U.S. housing sector that earlier witnessed a boom has lost its momentum in recent months, hurt by a tight jobs market, supply chain issues and shortage of raw materials. The FTC recently confirmed that it is investigating Zillow's $500 million acquisition of showing management firm ShowingTime and just last week Zillow's rival CoStar announced that it has signed a deal to build a new public facing portal to rival StreetEasy in New York.This advertisement has not loaded yet, but your article continues below.
The news comes hot on the heels of several other pieces of news that might be worrying CEO Rich Barton. Zillow has bet big on iBuying and this temporary pausing of its house buying comes as something of a surprise given that it has been looking to expand the local markets in which it operates and is more confident than ever in the Zestimate algorithm behind the offers it makes. In September a viral video in which one Nevada based realtor speculated that iBuying could lead to artificial home price inflation generated a lot of feedback on social media and even prompted Zillow and Redfin to respond to deny the video's insinuations. It's not just in the financial publications that Zillow and iBuyig in general have been making headlines. IBuying as a model has been in the news a great deal recently as it was revealed that Zillow has started using bond offerings to fund its home buying operations and that Zillow's main iBuying rival Opendoor has increased its borrowing capacity to $9 billion. The company's iBuying division (known as Zillow Homes) began purchasing and renovating homes in 2018 but apart from one quarter at the start of the pandemic, when it was forced to sell more homes than it bought, the business has not made a profit.Īccording to industry commentator Mike DelPrete, Zillow's rivals Offerpad and Opendoor (excluding stock-based compensation) both made a profit on their iBuying activities in Q2 with much of the recent uptick in iBuying's financial fortunes attributable to house price appreciation rather than operational gains. "We continue to process the purchase of homes from sellers who are already under contract, as quickly as possible." " We are beyond operational capacity in our Zillow Offers business and are not taking on additional contracts to purchase homes at this time." In an emailed statement seen by Bloomberg, Zillow confirmed that it would be concentrating on clearing properties already purchased through its Homes iBuying division: Zillow has paused its home buying activities as its iBuying division works through a backlog of homes already on the Seattle-based real estate giant's books.