Zillow Won’t Sign New Contracts to Buy Homes Through Rest of 2021. The Stock Is Sliding.
Zillow Group was sliding more than 6% in premarket trading Monday after saying it won’t sign any new contracts to buy homes through the end of the year.
Zillow (ticker: Z) cited a “backlog in renovations and operational capacity constraints.”
Zillow said pausing new acquisitions will allow it to work through its backlog. It will continue purchasing homes with already-signed contracts but that have yet to close. Zillow said it would continue to market and sell homes through Zillow Offers during this period.
“We’re operating within a labor- and supply-constrained economy inside a competitive real estate market, especially in the construction, renovation and closing spaces,” said Chief Operating Officer Jeremy Wacksman in a statement Monday. “We have not been exempt from these market and capacity issues and we now have an operational backlog for renovations and closings. Pausing new contracts will enable us to focus on sellers already under contract with us and our current home inventory.”
The company bought 3,805 homes in the second quarter—the most the company has ever purchased in a single quarter by a wide margin—while selling 2,086 homes.
Read more: Home Prices Are Cooling Off, Sort of. What Buyers Need to Know.
Zillow Offers launched in 2018 to allow customers to request instant offers and sell directly to Zillow, which then buys the property, makes necessary light repairs, and then re-lists the home for sale.
Zillow issued its statement early Monday in response to a report from Bloomberg that it was pausing new home purchases.
Zillow Homes, the iBuyer segment, reported fiscal second-quarter revenue of $777 million, up 71% from a year earlier, while mortgage revenue of $57 million rose 68%.
In an interview with Barron’s in August following second-quarter earnings , CEO Rich Barton said the company’s iBuyer business was “really accelerating,” despite the fact that sellers have many options for selling homes in what remains a hot market with limited supply.
Zillow said it expected fiscal third-quarter revenue of $1.93 billion to $2.05 billion, which was well ahead of the Wall Street consensus of $1.45 billion at that time. Analysts have since lifted sales estimates for the period, with the FactSet consensus now at roughly $2 billion. The company back in August projected revenue from Zillow Homes of $1.4 billion to $1.5 billion.
The company’s statement made no mention of whether it would be making any changes to its outlook.
Zillow’s Class C shares fell 6.81% in premarket trading to $88.50. The stock has declined nearly 27% so far in 2021.
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