Here's why Zillow's stock plunged 20%—and why it won't flip homes anymore:
Shares of digital real estate marketplace Zillow tumbled nearly 20% on Wednesday morning, a day after the company announced in its earnings results that it would shutter its home-flipping business due to the “unpredictability” of the housing market.... [+]Zillow’s stock fell nearly 20% to around $69 per share by midday on Wednesday, hitting its lowest point in the last 12 months of trading.
The move to dramatically scale back its business will amount to the company laying off 25% of its staff—around 2,000 people—over the next few quarters. Zillow described its home-flipping business, which also was impacted by labor and supply chain shortages, as too risky because it was no longer able to accurately predict future home prices.
That became clear from Zillow’s unprofitable third quarter: The company took a $304 million write-down on inventory—it still has thousands of unsold houses—because of “unintentionally purchasing homes at higher prices than our current estimates of future selling prices,” according to aWhile the housing market slumped at the start of the Covid-19 pandemic, it has since bounced back in spectacular fashion—with prices in many major markets climbing to record-high levels.
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