ZILLOW STOPS HOME PUCHASES
Zillow Quits! How Does This Affect The Housing Market?
We all know Zillow for it’s user friendly website to search for homes but maybe you heard recently that they have ended their ibuyer arm called Zillow offers and are wondering how it is going to affect the housing market. Should you wait to buy assuming there will be more inventory once Zillow unloads these properties?
There are a number of iBuyer companies in the market. They buy your home so you do not need to list with a real estate agent then in turn lists it a week or so later at a higher price. Now I know Realtors were not happy about this because for years Zillow has used our listings to get buyer leads and then sell them back to said Realtor. It’s definitely a brilliant concept and it’s worked for years and as Realtors we have allowed it to….Well I don’t because I don’t pay for leads but in any case, why was the iBuyer plan not a brilliant concept? Well Zillow doesn’t want to own these homes longer than getting the leads on it to sell to Realtors.
The problem is, an algorithm cannot predict what is going to happen in the real estate market and really none of us can but being local in the market everyday certainly helps. So it turns out that this algorithm couldn’t predict the inventory shortage that increased prices. Local realtors that live in a community and see what is happening day to day can point out trends that may not be happening in the broader market, like potential building projects or proposed zoning changes at the county level.
The problem is the algorithm that hones in on the “Estimated Zillow offer” couldn’t predict the lumber and inventory shortage that drove the prices up so quickly and then in turn the cooling off this past summer, so in October, Zillow told investors that it would stop buying houses, due to construction, renovation, and closing labor shortages.
I know of one home in particular in St Augustine that a colleague of mine could not comp out to match an offer that an iBuyer made so the seller went with the iBuyer, now that house is on the market at an even higher price and I believe it’s still on the market, as overpriced priced homes usually are.
Bloomberg reported that the company is trying to sell their homes to “institutional investors” to the tune of $2.8 billion, which is relatively small compared to the $36 trillion dollar residential real estate market,
When stepping back and looking at the bigger picture. Zillow only bought up about 12% of the homes they planned to purchase, plus as a whole these iBuyer programs made up of only 1% of the housing market in the second quarter of 2021.
And the investors that are buying these houses still have to do repairs and renovations so even when the supply comes on the market, it’ll be gradual and some will go into the rental market. So we are not expecting a huge impact from this at all.
In my experience in dealing with these iBuyers homes that are for sale. I’ve actually been pleasantly surprised at the communication from the IBUYER COMPANIES but again they lack the human contact needed locally when trying to show buyers these homes. For example. I had a couple that flew in from Colorado, we booked a showing in a gated community and when we got to the gate I followed the instructions per the iBuyer showing instructions and after waiting 30 minutes we couldn’t get in. This is because the “iBuyer AKA seller” didn’t realize you need to call the HOA Management Office and security gate to put visitors on the list for entry. Here again it comes down to being on the ground and knowing the local situation.
In the end the failure of the “iBuyer program” proved that the residential real estate market needs Real Estate Agents that are local to the area and understand their market. There may be a place for their business model in more basic situations like a high rise apartment complexes in New York with hundreds of similar units that come on the market in cycles, but in a town like St Augustine with lots of unique neighborhoods and so many different types of homes and properties within those neighborhoods I’m pretty sure that local agents like myself will be the ones to provide superior service for years to come.
So if you are considering waiting to buy because you think that there is going to be a flood of new inventory on market due to this iBuyer exit from Zillow you may want to think again. So best to continue keep an eye on the market and if a home comes up that you like , go for it.
I hope you found this info helpful. Feel free to reach out with any questions. Thanks for tuning in and I’ll catch you on the next one.