Zillow Halts Homebuying, Pressing Pause on Strategic Shift

(Bloomberg) -- Zillow Group Inc. is pausing its push into homebuying, putting a key piece of its strategic shift on hold as the coronavirus roils the U.S. economy.

The company slowed its home-purchasing program earlier this month, and is now halting it entirely to preserve capital and protect employees, Chief Executive Officer Rich Barton said in a statement Monday.

Zillow has spent the better part of two years transforming itself from an online marketing company into one that acquires homes directly from sellers, makes minor repairs and resells them.

The new strategy required massive investment -- Zillow lost an average of about $6,400 on each of the hundreds of homes it sold in the fourth quarter. But investors had rewarded the company’s progress, with shares reaching an all-time high in February after the company reported earnings.

Now, Zillow is facing an economic shock that will likely make it harder to sell the 1,860 homes currently on its books -- creating a drag on revenue and increasing the amount of interest, insurance, and property tax expenses the company incurs.

Zillow started the year with 2,707 homes on its books. It is still marketing the houses it owns through online channels, but halted open houses in response to public health concerns earlier this month.

Zillow is also facing slower demand in its core business. The company said last week it would begin offering a 50% discount to some real estate agents who buy leads. That move is likely to cost the company as much as $50 million in revenue.

Redfin Corp., a real estate brokerage that employs a similar strategy of buying and selling homes, said last week that it would suspend home purchases.

©2020 Bloomberg L.P.