To all the agents in the house,
Zillow announced Tuesday that it is winding down iBuying and laying off 25% of its workforce. I'll have a longer piece written later today, but here are three quick takeaways:
- The number of layoffs bears watching
According to Zillow's quarterly report released Tuesday, the company's workforce has grown 32% to 7,999 employees from Dec. 31, 2020 to Sept. 30, 2021. The report does not break down which divisions hired these employees, and I haven't yet asked Zillow about this. But it stands to reason that most were hired for the Zillow Offers' iBuying program.
After all, in Zillow's second quarter 2021 earnings report, CEO Rich Barton discussed the expansion of that program. Also, Zillow Offers makes up 68% of the company's revenue, about 80% of its expenses – including a $304 million write down – and 66% of the company's $4.4 billion in corporate debt.
The outsized impact of Zillow Offers on the company's balance sheet and recent hires suggest the layoffs may be even greater than the 2,000 approximated Tuesday.
- Opendoor's third quarter earnings report next week looms large
Opendoor hemorrhaged money on iBuying before Zillow made it mainstream. But the company has insisted over the last couple of weeks that it has responded to housing market changes, and is expanding responsibly.
If Opendoor were to have the first ever profitable quarter in the company's history as a publicly traded entity, it could be cited as evidence that the problem here is Zillow and not the concept of iBuying. But if Opendoor continues losing money amid a housing boom, it raises existential questions about iBuying as a relevant business model in real estate.
- Will this prompt a truce between Zillow and agents?
Through thin and thin with Zillow Offers, Zillow Premier Agent has anchored the company, even leading to an overall profitable Zillow in the first two quarters of 2021. Zillow recorded $339 million in revenue in the third quarter through Premier Agent.
But, agents, many of you were ambivalent about using the venerable lead-generating program precisely because it seemed like Zillow Offers was trying to replace the agent. Does yesterday's big news augur a more compatible relationship with Zillow? Or does it make you want to have nothing to do with a company perhaps on the brink of disaster?
Send me your thoughts anonymously to mblake@housingwire.com.
Sincerely,
Matthew Blake
Senior Real Estate Reporter
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