BrokerageReal EstateNewsletter

Zillow: Over half of our iBuying inventory is on the move

Company says that plans are in place to sell over half of 18,000 homes currently held

Zillow said Thursday that more than 50% of its remaining iBuying inventory “has sold, is under contract to sell or has reached agreement on disposition terms.”

Also, the company’s board of directors authorized the repurchase up to $750 million in shares of Zillow stock, according to a press release. It marked Zillow’s first major statement since announcing the wind down of the Zillow Offers’ iBuying program last month.

The company’s iBuying division, Zillow Offers, generated $1.2 billion, or 68%, of the company’s revenue in the third quarter. But the division produced a $421 million loss before taxes, and analysis from KeyBanc and industry analyst Mike DelPrete as well as anecdotes from real estate agents indicated Zillow paid more than market value for homes.  

As of last month, the firm reported 9,800 homes it purchased but has yet to sell, and 8,200 it is contractually obliged to buy – or a shade under 18,000 total. The Wall Street Journal has reported that Zillow is pursuing institutional investors to buy the properties, and New York-based firm Pretium Partners agreed to purchase 2,000 homes last month.

The over 50% inventory being moved is more than half of the 18,000 number, a company spokesperson said Thursday. As to Zillow’s return on these sales, the spokesperson referred back to a statement last month that the company expects a 5-7% loss on resales compared to the purchase price.

That loss does not include general operating expenses to run Zillow Offers, which is now in the process of shutting down. Zillow plans to lay off 2,000 workers, or 25% of its total workforce.

Zillow did restate Thursday it expects the wind-down of iBuying inventory, operating costs, and restructuring costs to be “at least cash flow neutral, including after repaying all Zillow Offers secured debt, which was $2.9 billion as of Sept. 30.”

Such assertions have not allayed some investors. The company’s market cap has fallen to $13.7 billion after hovering above $48 billion in February.

Stock repurchase plans are sometimes used by executives to demonstrate confidence in their companies’ Wall Street value. CEO Rich Barton’s plan calls for “repurchases of up to $750 million of the company’s class A common stock, class C capital stock, or a combination of both.”

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