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Zillow is expanding its portfolio of programs, including Zillow Offers and Zillow Home Loans and more (possible takeover rumors, as well). Check it out! I'm planning on getting in soon. Watching!
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Hi River;
While there has definitely been money to be made with Zillow when on the right side of the trade, being in a related industry (almost 30 years in the Mortgage industry) I have a personal bias where I am staying away.
I have seen established business models expanding into related fields like this and most of the time I do not feel most realize the immense costs associated causing lower net margins. The large volume needed in a cyclical market that is also extremely competitive, with competition that also has deep pockets can put a lot of pain into the new guy very easily. (I cannot imagine Zillow being the Amazon of Real Estate and outside of some pharma plays I never put weight on buyout possibilities.)
I wish you luck and hope it pans out, but definitely be cautious!
-Adam
Old Hippy & Mortgage Pro -
Adam, thank you for the warning, and the benefit of your valuable experience and perspective! Wow! I am definitely going to reconsider. Have a low-ball bid in but am going to cancel it and leave Zillow on my watch list for a longer time period to see what happens. I had a good friend who was an early investor and promoter of Re-Max in our city. You're right, he was squashed relentlessly, so I truly understand where you are coming from.Comment
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I think the Zillow Homes projections are for them to go from 1-2 Billion to 20 Billion dollars of volume within 5 Years. But again, with a somewhat finite market (leaving out new construction), where are these homes coming from and who is going to be fighting hard to not give up their piece of pie?
Also, the somewhat finite amount of fees to be earned from Real Estate and both Realtor and Mortgage Associations are re-looking at the 'partnerships' they have been paying Zillow for as no one is happy about these recent announcements. Technology has also brought a new generation of highly skilled professionals into this sector and I am regularly seeing new companies offering an array of services that impress me with new ideas to make my job easier and more streamlined. Social Media continues to be a great platform to help these new ideas spread fast too. Not that I would invest in any of these new ideas though as right around the corner there is another one trying to show me why they are better.
Very competitive industry and when personalities clash it can be very cutthroat. (A recent example I am seeing is Quicken Loans. Privately held behemoth that has grabbed an impressive market share and has succeeded doing that with low margins and relying on volume. However, that chunk of their pie is being chomped on by a few others now, especially in my wholesale sector, and I am seeing all of them sweating it out as they try and take a slice of the pie from the other.)
Keller Williams Real Estate last year made a huge push to take a big slice of the residential mortgage pie as well; as other Realty Companies try and do with opening their own Mortgage divisions. Some work out better than others; but throughout there is always a big push back and any change in market conditions or one of the bigger players dropping their margins to grab more of that finite pie can really put the squeeze on others - which is especially painful once they have made the initial expenditures to set up that infrastructure to handle their lofty projected volumes.
Just rambling and I think there are better places to park my investments.
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The market likes Zillow's earnings release (and up 15% AH) but I remain wary.
The biggest change in Zillow’s business in the past year has been a big push into purchasing and selling houses. The online real-estate company said Thursday that it bought 898 homes in the quarter, up 80% from the fourth quarter, and sold 414 homes, triple the number from the previous quarter, but I want to see how that grows and the extent of the profitability.
The company still does not make money and I remain very wary.Comment
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Anyone who bought Zillow at $37 in April 2019 is now up $100 after 2 years of holding onto it. That's nearly a quadruple in 2 years, (100% annualized gain). Holy cow!
April 2019 Z=$37
April 2021 Z=$137
137/37=3.7
I guess Zillow figured out how to make money after all!Comment
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