(Disclosure: Rose Law Group represents Offerpad.)
By Ashley Fahey | Phoenix Business Journal
The wind down of Zillow Group Inc.’s (NASDAQ: ZG) iBuying business announced last week has thrown new scrutiny onto the direct-homebuying business.
Inability to predict home prices amid a volatile market was the key reason cited by Zillow for its exit from the iBuying business, a closely-watched segment of the residential real estate market. The program’s shutdown, and subsequent expected layoffs of one-quarter of Zillow’s staff, prompt questions about how sensitive the iBuying model could be to swings in the overall housing market.
The past 12 to 18 months have seen a housing market unlike any other, where investors — iBuyers or otherwise — have been able to snap up homes, invest some capital in renovations, then sell them for a sizable increase weeks later. The basis of iBuying is rooted in purchasing homes for a discount, then selling them a short time afterward for a profit.
But with home-price appreciation tapering off in recent months, albeit still growing, that prompted questions about how much profit iBuyers and others may be able to make selling homes they’ve purchased — after months of staggering price appreciation.
