As of this writing, Zillow’s stock is at its 52-week low, battered by its recent announcements about trouble in paradise. Turns out, Zillow’s iBuying business had some operational issues, and the company finds itself saddled with thousands of houses it needs to unload — perhaps not at fire-sale prices — but not at the prices Zillow executives hoped for. Nor are they the prices that make the iBuying business a success, at least not for Zillow.
Industry analysts are openly chanting some version of the “I told you so” story, and communities like LinkedIn are flooded with opinions. For a company that still has a $20 billion market cap and whose name is a metonym for “house values,” the whole affair is undoubtedly difficult, and perhaps cause for soul-searching.
Here’s the thing: Most of the “I told you so” crowd never told anyone anything. They clapped as new iBuyers were born almost daily and sent Zillow stock up to stratospheric heights. Most housing watchers marveled at the “innovation.” We saw the chest-thumping daily and the confident clichés about “disrupting agents and brokers” bandied about incessantly. Tens of billions of dollars of market-capitalization were added and SPACS (special purchase acquisition companies) were formed. CEOs got on stage and warned the industry not that a new player was in town but that the very game had changed.
To the victors go the spoils, but do the victors deserve it?
A small, silent crew of folks differed about Zillow’s iBuying and the iBuying business model, in general. The math seemed scary. The carrying costs of thousands of houses put fear in their hearts. The idea that a downturn could wipe out large players came to their minds (let’s remember what happened just a little over a decade ago!). This crew was likely talked down by the big-shots, told their views were “too pessimistic.” This crew didn’t get to headline SPACS or make billions of dollars on inflated stock values.
And here we are a few years later. Zillow is looking to offload 7,000 houses and iBuying has been exposed as a low-margin business with huge capital requirements. Those who spoke of great “innovation” have started to realize that there is no ATM machine here, no self-replicating sales robot, and no superhero. Just a bunch of people calling on others to sell their homes, a bunch of people valuing the homes, and a bunch of people making offers.
The disrupted are having a laugh. Indeed, agents who add value and who have relationships with customers are having a banner year. They are employing new innovations like talking on the phone with clients, understanding the nuances of neighborhoods, and using technology as a tool, not genuflecting to it as a god.
PropTech is an incredible space. But I’m not going to believe anyone who talks about disruption or who writes premature eulogies of entire professions. Nah, I’ll leave that to the folks who should have egg on their face but who are, instead, feasting on the carcass of a business that someone else killed.
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