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Zillow shares fell more than 20% Wednesday on the news that it’s pulling the plug on its house-flipping business and laying off a quarter of its staff.
Zillow Offers, the division the company launched three years ago, appears to have badly misjudged the market and racked up $380 million in losses last quarter.
“The unpredictability in forecasting home prices far exceeds what we anticipated,” said Rich Barton, Zillow’s co-founder and CEO, on Tuesday. “Continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility.”
Zillow Offers, a business known as iBuying, was once billed as the future of the company. But it seems Zillow’s algorithm was too aggressive — the company reportedly overpaid for houses it ultimately had to sell at a discount. And while rivals like Opendoor and Offerpad were slowing down their purchases, Zillow ramped up.
It’s not clear what the future holds for Zillow as it lays off some 2,000 people and falls back on its core business — serving up those tempting little red dots, like portals to another life in which you have a whole house to yourself, with some land and a pool and a fence for the dog and whatever other amenities you want to filter for.
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Bank of America is now predicting that Brent crude oil, which drives US gas prices, will hit $120 a barrel by June 2022. That’s 45% higher than right now. Meanwhile, prices at the pump are already the highest they’ve been in seven years. The national average stands at $3.40 a gallon, and they’re flirting with $4 in Nevada, Washington and Oregon.
The Federal Reserve has been pushing the economic stimulus pedal to the metal nonstop since March 2020. Now, it’s easing off the gas.
As was widely expected, the central bank announced it would wind down its aggressive emergency bond purchases by about $15 billion a month, starting this month. At that rate, the Fed’s balance sheet will be back to its pre-pandemic level by June.
- This all goes back to the Fed essentially throwing itself on the economic and financial grenade of the pandemic back in March 2020. Markets were tanking as lockdowns began, millions of jobs were lost and businesses shuttered.
- So the Fed got to work, creating a double-barrel approach to economic stimulus. It dropped interest rates to near zero and began buying up loads of government debt — to the tune of about $120 billion a month in Treasury bonds and mortgage-backed securities.
But those measures were always meant to be temporary — they were a crutch to keep markets moving while the economy healed. Now’s the time to wean them off the government assistance, a process known as tapering.
The Fed is hardly ripping off the stimulus Band-Aid: It will maintain its target interest rates near zero for now, and it left the door open to more bond purchases if economic conditions change. Our boy Jay Powell, aka the Silver Fox, aka Jay Money, aka Fed Savage, has been signaling this plan for months so as not to panic the sensitive souls on Wall Street.
There was no immediate “taper tantrum” in the market following the Fed’s announcement. The major stock indexes even inched higher and closed at fresh record highs. CNN Business’ Anneken Tappe has more.
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