Three years ago, Zillow dramatically transformed into a company that primarily does instant homebuying, or iBuying.
But on Monday the home listings giant called a timeout on purchasing homes through the end of 2021. Zillow will keep trying to sell existing home inventory, plus renovate and try to resell homes it has purchased under contract, according to a company press release. However, Zillow’s home purchasing is at “operational capacity.”
“We’re operating within a labor and supply constrained economy inside a competitive real estate market, especially in the construction, renovation and closing spaces,” said Jeremy Wacksman, chief operating officer at Zillow, in a written statement. “We have not been exempted from these market and capacity issues and we now have an operational backlog for renovations and closings. Pausing new contracts will enable us to focus on sellers already under contract with us and our current home inventory.”
The company did not elaborate on these labor and supply issues, and Zillow did not immediately respond to follow-up questions.
Broadly speaking, there’s a dearth of U.S. construction workers. Jobs in the construction sector in September was at 200,000 positions below February 2020, pre-covid levels. Also, there remains a bottleneck of lumber and other supplies, leading to prolonged industry concerns. For example, Miami-based homebuilder Lennar complained on a September earnings call it cannot ramp up new home construction to meet demand.
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Zillow, though, had not previously focused on labor and supply issues publicly. In fact, the company’s second quarter earnings report, released in early August, indicated an acceleration of home purchases.
“We expect Zillow Offers revenue to increase in future periods as we continue to increase our home buying and home selling activities,” reads the report.
Zillow’s two primary iBuying competitors – Opendoor and Offerpad – were quick to note Monday they have no plans to pause homebuying.
“We know how important certainty and convenience are to homeowners seeking to move and we’ve worked hard over the past seven years to ensure we can continue to deliver our experience at scale,” stated a company spokesperson. “Opendoor is open for business and continues to scale and grow.”
Offerpad, meanwhile, announced Monday it was expanding purchase business into Sacramento, San Bernardino, and Riverside in California. “Offerpad’s ibuyer operations are running as smoothly as ever,” said a company spokesperson.
Zillow reported acquiring 3,805 homes in the second quarter and has $1.2 billion in unsold home inventory.
The company’s iBuying segment was responsible for $772 million of its $1.3 billion second quarter revenue, thanks to 2,086 homes sold. However, the segment posted a $59 million loss before taxes, depreciation, and amortization.
Overall, Zillow reported $9.6 million in second quarter net income thanks to the profitability of Premier Agent, the company’s longstanding program where real estate agents pay monthly fees to advertise themselves as buyer’s agents on Zillow’s website.
Zillow’s press release Monday notes, “For prospective sellers, Zillow Offers is connecting them with a local premier agent partner.”
