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JtR New Listing in SW Carlsbad

With the inventory so low – especially for the one-story houses – here’s a seller who senses an opportunity. We just listed the premier single-level floor plan in Aviara for a reasonable $1,900,000!

How hot are the one-story homes?

Here’s the action after 15 minutes on Saturday:

Sunday morning’s count:


https://www.zillow.com/homedetails/1344-Corvidae-St-Carlsbad-CA-92011/48180010_zpid/

I don’t know how these guys get away with these revisions after the listing hits the market:

Before Listing Hit the Market:

After Listing Hit the Market:

Top 10 Hottest Markets

These look like the towns to which people from New York and California are moving. Excerpts:

The boomer tide in the for-sale housing market is expected to continue to rise for at least the next 8 years; younger millennials will be hitting first-time home buying age at about the same time, meaning the 2020’s will be a period of sustained underlying demand in the housing market.

Year by year, these effects will be felt differently across markets.

In 2022, the market with the most demographic lift in the for-sale market is Austin, with a trend suggesting the formation of 3.4% more owning households (assuming there are homes available for them to buy). Orlando follows at 2.8%, and then Tampa at 2.7%. Of the largest 50 markets, 29 have natural owner household growth exceeding 1% in one year, the rule-of-thumb rate at which the housing stock increases nationally. The markets with the least demographic pressure for growth are Pittsburgh, Hartford and Buffalo.

Risks

There are two large known risk factors for housing markets in 2022. First, mortgage interest rates are expected to rise in 2022, making home loans more expensive for aspiring buyers. At the margin, this would restrict the inventory accessible in the most expensive markets, potentially driving up competition for the lowest-priced homes in those markets or removing them from consideration altogether.

Historically, home value appreciation in the following markets has strong negative correlation with interest rates — so if interest rates go up, these markets are likely to slow the most: San Diego, New Orleans, Washington DC, Los Angeles, San Jose and San Francisco.

Second, forecasts on the performance of stocks are incredibly wide, with analysts’ 2022 year-end targets ranging from -7% to +13%, slower growth in any case than what we’ve seen in the last 2 years if not declines. A slower stock market would mean buyers are bringing relatively less to the table for a down payment in 2022.

This would most affect markets where there are a lot of first time buyers or where more buyers are entering from lower cost areas, bringing less equity from their previous home. (Or if housing is treated as an asset it could mean a substitution to housing in the next few months. What follows addresses only the downside risk.)

In the following markets, growth has strong positive correlation with stock market returns — so if the stock market falters next year, we’d expect home value growth in these places to slow disproportionately: Phoenix, Las Vegas, Cincinnati, Hartford, St. Louis, Miami, Cleveland, Los Angeles and San Jose.

https://www.zillow.com/research/zillow-2022-hottest-markets-tampa-30413/

Zillow Local Forecasts

The Zillow 1-Year Forecasted Values are down 1-2 points from their previous guesses last month, but still very strong. This is their third consecutive month with similar forecasts:

NW Carlsbad, 92008:

SE Carlsbad, 92009:

NE Carlsbad, 92010:

SW Carlsbad, 92011:

Carmel Valley, 92130:

Del Mar, 92014:

Encinitas, 92024:

La Jolla:

Rancho Santa Fe, 92067:

For those who are steeped in real estate history, it’s hard to comprehend how prices could increase 25% to 30% this year – to think pricing could go up ANOTHER 20% next year is straining the brain!

I think it will happen, and be accomplished by mid-summer.

Zillow Offers Follow-Up

Susie asked for a Zillow Offers update, and yesterday they announced that the unwinding is going just fine. While the debacle did tank their stock price, they figured it would be a good time to buy more for themselves:

SEATTLEDec. 2, 2021 – Zillow Group, Inc. today announced it has made significant progress in winding down Zillow Offers inventory and has sold, is under contract to sell or has reached agreement on disposition terms for more than 50% of the homes it expected to resell during the entire wind-down process. Zillow Group’s Board of Directors has also authorized the repurchase of up to $750 million of its Class A common stock, Class C capital stock or a combination of both.

“We are pleased with the progress of our wind-down efforts and recognize that no longer operating Zillow Offers will allow us to have a more capital-efficient balance sheet and business moving forward,” said Zillow Group co-founder and CEO Rich Barton. “With that, we see today as an opportune time to announce a share repurchase program and reduce the cash balance we built up to support Zillow Offers.”

We can expect them to gloss over their little boo-boo and carry on.

More below – thanks Bode:

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Zillow 2022 Local Pricing Forecast

Zillow has been vilified for many reasons, but the one thing they have going for them is the viewer data for each area. If their 2022 projections are based on the number of clicks on listings, then their forecast should be a reasonable reflection of the actual demand – a macro look that no one else has.

The Big Question: if they are so confident about the 2022 appreciation, why did they quit home flipping?

Their first move of suspending the program until next year while digesting their inventory was understandable. But why quit altogether? I think it was due to having billions invested in a high-overhead venture that was new to them – and the rich guys hit the panic button, instead of calling me.

I’m sticking with my 2022 NSDCC Pricing Guess of +15%, and agree with Zillow that most areas could see +20%.  But this frenzy is going to come to a screeching halt with no notice (they always do), and it will be when you least expect it.

P.S. ALL of their forecasted value increases here are higher than last month:

NW Carlsbad, 92008:

SE Carlsbad, 92009:

NE Carlsbad, 92010:

SW Carlsbad, 92011:

Carmel Valley, 92130:

Del Mar, 92014:

Encinitas, 92024:

La Jolla, 92037:

Rancho Santa Fe, 92067:

Santaluz/Crosby/4S, 92127:

Coastal Oceanside, 92054:

S. Vista, 92081:

University City, 92122:

The additional last four areas show how overwhelming the demand is for all of north county.

Zillow – What’s Next?

Mike pointed out that Zillow simply kept paying too much for homes, and instead of adjusting on purchase prices being offered, they shut it down yesterday.

But Zillow is too big and too aggressive to rest.

Here’s what Mike thinks could be next:

While Zillow 2.0 may have been a failed experiment in iBuying, what captures the imagination is the next iteration of the business. How will Zillow leverage its massive competitive advantage and its iBuyer learnings for Zillow 3.0?

I wouldn’t be surprised to see Zillow play deeper in the Power Buyer space, a model that is asset-light, easier to scale, less risky with better unit economics, and has a natural overlap with Zillow Home Loans (Opendoor diversified into Power Buying earlier this year).

Zillow as a Power Buyer — either through organic development, partnership, or acquisition — is a natural extension to its existing business of helping home buyers. The world of real estate has evolved significantly since 2018, and Zillow needs to stay relevant to those evolving consumer needs.

It would be a smart move.  The buyer side is where the help is needed.

Assisting buyers with making all-cash offers is a very attractive service, with no real downside because all they have to do is funnel the business into their mortgage company to refinance the purchases after the fact. They could flip these buyers to their Premier Agents too – a group who is wondering if it’s worth it to be a Zillow customer today.

The supply and demand will be out of balance for years to come, and buyers are the ones that really need the help. Go Zillow!

www.mikedp.com

Zillow Quits Home Flipping

If you can’t make a profit flipping houses in this market, well then yeah, you should probably stop (hat tip G.A.!)

Real-estate firm Zillow Group is exiting the home-flipping business, saying on Tuesday that its algorithmic model to buy and sell homes rapidly doesn’t work as planned.

The firm’s termination of its tech-enabled home-flipping business, known as “iBuying,” follows Zillow’s Oct. 18 announcement that it was halting all new home purchases for the rest of the year. At the time, Zillow pointed to labor and supply shortages for its inability to renovate and flip houses fast enough.

But Chief Executive Rich Barton said Tuesday that Zillow had failed to accurately predict the pace of home-price appreciation, marking an end to a venture the company once said could generate $20 billion a year.

“We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility,” Mr. Barton said in a statement.

Zillow’s share price was down about 12% in late trading on Tuesday, but before it announced the decision to end home flipping.

The move represents a big hit to Zillow’s top line. Home-flipping was the company’s largest source of revenue, but it has never turned a profit.

Zillow, which will release earnings later on Tuesday, said it would report that its home-flipping business, Zillow Offers, lost $381 million last quarter, resulting in a combined loss of $169 million across all of Zillow. The company said it also plans to cut 25% of its workforce.

Zillow has an inventory of more than 9,800 homes across the U.S. that it is currently shopping to investors. There are another 8,200 homes in contract it has agreed to buy. The company expects to lose somewhere between 5% and 7% on these homes, the company said.

Starting in the summer, competitors such as OpenDoor and Offerpad began to pull back from home purchases in one of the biggest home-flipping markets, Phoenix, as the red-hot pandemic market began to cool.

But Zillow accelerated, according to an analysis of sales records by real estate tech researcher Mike DelPrete, scholar-in-residence at the University of Colorado Boulder. Zillow also paid significantly more than those competitors for each home it purchased, buying homes priced $65,000 above the median on average, according to Mr. DelPrete’s analysis.

By October, the company had listed 250 Phoenix homes at an average price discount of 6.2% below what it had paid for them. Mr. DelPrete called Zillow’s price blunder “a catastrophic failure.”

A wider look at Zillow’s national performance by analysts at KeyBanc Capital Markets found it had listed 66% of homes at prices below what it had paid for them, with an average discount of 4.5%.

Zillow said it expects that the wind-down of its home-flipping outfit will take several quarters.

https://www.wsj.com/articles/zillow-quits-home-flipping-business-cites-inability-to-forecast-prices-11635883500

Zillow Fumble

It’s too bad they would rather give discounts to insiders, instead of just lowering the price on the individual listings and let the retail buyers benefit.

Zillow Group Inc. is looking to sell about 7,000 homes as it seeks to recover from a fumble in its high-tech home-flipping business.

The company is seeking roughly $2.8 billion for the houses, which are being pitched to institutional investors, according to people familiar with the matter. Zillow will likely sell the properties to a multitude of buyers rather than packaging them in a single transaction, said the people, who asked not to be named because the matter is private.

A representative for Zillow didn’t immediately comment.

The move to offload homes comes as Zillow seeks to recover from an operational stumble that saw it buy too many houses, with many now being listed for less than it paid. The company typically offers smaller numbers of homes to single-family landlords, but the current sales effort is much larger than normal.

If successful, the sale would make a dramatic dent in Zillow’s inventory. The company acquired roughly 8,000 homes in the third quarter, according to an estimate by real estate tech strategist Mike DelPrete.

Zillow shares dropped 8.6% to $96.61 on Monday. The stock had slipped 22% this year through Friday after nearly tripling in 2020. The company is scheduled to report earnings on Tuesday.

Zillow recently said it would stop making new offers in its home-flipping operation for the remainder of the year, though it continues to close on properties that were already under contract. The decision came after the company tweaked the algorithms that power the business to make higher offers, leaving it with a bevy of winning bids just as home-price appreciation cooled off a bit.

An analysis of 650 homes owned by Zillow showed that two-thirds were priced for less than the company bought them for, according to an Oct. 31 note from KeyBanc Capital Markets.

“I think they leaned into home-price appreciation at exactly the wrong moment,” said Ed Yruma, an analyst at KeyBanc.

Zillow put a record number of homes on the market in September, listing properties at the lowest markups since November 2018, according to research from YipitData. It also cut prices on nearly half of its U.S. listings in the third quarter, according to Yipit, signaling that its inventory was commanding prices lower than it expected.

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Zestimate Manipulation

Zillow did get around to updating their Estimated market value after a few days. They kicked up the zestimate by $633,200 to get within 0.18% of the list price – and they are still wrong!

It is incredible how much faith and confidence the consumers put in their zestimate’s accuracy. But after years of being the source for the one-click home valuations – and consistent re-marketing by email – people believe it.

Zillow says their zestimate is within 1.9% of being right on price with the on-market homes, which sounds really good until you realize what that means – they just change the zestimate once a home gets listed…..and they brag about that? They hope you don’t notice.

From last week:

Zillow Offers Takes a Break (?)

Hat tip to GA for sending this in:

Zillow Group Inc. is taking a break from buying U.S. homes after the online real estate giant’s pivot into tech-powered house-flipping hit a snag.

Zillow, which acquired more than 3,800 homes in the second quarter, will stop pursuing new home purchases as it works through a backlog of properties already in its pipeline.

“We are beyond operational capacity in our Zillow Offers business and are not taking on additional contracts to purchase homes at this time,” a spokesperson for Zillow said in an email. “We continue to process the purchase of homes from sellers who are already under contract, as quickly as possible.”

Zillow is best known for publishing real estate listings online and calculating estimated home values – called Zestimates – that let users keep track of how much their home is worth. The popularity of the company’s apps and websites fuels profits in Zillow’s online marketing business.

https://www.bloomberg.com/news/articles/2021-10-17/zillow-pauses-home-purchases-as-snags-hit-tech-powered-flipping

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They are known for their marketing prowess, so if you’re like me, you probably wondered if they just cooked up a great excuse – and/or if was there any more to the story.

I know one homeowner who got a quote from ZO about a month ago that was around the retail value of the home. Two weeks later, ZO revised their quote downward by 5%, and claimed it was due to ‘market conditions’, not a pipeline backlog.  But there’s no obligation for them to tell the same story everywhere.

Let’s check their market conditions.

These are the MLS stats for the broker from Corona who has 91 agents handling the bulk of the Zillow listings for Southern California:

Solds between April 18 – July 18th:  174

Average Days on Market: 14

Median Days on Market: 6

Solds between July 19 – Oct. 18th:  273

Average DOM: 26

Median DOM: 22

ACTIVE LISTINGS TODAY:  294

Average DOM: 29

Median DOM: 21

They were in love with the frenzy, and were able to sell half of their listings in the first 6 days on the market. But today, most of their active listings have been on the market for weeks, and are still unsold.

When their home isn’t selling, amateur sellers cancel their listing and wait for a ‘better market’.

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