The US property market is imploding at a rapid rate. Online real estate marketplace Zillow emailed about 300 employees Tuesday that they were being laid off effective immediately. In November last year, Zillow announced that it would lay off a quarter of its staff, around 2,000 people. These layoffs impacted Zillow Offer advisors, PA sales and back-end staff at Zillow Home Loans and Zillow Closing Services, among others. Yesterday it was announced new home sales declined 10.9% month-over-month in September.
The demand with interest rates at 2007/8 levels over 7% for 30-year fixed mortgages has fallen dramatically for products from companies like Zillow. The supply of new homes for sale stood at 9.2 months, versus 8.1 months in August and 6.1 months in September 2021. A six-month supply is typically associated with a more balanced market.
Zillow says is shifting focus toward technology-related positions in the company.
“As part of our normal business process, we continuously evaluate and responsibly manage our resources as we create digital solutions to make it easier for people to move. This week, we have made the difficult — but necessary — decision to eliminate a small number of roles and will shift those resources to key growth areas around our housing super-app. We’re still hiring in key technology-related roles across the company,” a Zillow spokesperson said in a statement emailed to TechCrunch.
US home prices increased 13.1% in the year that ended in August (consensus 14.0%) after increasing a revised 16.0% (from 16.1%) in July according to the CoreLogic Case-Shiller 20-city home price index. The index fell -1.32% in August from July, (est -0.80%; prevR -0.69%), the second month-over-month decline since January 2019.
TechCrunch said that Zillow did not reveal the percentage of its workforce affected by the decision. However, in its last quarterly report filed with the U.S. Securities and Exchange Commission in August, Zillow reported that it had 5,791 full-time employees in its workforce. This would suggest the layoff has impacted around 5% of employees.
Zillow laid off around 2000 employees after it would down its Homes segment, which focuses on house flipping. The wind down exceeded internal expectations, both in terms of speed and profits. ZG now only has a small remaining inventory and is at the tail end. This segment had been wreaking havoc on the overall financials of the company both up and down as it overwhelmed ZG’s core segments due to the sheer size of home sales.
Zillow did not entirely close the door on home sales back in August it announced a partnership with Opendoor (OPEN). The deal is $OPEN will funnel Zillow clients to seamlessly request an Opendoor offer to sell their home. Clients will then have the option to tack on Zillow services such as financing, closing and agent selection. Clearly less risky than ZG taking direct ownership of the home.
We saw with Meta, Alphabet, Spotify, Microsoft, Tesla, Netflix and SNAP among others how disastrous this falling economy with higher rates has impacted technology and growth companies. Profits and revenue is down, losses up, stock prices smashed, and staff laid off. Earlier this week, telehealth unicorn Cerebral reduced its workforce by 20% due to an ongoing push for efficiency.
An initial take at the Zillow news after winding down its Homes segment and the state of the real estate market is the company has returned to it roots as a real estate technology company. It remains the dominant player there and performs handily.
Source: Reuters, TC, TechCrunch
From The TradersCommunity News Desk