Zillow And The Economy

I’ve noticed that many folks are predicting a real estate crash based on Zillow pulling out of the buying houses that may need some work or are in distress segment of the real estate market.

Let’s go over what we do know.

Zillow created a program or platform a form of artificial intelligence called “Zestimate” to analyze the deals they wanted to purchase. All of this due diligence was only online by AI aka artificial intelligence. Everyone involved in these types of real estate transactions know that an investor has to put boots on the ground. They did not use a person to go visit these houses before they made any offers and they lost money on around seven thousand properties they picked up in this capacity using their “Zestimate”. I do feel bad for the coders that may lose their jobs over this fiasco.

Another factor that most of us did not anticipate was the unexpected increase in prices for lumber and other related materials that go into home construction and remodeling.

Supply chain issues from rona shut downs created the shortages and increase in prices of materials for housing. Hopefully, these issues sort themselves out soon. Zillow I believe is in an internal reorganization right now to minimize the damages of buying too high for their real estate acquisitions. I think once they sort through what went wrong with their business model as well as all of their mistakes, they may or may not decide to go back into buying houses for rehab and resale.

Does this mean the housing market is going to crash?

There are so many moving variables that basing a real estate market crash on Zillow pulling out of the game is not enough information to make this claim. In fact, the smaller investors as well as the larger well known names such as Redfin and Open Door are still in the game picking up these types of properties from home owners. Currently, home buyers are on the market searching for their dream homes. No stress just yet on the real estate market taking a dive.

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Many thanks to David McBee for the picture he contributed to Pexels.