What Went Wrong With Zillow? A Real-Estate Algorithm Derailed Its Big Bet

[Doc]

BUSINESS

What Went Wrong With Zillow? A Real-Estate Algorithm Derailed Its Big Bet​

The company had staked its future growth on its digital home-flipping business, but getting the algorithm right proved difficult​

Interesting article here: https://www.wsj.com/articles/zillow-offers-real-estate-algorithm-homes-ibuyer-11637159261

 

[300 H and H]

I have to wonder if inflated material prices caught them, like so many others off guard. Actual real-estate prices have risen, but not as fast.
Since it is behind a pay wall I did not read it.
So what's their take Doc?

 

[Doc]

If I had known it was behind a pay wall I would not have posted the link. Sorry all.

Their take is the algorithm zillow put in place for what to buy where and how to flip them quick was flawed. They bought billions in property and now are taking massive losses due to the numbers. That's it in a nutshell.

 

[Answers Dan]

To me it seems like Zillow is betting against me. Artificial house price don't hold, because houses only need a set amount of labor and materials to make. They'll always have a certain cost to produce, and the price of the house can always fall to near real value. The price doesn't tell you what the house is worth.

They are repairing houses (good), but they are also buying up everything and artificially driving prices up (bad). Inflated house prices don't hold value, so house flippers are betting against me. If I need a house to live in and prices are stupidly inflated, then I know I'm going to lose since price will not hold.

So I am glad their business model failed. If it succeeded more companies would copy them, and no house would have a price related to its value.