Zillow restarts home-buying business, showing confidence in real estate amid ongoing pandemic

(Zillow Photo)

Zillow Group is resuming its Zillow Offers home-buying business, reflecting the company’s confidence in real estate despite the ongoing global pandemic.

The Seattle-based company said it will restart Zillow Offers in four cities — Phoenix, Ariz., Tucson, Ariz., Raleigh, N.C., and Charlotte, N.C. — after pausing the program across 24 markets in March[1] due to the coronavirus outbreak.

Zillow last year made a big bet on buying and selling homes, an evolution for the 14-year-old company that traditionally made money off its media business. Zillow Offers is one of several “iBuyer” programs run by competitors including Opendoor and fellow Seattle giant Redfin, which paused its Redfin Now service but is also restarting it in select markets this month.

In a press release, Zillow touts Zillow Offers as a “convenient option to sell without showings or open houses and the ability to close the transaction digitally.” The company is following safety protocols, such as additional cleaning regimens for for-sale homes, virtual tours, and recommending customers wear masks and gloves during in-home tours.

Earlier this month Zillow beat analyst expectations for is Q1 earnings report with revenue of $1.1 billion, up 148% year-over-year and buoyed by its “Homes” segment that brought in $770 million in revenue, up 27% percent from the fourth quarter.

Zillow CEO Rich Barton expressed optimism for the future of real estate[3] even though COVID-19 has slowed home sales and leaves the industry with an uncertain future. In a letter to shareholders[4], Barton cited increasing buyer demand in certain markets and traffic to Zillow’s web properties returning to pre-COVID-19 levels.

“One thing we’ve always believed, and confirmed again over the past two months, is real estate is resilient,” Barton said in the letter, co-written with Zillow CFO Allen Parker. “People still need to move — and dream of moving, perhaps now more than ever.”

Dr. Regina Benjamin. (Zillow Photo)

Zillow published housing market projections[5] on May 4, outlining three scenarios for home prices and sales over the next year-and-a-half.

Using a baseline prediction that GDP will decrease 4.9% in the U.S. this year, and go up 5.7% next year, Zillow estimates a 2-to-3% drop in prices through the end of 2020 compared to Q4 2019 levels, with normalcy returning by Q3 2021. It also projects as much as a 60% decline in home sales this quarter measured from the end of 2019. Sales volume will bounce back by the end of 2021, based on its estimates.

The company also laid out two other estimates — optimistic and pessimistic — based on varying scenarios related to how long the pandemic lasts and the country’s economic recovery. It believes the pessimistic option is more likely than optimistic.

Zillow used a mix of published and proprietary macroeconomic and housing data to calculate its projections. See the full appendix and methodology here[6].

Redfin posted its latest data last week[7], noting that homebuying demand is “making a comeback” and that “prices are on the upswing.”

Zillow also announced Monday its new “health advisor,” former U.S. Surgeon General Dr. Regina Benjamin, who served in the Obama administration.

“As people venture into the real estate market, it’s critical they have precise information and guidelines on how to stay safe during every part of their move,” Dr. Benjamin said in a statement. “From listing, to shopping, to closing documents, we must minimize risk and protect each other. I am pleased to join Zillow in its dedication to public health through this new initiative.”

Last month the company told its employees that they can work from home[8] until at least the end of 2020.

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