Some initial thoughts: (1) scaling a lipstick flipping business was going to be difficult for anyone in the space, especially when home prices became volatile. Zillow Quits Home-Flipping Business, Cites Inability to Forecast Prices - WSJ wsj.com/articles/zillo…
(2) There’s a reason most successful flippers are local and focused on value add - doing major renovations shields a flipper from price fluctuations and forces equity. Doing little is akin to short term speculation.
(3) Many will fault ZG for their operations because other competitors - Opendoor etc - are still in the game. But since Zillow has other sources of revenue, it’s possible they could be the smart ones getting out early.
(4) as much data and Zillow and others have, they lack scalable data inputs into their AVM that give signals as to past work that was done on the home and what such work might bring to the past and future value of a home.
(5) I wouldn’t count out iBuying for good. As better data inputs - say from records of past work and market valuation of potential improvements - become available.
(6) My hunch is that a scalable model is not based on lipstick improvements, but bigger value add improvements. The trick is to assemble the labor and materials at scale to undertake such improvements and to be able to hold for 4-6 months while undertaking work.
(7) Point (6) is important since it protects flippers from fluctuations (though not 100%) in home prices.
(8) Look for other players who’s business is 100% ibuying to alter their business models as home prices appreciation slows. End thread.
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