Suburb in Arizona
Zillow has waved the white flag on its home-buying operation, which it launched in 2018. Despite having its most active week of home purchasing to date in early October 2021, Zillow has since shut down its iBuying wing and laid off 25% of its workforce. The company has lost money—approximately $400 million—buying houses at higher prices than the market would pay. A nationwide contractor shortage compounded the issue, delaying the company’s timeline for flipping homes. As Wired reports, the “Zestimate” home valuation algorithm—which employed big data to predict the price at which the company could sell a property—was no match for the volatility of the market in the era of the pandemic. The Zestimate ran into further problems when it attempted to assess the value of less conventional products, such as residences that needed more work or fell outside the easy-to-sell, cookie-cutter type. “There are a lot of things that affect the valuation of homes that even very sophisticated algorithms cannot catch,” says Tomasz Piskorski of Columbia Business School.
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