While the question asks "Why did Zillow go out of business?", it's important to clarify that Zillow did not go out of business. Instead, the company made a significant strategic decision to exit its iBuying business, known as Zillow Offers, in 2021.
Why Did Zillow Stop Buying and Selling Homes Directly?
Zillow's decision to cease its direct home-buying and selling operations (iBuying) stemmed primarily from the company's inability to accurately predict future home prices amidst an unpredictable market.
The iBuying Model and Zillow Offers
Zillow Offers was an ambitious venture into the iBuying space, where "i" stands for instant. The model involved Zillow using its data and algorithms to make instant cash offers on homes, purchase them, make minor repairs, and then quickly resell them for a profit. The goal was to provide a fast, convenient, and certain selling experience for homeowners.
Key Reasons for the Exit
The primary factors leading to the discontinuation of Zillow Offers were:
- Inaccurate Price Forecasting: Zillow's algorithms struggled to correctly forecast future home prices. CEO Rich Barton explicitly stated that the company was "unable to correctly forecast future home prices" in the volatile market conditions.
- Market Volatility: The housing market experienced unprecedented fluctuations and a "frenzy" driven by the COVID-19 pandemic. This volatility made it incredibly difficult for Zillow's models to accurately assess risks and potential profits, leading to significant losses on homes purchased.
- Operational Challenges: Beyond pricing, the iBuying model also presented logistical challenges related to acquiring, renovating, and reselling thousands of homes at scale.
This strategic pivot allowed Zillow to focus on its core business as a leading online real estate marketplace, connecting buyers, sellers, and renters with real estate agents and properties. The company continues to operate successfully as a platform for real estate information and services.
For more details on Zillow's operations and its iBuying exit, you can refer to reputable business news sources.
