Zillow’s failure and future

In the fall of 2021, the Seattle-based proptech abandoned its home-flipping blitz and laid off 2,000 employees. It’s now ramping up for another moonshot project: building a super app for real estate.

Why should we care?
It doesn’t seem like Zillow’s leadership understands why its home-flipping strategy failed. While the company’s execs attribute the failure of that initiative to price volatility and labor shortages, other companies, including Opendoor and Redfin, weathered the same conditions without crashing. It seems Zillow abandoned procedural failsafes for the sake of aggressive growth, buying properties at tens of thousands of dollars above asking price, and thus often failing to sell those houses at a profit. “When I asked [Zillow CEO Rich] Barton why his company failed where competitors succeeded, he traced a seemingly circular logic,” writes Patrick Clark for Bloomberg. “Zillow needed to grow fast, which meant running the business less efficiently. That in turn led to losses that convinced Barton the business was too risky and not profitable enough to be worth the trouble.” The housing super app in the works at Zillow adds even more volatile products into the mix, such as bridge loans and mortgages. If Zillow adopts a similar “grow-at-all-costs” mentality for the sake of ballooning the user base of its super app, then we might expect a Zillow-fueled tidal wave of defaults: The proptech giant might offer financing to risky clients in the name of market share.