Zillow tumbles 11% after halting home purchases through year-end as it works through a renovation backlog made worse by staffing shortages
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- Zillow shares slid as much as 11% on Monday after the company said it will temporarily stop buying houses.
- The Zillow Offers unit has a lot of purchased homes that need renovating but it's dealing with a labor shortage.
- Zillow bought more than 3,800 homes during the second quarter, according to Bloomberg.
Zillow shares sank as much as 11% on Monday after the real-estate-listings heavyweight said it will pause its purchases of homes through the end of 2021 as the company deals with a backlog of renovation work.
The company's statement followed a Bloomberg report about the temporary halt in home purchases. It bought more than 3,800 homes in the second quarter, the report said.
The halt will allow the Zillow Offers business to continue working with its current inventory and the home sellers with whom it's already under contract.
"We're operating within a labor- and supply-constrained economy inside a competitive real estate market, especially in the construction, renovation and closing spaces," Jeremy Wacksman, Zillow's COO, said in a statement. "We have not been exempt from these market and capacity issues and we now have an operational backlog for renovations and closings," he said.
Zillow Offers is the house-flipping business Zillow launched in April 2018, joining companies known as ibuyers that purchase homes with almost instant all-cash offers. Zillow in March 2020 temporarily shopped buying new homes because of the coronavirus pandemic.
The US labor market is facing a shortage of workers in a variety of industries even as millions of people remain unemployed in the wake of the worst of the COVID-19 outbreak. Ongoing concerns about the virus and people rethinking their work and home life situations are factors contributing to the worker shortage, Labor Secretary Marty Walsh recently told Insider. Meanwhile, supply-chain bottlenecks have led to a shortage of building materials.
Zillow said Monday it will refer prospective sellers to its network of local real estate agents.
Shares of the company had lost more than 30% on a year-to-date basis ahead of Monday's session. They hit an all-time high of $208.11 in mid-February.