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Zillow Group Inc Class C (NASDAQ: Z) stock price plunged 11.4% after announcing that it was halting the signing of new home sales contracts for the rest of the year.
The online real estate marketing company cited a massive backlog of renovations and was operating above its capacity.
The company noted that while it was pausing new home purchases, it would continue purchasing homes that had signed contracts and were yet to close.
The real estate firm will also keep marketing and selling homes via its “Zillow Offers” during the same period.
Jeremy Wacksman, Zillow’s Chief Operating Officer, said: “We’re operating within a labor- and supply-constrained economy inside a competitive real estate market, especially in the construction, renovation and closing spaces,”
“We have not been exempt from these market and capacity issues, and we now have an operational backlog for renovations and closings. Pausing new contracts will enable us to focus on sellers already under contract with us and our current home inventory.”
Zillow launched its “Zillow Offers” program in 2018, allowing homeowners to request instant offers from Zillow. The company then buys the homes and makes the needed renovations before listing them on the site again.
Zillow bought 3,805 homes via its offers program in Q2 2021, leading to the current backlog in renovations, as this was by far the largest number of homes ever bought by the company.
Investors and analysts fear that the company might lose market share in a very competitive market environment where supply remains limited, and buyers have multiple avenues to sell their homes.
However, only time will tell if Zillow will have lost any market share once it resumes the program next year.
*This is not investment advice.
Zillow stock price.
Zillow stock price plunged 11.37% to trade at $84.12, falling from Friday’s closing price of $94.91.
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