House sale business
Zillow Group Inc. has reached a deal to sell about 2,000 homes as part of its ill-fated demolition programme, the company's biggest wholesale sale, as it begins unloading thousands of homes and ceasing its business.
New York-based investment firm Pretium Partners has agreed to buy Zillow homes in 20 US markets and plans to rent them out, according to people familiar with the matter.
The digital real estate company said it intends to sell about 9,800 homes it owns, plus a further 8,200 homes that were in the process of being bought. The company expects to lose between 5% and 7% on these sales. According to these people, in the Pretium deal, Zillow got the market price for the properties.
Zillow's practice of flipping was to buy houses, renovate them slightly and then sell them quickly, making money on transaction fees and house price appreciation. The firm and other so-called iBuyers used an algorithm to estimate house prices and determine what to pay home sellers.
Last week, Zillow said it was closing its business because it could not accurately predict future house prices and was losing too much money. The company expects to record a loss of more than $500 million from home-flipping by the end of this year and is laying off a quarter of its staff.
The sale of Pretium marked the beginning of the winding down of Zillow's iBuying business.
Pretium, which owns about 70,000 single-family homes, plans to keep the homes and rent them out. The business has proved successful for the firm and others that specialise in renting homes near hot metro areas, where families often feel they are priced out of the market. A surge in the formation of new households, which was delayed earlier due to the pandemic, has also boosted demand for rental housing.
"We continue to invest in communities and improve access to housing across the US," said a Pretium spokesperson.
According to CoreLogic, the housing data provider, single-family rents rose 8.5% in July compared to the previous year, the highest such increase in 16 years.
Other big investors in rental homes, such as Invitation Homes Inc. and American Homes 4 Rent are also considering bids to buy some of Zillow's remaining housing stock said people briefed on the matter.