Zillow’s largest source of revenue is from their “Zillow Offers” program, where they make cash offers from homes and then renovate, repair, and re-sell them weeks/months later, often for a premium. Many people – such as myself – have criticized Zillow for this iBuyer business model as it potentially makes the Housing Bubble worse in certain markets (Phoenix, Tampa, Los Angeles).

But Zillow recently announced that they will stop buying homes for the rest of 2021 due to operational capacity constraints. Their stock price has declined by nearly 9% on Monday October 18th in response. Zillow, the largest real estate tech company in America, is suddenly refusing to buy homes and is selling off their existing inventory. Could they be predicting a Housing Crash?

Zillow, along with the mainstream narrative, suggest no. They argue that this is a Zillow-specific problem related to labor shortages and operational constraints. And that iBuyer competitors like Opendoor and Offerpad are still active in the market.

But one must wonder…if staffing shortages were to blame, why wouldn’t Zillow simply scale back their buying program? Or eliminate buying in a certain Housing Markets, such as Phoenix, Tampa, or Los Angeles. Why are they choosing to completely cut out their largest source of revenue and get pummeled in their stock price?

The behavior suggests that Zillow could be skeptical of the future of the Housing Market, and might believe, like many others, that there is a massive Housing Bubble occurring right now. If so, Zillow might not want to be caught holding a significant amount of homes/housing inventory when the Bubble turns into a Housing Crash.