Zillow Group is pausing its direct homebuying business across the country.
Zillow also retracted its full-year earnings guidance and is working to reduce its budgeted 2020 expenses by 25%, instating a hiring freeze, stopping most marketing spending and cutting other discretionary spending. These measures come as COVID-19 hits the residential real estate industry and, in turn, the company’s revenue.
The measures on the heels of a similar move by Opendoor, a company that buys homes quickly for a fee, which announced it was suspending homebuying because of concerns over the coronavirus and just a week after Zillow said it would support the real estate agents it works with during the coronavirus pandemic.
Visitor traffic on Zillow's website decreased nearly 20% in recent days compared with the same time last year, CEO Rich Barton said during an investor call Monday. To show the significance of the drop, he said earlier this year visitor traffic had grown in the double digits compared with the year prior.
“During the past week, we have also seen some government restrictive orders that have impacted activity we see online and in our field operations. Many of these orders have specifically called out real estate showings and other activities as nonessential,” Barton said. “As traffic has fallen, we've also seen a request for connections with agents decline in some markets more than traffic, but not as much as one might expect.”
He said agent connections are down 40% in markets where governments have told people to shelter in place, compared with 30% nationally.
“This could mean that at least for now, people are still considering moves,” Barton said. “Despite the widespread uncertainty, people are still shopping for homes and rentals on our apps and sites, and many sellers still need to sell.”
Zillow employs about 225 people in its 25,000-square-foot Scottsdale office it opened nearly a year ago on the third floor of Galleria Corporate Center, 4343 N. Scottsdale Road in downtown Scottsdale for its Southwest hub.
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Zillow will continue to market and sell the 1,860 homes in its inventory through Zillow Offers, but the company will temporarily stop making cash offers to home sellers in the 24 cities where it currently operates the service. Zillow Offers also will postpone its planned launches into Oklahoma City and Jacksonville, Florida.
Zillow's action follows a similar move by Seattle-based brokerage Redfin last week, which paused its direct homebuying service RedfinNow.
Zillow is working with existing customers to cancel existing contracts to the extent it can, Barton said, but is evaluating on a case-by-case basis.
Zillow is maintaining the Zillow Offers technology and staff so it can accelerate out of this operations half, Barton said, because he expects demand will be high after the disruptions caused by COVID-19 have passed.
“We intend to un-pause acquisitions under Zillow Offers as soon as the health situation stabilizes and we feel the housing market is functioning,” Barton said.
Author: By Paxtyn Merten Staff writer, Puget Sound Business Journal