This week Zillow announced that they have stopped buying homes directly from home sellers. When a big player in the field makes a drastic change to their business model it’s worth asking why, and what that means for us.
Zillow’s CEO stated, “We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated.” I Think it’s incredibly hard to predict home prices out into the future. It turns out that Zillow was losing money in many markets, and this is in a time of record gains in home prices. The company that claims to know what your home is worth was overpaying for properties and selling them at a loss. I believe they realized they were not succeeding during a time of record gains in the market, and therefore came to believe they would lose even more money in a market that shows signs of leveling off. Until recently a home would be worth more tomorrow than it was yesterday. That was supposed to help Zillow make money (and they failed in the best of times).
What does this mean for the buyers and sellers in our market. Here is my take… Zillow is forecasting that the market, on the whole, is leveling off. We’re seeing an uptick in interest rates, and less of a feeding frenzy on each listing. We’re also seeing longer market times. It’s still a great time to purchase a home in San Diego, but buyers should always be looking at real estate as a long term investment. Interest rates are still near record lows, and locking in that low rate will bode well for any home buyer. In San Diego, homes are still affordable due to low interest rates and an economy that supports high real estate prices. On the flip side, it’s a great time to sell a quality home. The best listings are continuing to attract a ton of interest because there is simply a lack of housing supply, just don’t expect your home to be worth more tomorrow than it is today.