Z-Zillow Group

[TwoCitiesCapital]

Exited my position today. May regret it, but it's gone very far, very fast, and we're still not seeing profitability of the real estate segment which is where my hopes are primarily pinned.

 

Think the long-term implications of their involvement acting as a liquidity provider to the real estate market will be a large plus in an industry ripe for disruption - but I think the excitement needs to cool off a bit until the proof starts coming through in the pudding.

 

Some thoughts:

1) Nice to see more homes sold then bought despite expansion into new markets. Shows a responsible management of inventory levels where one of my prior concerns was that they'd just keep buying homes and sitting on a larger and larger pile of inventory that'd kill them when the market turns

 

2) Revenue growth is obviously there. Hard to say the same for proof of profitability BUT the loss margin on home segment is getting smaller and smaller suggesting that maybe there is something to scale being able to drive this business to a modest profit on a vast revenue base/potential

 

[Foreign Tuffett]

I don't understand all this talk about Z being a "market maker" to the housing market. Market making includes the idea of fungibility, right? This share of AAPL is just like every other share of AAPL, this kg of gold is just like every other kg of gold, etc. All houses are different, so in what way is flipping houses, even on a massive scale, market making? No one is ever going to call up Zillow and say "Give me six houses, any houses, at $137,000 per house."

 

I also don't fully understand the "liquidity provider" thesis. In places people actually want to live, there are no shortages of buyers in the housing market. Sure, Zillow can close faster on a house than a traditional buyer. But its business model hinges on getting a discount, so the seller needs to be "motivated" to sell to Zillow. This opens the question of how many "motivated" sellers are out there, and how much competition from folks like Opendoor, etc.

 

[DooDiligence]

My last post in this thread is possibly the most embarrassing thing I've ever written.

[TwoCitiesCapital]

https://www.housingwire.com/articles/opendoor-and-zillow-put-a-pause-on-ibuying-citing-coronavirus-concerns/

 

Zillow stops buying houses in CA.

 

For those of us concerned they'd be holding the bad on housing inventory, steps like these make it less likely.

 

Still could be some damage, but if they're unloading more houses than they're buying elsewhere in preparation for this possibility than we're probably going to be ok on this

[Xerxes]

i don't own these names.

But i know Steve Eisman (big short) had Zillow as a short target for a long while.

He has been talking about that short + the his shorts Canadian banks (which didn't make sense at the time, but make sense now) for almost 18 months or so on Bloomberg TV and BNN

 

 

He was also short on Tesla, but covered before the big rally

[abitofvalue]

https://www.housingwire.com/articles/opendoor-and-zillow-put-a-pause-on-ibuying-citing-coronavirus-concerns/

 

Zillow stops buying houses in CA.

 

For those of us concerned they'd be holding the bad on housing inventory, steps like these make it less likely.

 

Still could be some damage, but if they're unloading more houses than they're buying elsewhere in preparation for this possibility than we're probably going to be ok on this

 

they stopped buying because of the govt order not because of some risk discipline.. they are continuing to operate in parts of the country that dont have a stay at home order.  dont think it should make one feel better about their discipline at all..

 

if anything the fact that it took a govt stay at home order (meaning there is going to be very very limited activity as it is) for them to stop could be a sign that they are not self-discilplined will be left holding bad inventory if the real estate situation rapidly turns in the future or ever....

[TwoCitiesCapital]

i don't own these names.

But i know Steve Eisman (big short) had Zillow as a short target for a long while.

He has been talking about that short + the his shorts Canadian banks (which didn't make sense at the time, but make sense now) for almost 18 months or so on Bloomberg TV and BNN

 

 

He was also short on Tesla, but covered before the big rally

 

Can't say what his thesis was, but shorting at 40, 50, and 60 proved smart. Continuing to short @ $25 probably makes less sense.

 

There is real opportunity for them in the ibuyer segment IMO if they can get it right. That's still an uncertainty, but it seems like since it was announced it's been one of the few tech companies where investors question it's ability to be successful instead of taking it as a given....which is why the attractive price seems to exist.

[TwoCitiesCapital]

https://www.housingwire.com/articles/opendoor-and-zillow-put-a-pause-on-ibuying-citing-coronavirus-concerns/

 

Zillow stops buying houses in CA.

 

For those of us concerned they'd be holding the bad on housing inventory, steps like these make it less likely.

 

Still could be some damage, but if they're unloading more houses than they're buying elsewhere in preparation for this possibility than we're probably going to be ok on this

 

they stopped buying because of the govt order not because of some risk discipline.. they are continuing to operate in parts of the country that dont have a stay at home order.  dont think it should make one feel better about their discipline at all..

 

if anything the fact that it took a govt stay at home order (meaning there is going to be very very limited activity as it is) for them to stop could be a sign that they are not self-discilplined will be left holding bad inventory if the real estate situation rapidly turns in the future or ever....

 

Zillow announced this AM that they've stopped ALL home buying.

 

Also said inventory had declined from 2,707 at year end to 1,860.