Zillow, an online real estate marketplace, is halting its recent home-buying spree amid labor shortages in the construction industry.
As the American economy began recovering from COVID-19 and the lockdown-induced recession — and as housing prices concurrently increased — the firm began making cash offers to consumers trying to sell their property.
CNN Business reported in February:
For certain homes, Zillow’s “Zestimate” — the online estimate of the home’s value — will now represent an initial cash offer from the company to buy the property. That could mean an even quicker timeline for homeowners looking to close a sale without going through the hassle of a formal listing, or a source of helpful data for would-be sellers who want to know how much money they’ll have to buy their next house.
The Wall Street Journal further explained:
The American home-sales market has been on a historic rally during the pandemic, but sales volume has recently begun to cool. The premise of Zillow’s home-flipping business is the ability to leverage its vast platform to generate sales in volume and collect transaction fees on each sale.
On Monday, Zillow announced that a shortage of on-the-ground workers is bottlenecking their ability to purchase and renovate property — meaning that they will have to cease their purchasing spree. As a result, the company’s stock plummeted over 10% within the first hours of trading.
“We’re operating within a labor- and supply-constrained economy inside a competitive real estate market, especially in the construction, renovation and closing spaces,” explained Chief Operating Officer Jeremy Wacksman. “We have not been exempt from these market and capacity issues.”
As Wacksman mentioned, American businesses across multiple industries are facing severe labor shortages.
The Department of Labor recently stated that a record 4.3 million workers left their jobs in August — the highest level of resignations in over two decades. Although the economy created a net 2 million new jobs during the same period, overall employment is still 3% lower than its pre-COVID level.
The high quit rate points to a labor market that favors employees over employers. As the number of job openings exceeds the number of available workers, businesses have been hiking wages and increasing benefits to attract talent.
In many cases, firms are more willing to rely upon technology. The Small Business Recovery Survey — which polled hundreds of small to midsize businesses between August 5 and August 16 — found that roughly three in ten have relied upon automation to handle record consumer demand.