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Why Zillow Stock Is Down 12% Today

By Travis Hoium – Nov 2, 2021 at 1:40PM

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The news about Zillow's iBuying business keeps getting worse.

What happened 

Shares of real estate technology stock Zillow Group (Z 1.74%) (ZG 1.96%) fell as much as 12% in midday trading on Tuesday. Shares are at their daily low as of 1:10 p.m. EDT and show no sign of stopping right now. 

So what

News continues to get worse out of Zillow's home buying business. Last month, news broke that Zillow was "pausing" its iBuying business for the remainder of the year as it works through backlog. But today Bloomberg reported that the company is hoping to sell 7,000 homes for $2.8 billion and KeyBanc analyst Edward Yruma estimates that two-thirds of the company's homes are listed below the purchase price.

Couple looking at a home.

Image source: Getty Images.

Zillow reports earnings after the market closes today and investors will learn a lot more about the home buying business. But what we seem to be learning from recent reports is that Zillow may have overpaid for homes recently, which could result in losses. 

Now what

Overpaying for homes and selling them at a loss is bad, but keep in mind that the iBuying business is very young and Zillow along with other players in the market are learning as they go. 

We have also learned that there seems to be lots of demand for homeowners to sell their home through a no-hassle process like Zillow's. That should be a benefit to the company long-term. We'll learn more after earnings are released, but I see this as an opportunity to buy a great company long-term because I see iBuying as the future of real estate transactions. 

Travis Hoium owns shares of Zillow Group (C shares). The Motley Fool owns shares of and recommends Zillow Group (A shares) and Zillow Group (C shares). The Motley Fool has a disclosure policy.

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