Zillow Cuts iBuyer Program
Zillow Firesale in Tucson, Arizona
If you’re a home buyer or seller here in Tucson, Arizona, this is a must-watch video. Zillow canceled their iBuyer program and is starting to firesale homes listed in the Tucson MLS. Hello, Tyler Ford here at Tucson, Arizona with eXp Realty. And welcome to this episode of Living in Tucson, your Tucson real estate connection. And this episode is a must-watch. Whether you are a homeowner, home seller, home buyer, this is a must-watch.
Zillow Cuts iBuyer Program
Back in October 18th of this year, Zillow announced that they were no longer going to continue with their iBuyer program. And they blamed it on constraints of being able to get things done, lack of workers, lack of supplies. But I call that a bunch of malarkey. I don’t believe a word of what they’re saying in terms of why. And as a result, I’ve been diving into the number to kind of get a better feel for it. And sure enough, over the weekend, some news came out that is pretty revealing as to what’s going on.
So I’m going to dive into that and show you the impact that I think it’s going to have, whether you’re a buyer or a seller or a homeowner in terms of your property values. On October 18, Zillow announced that they were canceling their iBuyer program. And the reason that they stated is supply constraints and the lack of being able to get things done in a timely matter. And therefore, they were canceling their iBuyer program. But as I read this, I just didn’t believe a word of it just because Zillow has more analytics than any other real estate company out there. And they can foresee things before the rest of the market does based on their analytics. And I thought that, in my opinion, that they saw this market was starting to slow and pull back. And as a result, they canceled their iBuyer program.
Zillow Losing Millions of Dollars
So over the weekend, some news came out in regards to Zillow and how bad it really is, in my opinion. Right now, this article right here, they’re selling 64% of their homes listed. They’re going to be selling them less than what they paid for them. So I mean, that’s huge. And then, another article came out and this one was geared more towards Phoenix and Arizona. 93% of the listings sold in Phoenix are going to be sold at a loss. And based on how much inventory they have in Phoenix, that loss is going to come out to be, just based on right now with no more price reductions. If they were to sell all their homes at their current list price, they’re going to lose $6.3 million in Phoenix, which is crazy. So the question is, what kind of impact is this going to have?
Zillow, Offerpad and Opendoor in the Tucson Housing Market
And Tucson has been a big market for iBuyers and Zillow. And so, now I’m going to dive into our market here locally and show you what’s going on. So over the weekend, I saw the article in regards to Phoenix and Zillow and it got me thinking. And as a result, I went into our MLS and pulled out some data. And I was able to export some really good information. And I started with Zillow. And once I pulled the numbers out from Zillow to see how many listings Zillow has in Tucson, and then looking at price reductions, and even what they paid for it, I was absolutely blown away. And started to think, okay, so there’s Offerpad and Opendoor. So I was able to export that information out as well. And the combined total of those three iBuyers, blew me away in terms of what is going on here in the Tucson market and how much inventory they actually control.
And I think it could have a major impact on our housing market here in Tucson, but also it’s going to start on a national level and then trickle down. So I’m going to dive into those numbers just to show you what’s going on in terms of the active listings, how aggressively Zillow is as far as price reductions. And in my opinion, Offerpad and Opendoor, they’re going to have to follow. Otherwise, their homes are just going to sit on the market. So I’m going to jump into those numbers and give you a peek as to what’s going on. So I went into the MLS and I was able to export all the listings in Tucson that Zillow has. And right now Zillow has 69 active listings in the MLS. And then what I did is I sorted them in regards to price reductions.
And we’re going to jump over to Zillow, and I’m actually going to show you what they paid for these things. And it’s just, it’s kind of hard to believe. So for example, the original list price on this property here was $481,000. And right now it is listed at 369,900. So they did a price reduction of $112,000. And it’s been on the market now for 97 days. So right now the average days on market in Tucson is 14 days, as of the MLS stats of last month. So if your home has not sold within 14 days, typically that means that it’s overpriced. So they’ve done a 23% price reduction. And again, I’m going to jump over to Zillow and show you these first couple of properties.
So you can see here, if we scroll down, all the listings that Zillow has currently active on the market, they’ve reduced their price by 1.8 million on 69 listings. And their average sales price right now is $345,000. And their average days on market of the homes currently listed in the MLS is 27 days. And again, the average days on market for homes right now is 14 and it has been steadily going up. So this is Zillow. Now, I’m going to jump on over to Opendoor. And this is where it gets a little scary, in that Opendoor and Offerpad right now are not being proactive. And you can see the results of what’s going on with their properties. Their days on market is definitely higher. And at some point, they’re going to have to cut prices in order to get stuff sold.
So Opendoor right now has, as of yesterday, I pulled this, they have 199 active listings in the MLS. Total price reductions that they’ve done on the active listings is 880,000. Average sales price of all their listings, 336,000 and average days on market 43. So again, it tells me that the things that they do have are overpriced because the average days on market is 14. So they’ve just started to do some price reductions. They have definitely not been as aggressive as Zillow. But in my opinion, they’re going to have to. So here’s one right here. The original price is 506,000. Right now it’s listed for 443,000. And they did a $63,000 price reduction for a total of 12%. So you can see here that a lot of the listings that they have, they have not done price reductions.
But in my opinion, they are going to have to. And then if we jump over to Offerpad, Offerpad has 39 listings in the MLS. They have barely done any price reductions. Average days on market right now is 38. The price reductions that they have done total 65,000. But again, in my opinion, in order to get stuff sold, they’re going to have to start to do some price reductions. And then jumping on over here. I was curious when I looked at all this, I wanted to know what percentage of the market do they actually control? And so, Zillow right now has 70 listings in the MLS. Opendoor has 199, and Offerpad has 40. So for a total of 309 listings. And right now in the MLS, for all listings there’s 1,753. And when I jump over to Zillow, in the next section I’m going to show you that.
iBuyer’s Control 18% Of The Home Inventory In Tucson, AZ
So the total percentage of listings that they have, they control 18% of the market. So 18% of the market can have a big impact on home value. So again, it’s something to pay close attention to, and more importantly on a national level. I mean, Tucson, Zillow, Opendoor and Offerpad all in two Tucson, Phoenix. There’s some other big areas that iBuyers are in. And so, not only Tucson, it’s going to have an impact across the country. And so, the question is, what kind of impact is it going to have up? Up and on over to Zillow, where I want to show you some examples. So first off, if you type in Tucson. Right now that could have changed a little bit from my Excel spreadsheet. Right now there’s 1,737 active listings in the MLS listed on Zillow.
Zillow Selling Homes in Tucson For Huge Losses
And what I’m going to do is I’m going to jump over to some of these property addresses that I showed you just so you can get a fill for what’s going on. And you can see the most recent price cut was $20,000, which is a big price cut. And then if we look at the history, you can see what Zillow paid for this property. Zillow back in July 8th of this year, Zillow paid $436,000 for this property. So they are having to take a huge, huge price cut in order to get this property sold. And it’s been sitting on the market, it hasn’t sold. And again, average days on market right now is 14 days. So if a home hasn’t sold, especially a home like this that look to be in pretty good shape, if it hasn’t sold, that means that it’s grossly overpriced.
The next address, let’s go look at one more here. Just give you another example. And if we look at the history of this property, still actively listed in the MLS by Zillow. They recently did a price reduction of 15,000. And if we look at the history here, you can see all the price reductions. And then more importantly, Zillow bought this and July 27th of this year. And they paid $447,000 for this property. So again, taking another huge haircut in order to get their properties sold, which is going to have a big impact on home values. And if notice here, a lot of these I’ve noticed on the Zillow ones, they’re not giving you a zestimate.
They’re not showing you what their zestimate says. Which in my opinion, they’re doing this intentionally just so there is no zestimate to give people that are looking a value of what it’s worth. But you can see the history here of what’s going on. And back on that Excel spreadsheet that I showed you. I mean, you can pull up example, after example, after example of what’s going on with the Zillow listings. And in my opinion, Offerpad and Opendoor are yet to follow. As an agent, people are always asking me my opinion of the market and what I think’s going to happen in terms of the direction of the market. And although I wish I had a crystal ball and could predict it, I don’t. But I do like to look at the numbers each and every month when the statistical numbers come out from TAR. And then I also keep a close tabs on the market in terms of what’s going on.
And so, all you can really do is look at the data and make an educated decision based on your own situation and your risk tolerance. So the question is, are we going to get a pull back here? And if so, what’s it going to look like? And I do think, the iBuyers over the last couple years have been a big part of the issue that we are now having. Inventory levels were low when COVID hit. And they aggressively went in and started to buy. And then list at prices that were extremely high, but they could get away with it just because there was very little inventory and it was just supply and demand. And people were willing to pay just because there wasn’t a whole lot of properties to choose from. But eventually, what’s happening now, is people are being priced out of this market.
Buyer’s Are Being Priced Out of The Market
And in the mortgage world, I spent 10 years on the mortgage side of things. It’s called the debt income ratio. And the income has to support the debt. And at some point, if values and the cost of living continues to go up like it does, people that are look to buy, their debt to income ratio is no longer in line and cannot support these higher values. So at some point, which is happening right now, people are not chasing the top end of this market. Properties are starting to sit. And as a result, we’re starting to see the market pull back and slow down and price reduction. So just based on what’s going on with Zillow and their aggressiveness and massive price reductions, to me tells you something. Just because they have more data than anybody, and they have a better look at the market.
And it’s one thing to get out of the iBuyer business, I get that. And then to sell off the inventory, but that’s not what they’re doing. I mean, they’re getting out, but they’re aggressively selling it off. Aggressively reducing prices, which is going to have an impact on home values in the near future here. So my suggestion, what I would do, if you’re a seller looking to sell, just make sure you price your home correctly. And because if you overprice it and it sits on the market, people begin to ask, “What’s wrong with this property? Why hasn’t it sold?” So you want to listen to your agent, price your home correctly and be aggressive in price reductions. Have a price reduction strategy in order to get your property sold for the most amount of money, in the least amount of time.
Tucson Home Buyer – FHA and VA Home Buyer
If you’re a buyer out there, I would encourage you a couple things. Just be patient, more inventory is coming. If you’re buying on an FHA or a VA loan with not putting a whole lot of money down, I would encourage you to save up more money. And put at least 20% down so you don’t have mortgage insurance. And you’re not overleveraged when, and if this market pulls backs. Because at the end of the day, not having equity into a deal and, or enough money in savings to weather a storm, home ownership can be a burden. It can be a liability. So I would encourage you just to hang tight. If you don’t have a whole lot of money, save up more. Put 20% down and have enough money in savings.
Six month reserve to weather a storm when, and if this get pulls back. The other thing you can do, and this has served me well, is buying on a 15-year fixed mortgage. So usually takes a little bit more money down so you can get the payment where it needs to be based on your finances and your budget. But the nice thing about a 15, each and every month when you pay your mortgage, a lot more goes to principle. And I would encourage you to look in an amortization schedule, just to see how much interest you’re going to save 30 versus a 15. But the nice thing is if we get a pullback in this market, the amount of money that you’re paying to principal can actually keep up with a declining market.
So those are just some things to think about. This isn’t gloom and doom. The market’s not totally coming unraveled, but just something to be aware of and make a good educated smart decision based on your risk tolerance. Want to get a better feel for what’s going on in the Tucson housing market, each and every month the Tucson Association of Realtors puts out their Tucson housing market report. And what I do is I do a deep dive into what’s going on. So what you can do is you can head on over to Tucson Homes and Lots. And when you do, if you scroll down to the page, you’re going to see the Tucson monthly market update. If you click on that button, up comes my market update for the current month, which does a deep dive into what’s going on. And I highlight the key numbers.
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