The dog days of iBuying [JDC/Stone via Getty Images]
Controversy erupted in New Zealand after the country’s “bird of the year” competition was won by a bat. Who could deny that face?
Stocks notched their sixth-straight day of gains after weekly jobless claims came in at the lowest level since the pandemic began — an encouraging sign for the labor market.
Foreclosed… Zillow’s stock plunged this week after the company reported a $330M quarterly loss and said it planned to end its house-flipping business, Zillow Offers. Zillow’s OG biz links home sellers to buyers for a fee. But in 2019, Big Z branched into iBuying — aka making instant cash offers on houses based on "Zestimates" and cutting out agents in the middle. Zillow’s goal: Fix up properties and resell them at a profit. Zillow’s iBuying revenues soared to $1.2B last quarter, but profits tanked:
iBlunder… Since Zillow already calculated Zestimates, iBuying seemed like a natural expansion two years ago. But it soon discovered the market wasn’t that simple: Home prices soared during the pandemic, and labor and supply shortages raised the cost of repairs.
Look before you pivot… Companies need more than a market opportunity to pull off new business lines — they need the right infrastructure too. Despite Zillow’s failure, others are still iBuying: Last month, tech-focused rivals Opendoor (which reports earnings next week) and Redfin said they planned to boost iBuying. High demand for real estate is expected to continue: home prices jumped 15% this summer from a year ago, after a five-year decline.
I've got the Powell... Probably Fed Chairman Jerome Powell's morning pump-up song. Yesterday the Fed finally approved plans to start scaling back its economy-boosting bond-buying program. The Fed will start this month, buying $15B less in bonds — and will end bond purchases altogether by June. ICYMI: The Fed has been dropping a whopping $120B a month to buy Treasury and mortgage bonds, adding trillions to the money supply since the pandemic started. Quick refresher:
Feeling #flated... The Fed has been monitoring inflation, unemployment, and recovery — and decided the time was ripe to dial back economic medicine. While the Fed still expects inflation to be temporary, prices have been surging longer (and higher) than anticipated. Blame shortages, supply-chain headaches, and soaring consumer demand. Twelve-month inflation is at its highest level in decades, and oil prices have jumped 42% from last year. BTW: Fed officials don’t want to raise interest rates (by selling bonds) until they've fully ended bond purchases.
Wall Street isn't sweating... Stocks jumped yesterday after the Fed’s announcement, and have been cruising around records for weeks. Investors aren’t surprised: The Fed has been signaling it would taper bond purchases for nearly the whole year. Wall Street also sees the move as a sign that the economy is strong and ready for less hand-holding. The unemployment rate fell to 4.8% in September, just 1.3 percentage points higher than the pre-pandemic rate. While the US's growth majorly slowed last quarter, the economy is expected to grow 5.6% this year as recovery continues.
Authors of this Snacks own shares of: Square, Moderna, Uber, Twitter, and CVS