One year ago, we shared a blog post about Zillow transitioning their data business over to Bridge Interactive, a real estate data and data solution for real estate brokers and multiple listing services (MLS). You can read that blog here.
Today, we're following up on that blog post one year later to review what has happened to Zillow since its API was deprecated.
What is Zillow?
Founded in 2006, Zillow is a revolutionary real estate marketplace for home buyers and sellers across the United States.
As the leading real estate portal and most visited real estate website in the US, Zillow empowers consumers with robust data and knowledge on the residential home and connects them with the best local professionals to provide an on-demand experience for selling, buying, renting, remodelling, and financing homes with near seamless end-to-end service.
Zillow currently operates a living database of more than 110 million residential homes across the United States—including homes both for sale and for rent as well as homes not currently listed on the market.
Zillow also operates its Zestimate® home valuation model which incorporates public, MLS, and user-submitted data as well as structure information, location, and market trends into their proprietary formula to develop an estimate of a home's market value.
Zillow API's deprecation
In September 2020, Zillow announced it would be transitioning their self-registered API over to Bridge Interactive—a company Zillow acquired back in 2016—in an effort to crack down on the misuse of its data.
Prior to this transition, thousands of users and businesses across the United States relied on Zillow's API to access accurate and up-to-date real estate information including important automated valuation methodology (AVM) absolutely free.
While Bridge Interactive would continue to offer real estate data sets including Zestimates®, it would also require users to sign up for a membership and receive approval from Bridge to use their platform and access the same data that Zillow had been providing for free up until that point.
What has happened since then?
In the wake of Zillow API's deprecation, thousands of users sought alternative platforms for unfettered access to real estate search functionality and property data including Estated's simplified property data API.
In an effort to avoid data disruption and maintain continued access to public record and valuation data, many clients onboarded to Estated's easy-to-use platform in the days and weeks following Zillow's API transition. You can learn more about our property data API here.
More recently, Zillow announced in early November 2021 that it was shuttering Zillow Offers—its on-demand home-buying marketplace—and exiting the iBuying space altogether.
Citing an overestimate of its ability to wrangle 'the unpredictability in forecasting home prices', Zillow, sitting on a stockpile of thousands of homes worth less than what they had paid for them, was forced to lay off 25% of its staff after having lost $420 million in Q3 of 2021.
Prior to its downfall, Zillow was the 2nd largest iBuyer on the market and had been on a voracious house-buying binge for months. But Zillow’s stumble raised questions about its core product built around its value estimates. But to better understand Zillow's demise, you have to first understand exactly is iBuying is.
In the process of iBuying, companies deploy algorithms and automated technologies to evaluate and purchase homes that they can then flip or sell for a profit. For home sellers, iBuying offers the benefit of an expedited selling process while the process can be very lucrative for iBuyer, if done correctly.
iBuyers employ automated valuation models (AVM) or algorithms that use a variety of data to assess whether a property is worth buying and at what price it should be purchased at.
Using AVMs, banks, real estate companies, and other firms began buying up houses en masse to capitalize on America’s white-hot housing market and in the process helped fuel skyrocketing housing prices and, in many cases, made it exceedingly hard for everyday Americans to buy homes.
However, in unpredictable housing markets filled with fluctuation and volatility such as the one we just experienced during the pandemic, these models tend to run into trouble—failing to accurately forecast the future price of inventory due to rapid change in home values.
A large part of the problem is that, for much of its iBuying career, Zillow was operating from a position of loss—losing millions of dollars on acquisitions but hoping to eventually make that money back and then some. In other words, Zillow overpaid for the houses they were buying while also over-projecting the price at which they would be able to sell them in the near future.
Institutional investment in residential real estate
Amidst all of the madness associated with Zillow exiting the iBuyer space, would-be home-buyers are now also being pitted against iBuyers and other institutional investors—like banks and investment firms—who are buying properties, not out of necessity, but for profit.
In particular, iBuyers have taken a keen focus on large metro areas experiencing the most explosive growth in home prices recently and edging out first-time buyers deal after deal, often swooping in with all-cash offers to snatch up properties.
iBuyers are then often turning around and selling said properties, not to new families in need, but to Wall Street firms and institutional investors who then convert them into rental properties where they can collect more profitable monthly rental checks.
Current state of the market
With Zillow out of the iBuyer picture since late 2021, other iBuyers like Opendoor, Offerpad, and Redfin quickly swooped in to take advantage.
However, the number of homeowners who sold to an iBuyer actually declined in the first few months of 2022. iBuyer marketshare as a whole fell to 1.3% of all homes sold during Q1—down from 1.7% the previous quarter.
While a portion of this decline in sales can be attributed to the now defunct Zillow Offers, an overall slowdown in home sales in the broader market due to low inventory and massive affordability issues largely contributed to the iBuyer marketshare dip.
Regardless, it’s been a strong recent stretch for the instant-cash-offer buyer, which has poured resources into expansion for a number of years leading up until this point. And despite the significant setback suffered by overall iBuyer activity as a result of Zillow's demise, the typical sale price of an iBuyer home is 14% higher than the original purchase price.
According to a new report, 1 in 10 US homes sold in the first quarter of 2022 was flipped—or bought and sold within 1 year—the highest level since 2000.
And while demand from prospective buyers remains strong, institutional investors are being partially blamed for the nation’s acute housing shortage—competing for houses with everyday Americans and, in doing so, driving up prices.
The real estate market is expected to cool as mortgage rates rise, home prices soften, and building materials continue to be in tight supply. It will be interesting to see if the percentage of cash purchases and purchases made by iBuyers and institutional investors increases over the next few quarters.
Try Estated's property data API
At Estated, we offer the most accurate and comprehensive data on over 150 million residential and commercial properties nationwide across the United States including public record data and automated valuation methodology (AVM).
If you're looking for easy and affordable access to nationwide property data and real estate information, look no further than Estated.
We offer a superior alternative to Zillow's API. We guarantee it. We're so confident you'll enjoy an enhanced customer experience with us that we're offering your first 100 property searches free!