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Zillow Group (ZG) Halts Home Buying Amid Coronavirus Crisis

Zacks Equity Research
·4-min read

Zillow Group, Inc. ZG recently announced that it will temporarily stop home buying for Zillow Offers in all of its markets due to the global coronavirus pandemic. The company has stated that operations for Zillow Offers will resume once the crisis has been dealt with.

However, the company isn’t stopping the sale of homes through Zillow Offers, but any plans to expand in additional markets will be temporarily suspended.

The move to halt the purchase of homes was made with the aim of reducing spending in this time of crisis and to ensure the safety and health of all stakeholders in the company.

Zillow Group, Inc. Price and Consensus

Zillow Group, Inc. Price and Consensus
Zillow Group, Inc. Price and Consensus

Zillow Group, Inc. price-consensus-chart | Zillow Group, Inc. Quote

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Impact of COVID-19 on Real Estate Market

The real estate market is expected to take a hit as the broader economy is affected by the novel coronavirus pandemic. Demand for homes is likely to be impacted as more people prioritize spending on essentials.

Moreover, rising mortgage rates in the United States remain a headwind and could potentially discourage American buyers from investing in a new home.
 
Further, weak demand across several other industries could lead to a loss of jobs, which will take more potential buyers out of the market.

Markedly, Zillow’s competitor in online real estate marketplace, Redfin RDFN has also announced its decision to pause home buying in response to the uncertainty in the housing market caused by the global pandemic.

Home Buying Pause to Dent Expansion Plans

Zilliow Group’s decision to temporarily suspend the purchase of homes is expected to impact its expansion strategy. The company has been expanding in additional markets, and had a presence in 23 markets as of fourth-quarter 2019.

Moreover, Zillow recently established a presence in Cincinnati with the launch of Zillow Offers in the city, allowing sellers to directly sell their properties to the company, taking the total markets to 24. The pause in home buying will likely put a cap on Zillow’s growth.

However, the company is still witnessing robust demand for homes, with its home inventory balance being 1860 homes as of Mar 19, 2020, marking a decline of 31.3% from 2707 homes at the end of 2019.

Additionally, the company had cash & cash equivalents and short-term investments of $2.42 billion as of Dec 31, 2019. The company’s strong cash reserves make it well positioned to survive the global pandemic and make a comeback over the long haul.

Further, platform capabilities like proprietary Zillow 3D Home technology to enable virtual home tours for Zillow-owned homes and virtual consultations from the company’s broker and Premier Agents hold promise as people opt for social distancing amid the outbreak.

Zacks Rank & Other Stocks to Consider

Currently, Zillow Group carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader technology sector include Microsoft Corporation MSFT and Garmin Ltd. GRMN. Both stocks sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Microsoft and Garmin is currently pegged at 13.2% and 7.4%, respectively.

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Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
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