When the labor market tightened and supply chain bottlenecks sent costs for supplies soaring, Zillow's already thin margins melted away.

After purchasing a home, Zillow would invest in repairs and maintenance and, even when factoring in all those costs, try to sell at a profit. The iBuying process allows homeowners to sell on Zillow instantly for cash rather than going through a broker and dealing with an extended bidding and closing process. Zillow was able to make money selling homes at high prices relative to where it purchased them, but at the same time the company was ramping up its buying. Prices ran up, setting records in many markets around the country. The housing market dried up for a brief time early last year, and then skyrocketed as the closing of offices and slowdown in business activity in cities led people to move to locations they deemed more desirable.

In particular, the pandemic threw Zillow's predictive abilities into disarray. 'We've been unable to accurately forecast future home prices at different times in both directions by much more than we modeled as possible.'

'We determined that further scaling up Zillow Offers is too risky, too volatile to our earnings and operations, too low of a return on equity opportunity and too narrow in its ability to serve our customers,' Barton said. What started off as a boon turned into a money pit. Zillow entered the business in late 2019 with hopes of using its popular marketplace site and massive data sets to profit from buying and selling homes in high volumes. CEO Rich Barton told analysts on the earnings call that Zillow was shuttering its iBuying operations, where it competes with Opendoor, in a move that will result in cutting 25% of its workforce.

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