Zillow Group Inc ZG has decided to close its home-flipping operation after a tweak to the company's algorithm led it to overpay for houses just as the interest in the U.S. housing market began to wane, Bloomberg reported Tuesday.
What Happened: Seattle-based real estate company Zillow decided to ax its home-flipping business after sustaining major losses. The company reported an operating loss of over $380 million.
The 15-year-old firm also plans to lay off 25% of its workforce and is set to write down close to $569 million in assets, as per Bloomberg.
See Also: 2 Reasons Zillow Selling 7,000 Houses Is 'A Clear Negative' For Investors
"Fundamentally, we have been unable to predict future pricing of homes to a level of accuracy that makes this a makes a safe business to be in," said Rich Barton, the company's CEO, on an earnings call, as per Bloomberg.
"We believe there are better, broader, less risky, more brand-aligned ways of enabling all of our customers who want to move. We now plan to focus our offerings on asset- and capital-light solutions."
The company now aims to focus on its initial plan of connecting homebuyers to agents.
Price Action: Zillow stock closed 11.5% lower on Tuesday at $85.48 and dipped another 11.55% in the after-hours trading.
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