Why Zillow Group, Inc. (Z) stock is falling in the premarket today?

Shares of the Zillow Group, Inc. (Z) stock were falling in the pre-market following the announcement of a halt in home purchases by the stock. Z stock price saw a decline of 7.12% to drop at $88.21 a share at the time of this writing. The stock was green in the previous trade and went up by 0.57% at closing. Let’s deep dive to explore more about this stock.

Zillow Group, Inc., is operating as a digital real estate company that operates mainly through three sections: Homes; Internet, Media & Technology; and Mortgages. Zillow stock has many mobile applications and websites that provide real estate transactions and other related services. The company was founded in 2004 and its headquarters are in Seattle, Washington.

What’s Happening?

Zillow Group Inc recently reported that it will not further buy U.S. homes for now. The officials of the Z stock said that company is beyond its operational capacity in its Zillow Offers business and will not entertain the further contracts related to purchasing of homes at this time. This news resulted in the decline in the per-share price of Z stock in today’s pre-market. The company is in the process of buying a home from sellers who are already under contract.

Halting the home purchases will allow the Z stock to work through its backlog. This is not the first time as Zillow stock previously halted the purchase in the initial days of the Coronavirus pandemic. Z stock then again started the purchases when the government lifted the early economic lockdowns.

Zillow Offers by Z stock:

In 2018, Z stock launched the new business known as Zillow offers, in which it joined a small group of tech-enabled home-flippers known as iBuyers. Under this business, Z stock invites the homeowners to request an offer on their house and generate a price by using algorithms.  If the homeowner accepts, the Z stock then purchases the home and again puts it in the market after light repairs.

Acquisition of ShowingTime by Z stock:

At the beginning of this month, Z stock announced the closing of the acquisition of ShowingTime, an online software company that schedules home showings. Z stock previously in February 2021 signed the definitive agreement to acquire ShowingTime for $500 million. Z stock will continue to invest in the ShowingTime in order to improve its functionality.

Wrap Up:

The announcement of taking a break in home purchases by the Z stock has negatively affected the per-share price of this stock. The company is planning to refer potential customers to traditional real estate agents for now. In a nutshell, investors should know the company’s fundamentals before making any decision.