Rising home prices and conservative borrowing have today's homeowners sitting on a record amount of potential cash. Today's mortgage holders saw their home equity increase by...Real Estateread more
SoftBank wants to push Neumann out of the CEO role ahead of the IPO.Technologyread more
The Mac Pro is the only major Apple computer to be assembled in the United States. Most of Apple's products, including the iPhone, are assembled in China and are facing tariff...Technologyread more
CNBC's Jim Cramer calls on investors to be wary of the slew of the hyped-up unicorn companies going public this year and encourages the focus to be on deliverable earnings.Investingread more
The UK's Civil Aviation Authority said Thomas Cook had now ceased trading and the regulator would work with the government to bring the more than 150,000 British customers...Europe Marketsread more
Markets have been betting Trump's Twitter attacks on the Fed will move rates. Among other things, Trump has called Chairman Jerome Powell "clueless" and Fed officials as a...The Fedread more
Trump's call with the foreign leader is reportedly the subject of a whistleblower's complaint that has spurred new accusations of wrongdoing from Democrats.Politicsread more
Harvard economist N. Gregory Mankiw says ultra-wealthy couples could split their fortunes in half through divorce and avoid paying a wealth tax proposed by presidential...Wealthread more
The U.S. Securities and Exchange Commission settled charges Monday against former Nissan CEO Carlos Ghosn and its former director Greg Kelly on Monday over false financial...Autosread more
An annual survey by Piper Jaffray finds iPhone that users willing to upgrade to newly released models declined from last year.Technologyread more
These are the stocks posting the largest moves midday.Market Insiderread more
Zillow shares plunged 9 percent on Friday after the online real estate database company announced it will begin buying and selling homes, a capital-intensive endeavor.
With Zillow's new program, announced on Thursday, home sellers in the test markets of Phoenix and Las Vegas will be able to use Zillow's platform to compare offers from potential buyers — and Zillow. When Zillow purchases a home, it will aim to quickly flip the home, making updates and repairs and listing it as soon as possible. An agent will represent Zillow in each transaction.
"We're entering that market and think we have huge advantages because we have access to the huge audience of sellers and buyers," Zillow CEO Spencer Rascoff said on CNBC's "Squawk Alley." "After testing for a year in a marketplace model, we're ready to be an investor in our own marketplace."
But investors are less enthusiastic. Flipping homes, a model that's being utilized by start-up Opendoor, is very different than operating an internet marketplace. It carries additional risk associated with buying and selling homes and requires a hefty investment in operations. And it also potentially puts Zillow in direct competition with the realtors on its platform.
Zillow sank $5, or 9.3 percent, to $48.77 as of mid-day on Friday, knocking more than $900 million off its stock market value.
"This is a business model that to date has been all advertising revenue driven, which is high gross margin," said Mark Mahaney, an analyst at RBC Capital Markets who has a "buy" rating on Zillow. "And now there's this pivot into this other category which has balance sheet risk and it has much lower margins and is in an uncertain housing environment," Mahaney said on CNBC's "Squawk on the Street."
In May 2017, Zillow announced the launch of Instant Offers, which enables home sellers in the Las Vegas and Orlando test markets to get cash offers from potential investors on Zillow's platform. The company said homeowners prefer the process, and that most of them who requested an Instant Offer ended up selling their home with an agent.
"Home sellers welcome a hassle-free experience selling your home without decluttering your garage or taking the kids out of the house," Rascoff said.
Rascoff said the company will take on collateralized debt to purchase the homes, and hopes to have between 300 and 1,000 homes held for sale by year's end. He called the move "industry friendly," benefiting buyers, investors and agents. He also said it could help stimulate the real estate market and open up new inventory for prospective buyers.
"There are people that are basically stuck in their home that would love to go buy another home, but can't sell," Rascoff said. "This could provide the ability to unstick people from their homes."
Mahaney said that it will help Zillow test how much the real estate market is turning.
"This is an interesting experiment on the company's part," Mahaney said. "They've reached the point of scale with both real estate agents and with consumers. There are data points in the market that suggest this way of buying and selling homes is really starting to gain traction."
The program will start this year in Phoenix and Las Vegas. Zillow didn't say when it will expand into other markets.