Zillow gets hammered over strategic shake-up

A change in strategy at online real estate company Zillow sent the stock plunging on Wednesday.

Zillow is exiting the business of flipping homes - a market it was expected to upend when it entered the segment 3 years ago.

The company says the real estate market has become so volatile in recent months that it has made home prices quite difficult to forecast.

Zillow went on to explain the decision this way: Home-flipping has just become too risky, resulting in too much earnings and balance-sheet volatility, adding "our aim was to become a market maker, not a market risk taker."

The original idea for the unit, called Zillow Offers, was to use the reams of data it had to make a quick buck - by buying homes, making light repairs, and then quickly putting them back on the market...But rapid price fluctuations and a labor shortage that slowed down repairs and resales disrupted that strategy.

Zillow says it will go back to just focusing on connecting buyers and sellers.

One analyst called this a major strategic shift that raises questions about the company's future direction.

Shares of Zillow plunged nearly 20 percent in mid-day Wednesday trading.

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