An anonymous reader quotes a report from Bloomberg: Faced with the fastest-rising real estate prices in U.S. history, Zillow tweaked the algorithms that power its home-flipping operation to make higher offers. It ended up with so many winning bids that it had to stop making new offers on properties. Now, after buying more homes in the third quarter than it ever has before, the company is working through a backlog of houses that need to be fixed up and sold while facing an unpleasant reality: Slowing price appreciation means it will sell many homes at a loss.

Zillow put a record number of homes on the market in September, listing properties at the lowest markups since November 2018, according to research from YipitData. It also cut prices on nearly half of its U.S. listings in the third quarter, according to Yipit, signaling that its inventory was commanding prices lower than it expected. The shift has been on display in places such as Atlanta and Phoenix, two markets where home prices have been surging. Zillow’s roughly 250 active listings in Phoenix are currently priced at 6% less, on average, than what the company paid for the homes. That amounts to a $29,000 discount on the typical property, according to data compiled by Mike DelPrete, a real estate tech strategist and scholar-in-residence at the University of Colorado Boulder. “Every key metric I’ve seen from Zillow over the past few months just doesn’t make sense,” DelPrete said. “It’s like it’s making decisions two to three months too late relative to the market.”

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Source: Slashdot – Zillow Home-Flipping Algorithm Outbid Buyers, Now Faces Selling Houses At a Loss