Opendoor co-founder Keith Rabois and “The Big Short” investor Steve Eisman predicted the end of Zillow Offers as soon as it began. What did they see that others didn’t?

Since Zillow Offers launched more than three years ago, industry experts have been going toe-to-toe, theorizing the overwhelming success or eventual demise of the portal giant’s foray into the iBuying space amid a wild market shift. Although some of those theorists are indeed licking their wounds today, there are others — namely venture capitalists Keith Rabois and Steve Eisman — who are likely indulging in the pleasure of saying, “I told you so.”

Keith Rabois | Credit: LinkedIn

“If they buy homes at the Zestimate price, they will be bankrupt quickly,” Rabois tweeted in April 2018 after Zillow unveiled its plans to enter the iBuying space. “If they don’t, isn’t the Zestimate fraudulent?”

The Opendoor co-founder’s tweet flew under the radar until Zillow CEO Rich Barton revealed Zillow Offers would be no more, as the company struggled to deliver on its bread-and-butter promise of accurately forecasting market trends.

“Our observed error rate has been far more volatile than we thought possible,” Barton said during the company’s third-quarter earnings call Tuesday evening. “Fundamentally, we have been unable to predict future pricing of homes to a level of accuracy that makes this a safe business to be in.”

A majority of the engagement on Rabois’ 2018 tweet has come over the past two weeks as the public watched Zillow Offers crumble in real-time and scrounged for every piece of insight they could find about Zillow and where they went wrong.

“This [tweet] aged well,” retweeted real estate broker and investing expert @AlexisMcGee retweeted on Tuesday.

“This was, and is, correct,” added The Motely Fool Live host @BillMann in a separate retweet. “And in a high capital intensity business, Zillow was in effect betting the farm on iBuying.”

“Exactly,” former real estate agent and software engineer @GeraldVillani continued on Wednesday. “If they buy low and sell at market, they screwed the seller. If they buy at market and flip it at market, they lose money. If they wait, they have holding costs and are praying for values [to go] up faster than inflation. I questioned it from the start.”

Rabois has been relatively quiet over the past three days, save for a response about what Zillow Offers end means for other players in the iBuyer space, namely his brainchild, Opendoor.

“Selling or shorting Opendoor due to Zillow’s flaws is akin to shorting Google due to Yahoo’s inability to monetize search well or return long-tail queries properly,” Rabois said in response to fellow co-founder Justin Ross’s tweet addressing concerns about the company’s stock market trajectory in the coming weeks.

Another early detractor Steve Eisman — who was the basis for Steve Carell’s character in “The Big Short” — isn’t on Twitter; however, users on the site have been sharing years-old news appearances of the investor predicting Zillow Offers doom.

“Two years ago, Steve Eisman announced he was shorting Zillow,” wrote user @Ssenecca. “His thesis was simple: [The] housing market is not just one market, it is thousands of local markets, very different and tough to crack. Another [total addressable market] fallacy.”

During a months-long press round in 2019, just as Zillow pushed fast forward on its Zillow Offers expansion efforts, Eisman sounded the alarm about Zillow’s foray into the iBuying space and why it was the wrong move.

Steve Eisman | Credit: NB Group

“What I find ironic about this is that people like platform companies because they generate a lot of revenue, they generate a lot of free cash flow, they’re not cyclical and they have margin expansion,” Eisman told Bloomberg Asia in May 2019. “Now Zillow is getting into a capital intensive, cyclical, low-margin business, and in a recession, they’ll get killed.”

“Every financial services company that I know of would kill to be thought of, even for a nanosecond, as an internet platform company,” he added. “And here we have an internet platform company trying to become a financial service.”

However, “The Big Short” investor, who predicted the collapse of the housing market in 2008, changed his tune in late 2020 as the coronavirus pandemic pushed buyer demand to record highs and forced consumers to embrace a digital transaction experience.

“I felt that because of COVID, more and more people would be searching for homes online and Zillow’s business of buying homes would be a lot better as some people would just want to sell their homes without having individuals traipsing through their homes looking through it,” he said of his decision to purchase Zillow stock in April 2020 during an appearance on the Tangent podcast. “It’s done better than my wildest dreams, and I still hold it, but how well they’ll do… [it’s unknown].”

“It’s now viewed as a major disruptor in the real estate industry and I don’t think that’s going to change,” he added.

Eisman, like Rabois, has been quiet on social media, but industry insiders and enthusiasts are waiting for the pair to provide insight on what may be coming next for Zillow.

“Steve Eisman deserves credit for this call,” tweeted John Rotonti, founder of The Motely Fool. “@BeckyQuick can you please consider getting Steve Eisman back on CNBC to discuss the news that Zillow is completely shutting down its iBuying business?”

Email Marian McPherson

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Hear from Realogy, Pacaso, SERHANT., Spotify, Redfin, Douglas Elliman, and 100+ more leaders at ICNY.Register now×
Limited time: Get 30 days of Inman Select for $5.SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription