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What Went Wrong With Zillow? A Real Estate Algorithm Derailed Its Big Bet

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Single-family homes in Del Mar, CA.

Computer-driven analysis has become mainstream in stock and bond markets, but buying and selling single-family homes has proved a trickier proposition.

Credit: Bing Guan/Bloomberg News

Real estate firm Zillow Group had looked to its digital home-flipping business Zillow Offers to lead its growth in the future, but the company has acknowledged that will not happen because the unit’s underlying algorithm could not reliably predict housing prices.

That failure, the company said, was rooted in the technology's inability to understand the real estate market and predict housing prices, which are shaped by fluctuating factors like aesthetics and regional factors that influence buyers' decisions.

Zillow CEO Richard Barton admitted to shareholders that the algorithm could not accurately predict swings in home prices, and the company is closing Zillow Offers.

From The Wall Street Journal
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