Zillow: It Is Finally Time To Close Short Position

Summary

• I have been bearish on Zillow since the end of 2020 due to its high valuation and excessive financial exposure to property prices and sales trends.
• The recent sharp rise in mortgage rates has caused home sales to slow, and given rates may continue to rise, the property market may be facing a prolonged slowdown.
• Now that Zillow has sold its risky home-flipping assets, its direct exposure to the property market is drastically lower than it was in the past.
• If Zillow manages to grow as expected, then it is likely trading near its fair value today, but material risk factors remain.

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The past two years have seen immense volatility in the U.S housing market. As mortgage rates collapsed and people made lifestyle changes, home sales skyrocketed. Unsurprisingly, this led to a surge in property prices, new home development, and

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.