Real estate consultant and Shark Tank host Barbara Corcoran discusses difficulties Zillow faced with house-flipping in a consistently unpredictable real estate market, and her thoughts on Rivian and Tesla electric vehicles.
And for more on all that playing out, I want to bring on Barbara Corcoran. Of course, you know her as the Corcoran Group founder and host of "Shark Tank" on ABC. And Barbara, good to be chatting with you again. I mean, a lot of people have been pointing out it's difficult to fathom you can have something like this not working out in one of the hottest real estate markets in a while. But I guess, there are some problems there at Zillow. What do you make of maybe the idea of that many losses stacking up?
But what he did was he went into a space that has nothing to do with finding homes for people. It's buying homes for flipping. And none of the stars aligned. I just-- I remember at the time, thinking, what the heck is he doing that for? It makes no sense at all. And I got it because it was very appealing and tempting at the time to know that you controlled the whole house hunting market, and you had access to all these sellers the moment they wanted to sell. So who wouldn't be tempted to say, hey, let's cash in, guys, and let's buy these houses? I think most of us would have reached the same conclusion.
However, the part that was overlooked was the market is volatile and that he said I think in some press release, he was surprised how surprised the market was volatile. That's real estate. It's always up, down, in between. It never stays the same. And what also happened is he never predicted how difficult it is to renovate a home, close it, and put it back for sale.
And that's the juggernaut in this whole thing that he couldn't get past. And that really has been the problem that he has. Great concept, but for anybody who's renovated a kitchen, you know how hard it is to get a contractor. And in these days, finding help is impossible. So he really bit off a lot more than I'm sure he ever envisioned that he would have to chew. Yeah.
JARED BLIKRE: Barbara, we have a big Fed decision in just over an hour here. And I'm bringing it up because interest rate, they matter to your business, the cost of capital. And we're expecting an announcement of the taper. I'm not going to get into the weeds there, but eventually, we're going to see higher rates here in the US, we think. How does that affect the deal pipeline that you deal with on a day-to-day basis?
BARBARA CORCORAN: You know, I'm really not worried about interest rates. Of course, they're exorbitantly low. And people assume it's American right now. Like, they breathe and they get low interest rates, right? But I don't think the Fed has made any announcements to do anything abruptly. I think they're going to increase the rates little by little over the next few years or so, they say. I don't know why I would mistrust that. But the market can certainly absorb it.
Will it take down the market or make it pause? No, it will make house owning expensive, but what the buyers have proven over the last year, at least a year and a half, is they're willing to pay more and pay more. And so the interest will be added to it. But as long as it's not a jerk up in interest prices, the consumer is more than happy to absorb that right now. That's how strong the market is. I don't think it will have a big effect.
ZACK GUZMAN: Yeah, Barbara--
BARBARA CORCORAN: In fact-- if I might add one thing, immediately, the effect it will help the markets. People will think the good old days are over. People will really jump and overpay for the next house.
ZACK GUZMAN: It could be a bit of a boost here maybe to unwind some of the problems at Zillow, too, because I want to get back to that. Because, you know, some people are saying that this could be a buying opportunity. And we've seen some buyers, I think Cathie Wood swooping in here to buy on this dip, as we see shares off more than 20%. And it sounds like you're kind of confident still in the platform itself. It sounds like this was just a bit of a misstep in terms of rolling this out and really leaning into Zillow Offers a bit more than the company may should have. So I mean, would you be still confident in what Zillow can do here in terms of turning this around and getting out of it?
BARBARA CORCORAN: You know what? You're reading my mind. I was thinking about that this morning, thinking, hey, is this a great time to jump something that's discounted, I think it's close to 30%, since six months ago? What an opportunity when someone controls the market. I mean, who could argue against that? But it depends on the cost of carrying those houses, which they planned to sell to institutional investors. And it really depends upon how deep that inventory really is, how much cash is being drained.
And I don't think we have those numbers yet. So it's a question of, is the problem over now? They're not going to do it anymore? What about the old problem, and what's it going to cost the business to really unwind that? So I'm not sure they're out of the woods I'd be too hesitant myself. Sorry if I look like a scaredy cat, but I am.
JARED BLIKRE: That's fine. You got to protect your money. But just sticking with kind of the theme of disruption within the real estate industry, what other deals are you looking at or what are their concepts that kind of caught your eye recently that we might not have seen before?
BARBARA CORCORAN: I don't see anything in the real estate space. The last big disruptor was Rich Burton because he had the foresight to see that buyers wanted more control of how they shop for real estate. He saw the same challenge in the travel space, and he capitalized on it. I haven't seen anyone in the space-- I mean, I guess you could count Opendoor, who buys twice as many houses as Zillow. And I'm sure that had a lot to do with fueling those guys over there. Whoa, look what they're doing. Let's jump in there. I could almost be at that boardroom, picturing that thing going down, right?
But Opendoor buys houses, flips houses. And so far, they've been in it twice as long as Zillow, seven years, I think-- close to seven years. But even there, confidence in iBuying is going to ripple through to them a little bit, too, I think. So you could say Opendoor's a disruptor, buying homes everywhere and flipping them.
But you can't forget about the market. This is not a good flipping market. This is a buyer's-- a seller's market, where every home is dear. And how do you really make money on that spread? It's tough, not to even account for, how do you get the workers to do the renovation? I don't know what's going on with Opendoor, but it'll be interesting to see how this really plays out.
ZACK GUZMAN: Yeah, it's tough to find a lot of workers out there in a lot of different sectors. But I'm reminded of the last time we had John, Barbara, and thinking back to kind of some of those calls. That's why I wanted to ask you about Zillow, is because you've been pretty spot on, on a few things. I remember asking you about Nikola and Trevor Milton and some of the issues there. Of course, you love Elon Musk and what he's doing at Tesla.
We are going to be seeing Rivian come public, the Amazon-backed electric carmaker there, at a valuation above $60 billion if all goes well. But they're going to be taking on Tesla. And they're one of your favorites in what they're doing in the EV space. I'm just curious to get your take maybe on how you're seeing the battle shape up there as we have Rivian coming out at a valuation that's going to be more than Honda and Ford, potentially, as they go up against Tesla.
BARBARA CORCORAN: Yeah, hey, that's a great start, isn't it? They come out of the gate. Everybody's believing them. That's the easy part of selling. The hard part of selling is keep the sale going. And what you need to keep the sale going is a phenomenal leader. OK, Tesla, what's great about him is he's a phenomenal leader. Everybody gets inspired by him. He's almost become a business god.
That's hard to compete with. It's not only the magic of salesmanship, but it's the guts that go along with it that the guy has produced. So who knows about the other? I would be the last person to guess so early. But it will be a battle. Do you think that guy is going to move over so fast for a competitor? Mm-mm, no way. I'm still getting in my car and drive it away. Yep, I am.
ZACK GUZMAN: Well, Barbara Corcoran there weighing in on everything here for us. We threw a lot at you. Appreciate you coming back on to chat and give us your insights. The Corocoran Group founder and host of "Shark Tank" on ABC, Barbara Corcoran, thanks again.