Zillow’s Home-Flipping Bonds Draw Wall Street Deeper Into Housing

Zillow Group Inc. is best known for the addictive real estate listings that keep people browsing the internet all night, checking out interior shots of homes for sale or the estimated prices of their own houses or the ones down the street. But Chief Executive Officer Rich Barton has staked his company’s future on a bet that its software can also ease a critical pain point for U.S. homeowners: the time it takes to sell. In recent years, Zillow has essentially dived into the house-flipping business, offering to quickly take properties off sellers’ hands. And in the process it’s helping pull Wall Street even deeper into the $2 trillion U.S. housing market.

In August, Zillow raised $450 million from a bond backed by homes it’s bought but not yet sold. The offering, led by Credit Suisse Group AG, was modeled on the loan facilities that car dealerships use to finance floor models. The novelty of using that structure for houses didn’t scare off investors hungry for a new way to bet on the hottest housing market on record. The offering was over subscribed and Zillow, which declined to comment on its bond market activities, is now in the process of selling another $700 million in bonds.