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(Zillow Photo)
Housing market headwinds remain strong. But Zillow Group seems to be weathering the storm.
Shares of the Seattle real estate giant were up more than 18% in early trading Thursday, following the company’s second quarter earnings release and the news that co-founder Rich Barton is handing the CEO reins to longtime executive Jeremy Wacksman.
Zillow reported second-quarter revenue of $572 million, up 13%. The company said it was the eighth consecutive quarter that its results have outperformed the residential real estate industry. Zillow raised its third quarter outlook for both revenue and profits.
The company’s net loss for the second quarter was $17 million on a GAAP basis, an improvement over the $35 million net loss posted in the same quarter a year ago.
The rising revenue and trimming losses come despite a lack of buying activity within the housing market, even with mortgage rates falling in recent months.
“We’re clearly well on our way to double-digit revenue growth in 2024 and margin expansion, and it’s been a rough housing market,” Zillow CFO Jeremy Hofmann told analysts on Wednesday. “So, we sit there and feel like the business is really well positioned despite all that.”
Pending home sales dropped 5.7% year-over-year last week, according to Redfin data, the biggest decline in nine months. Mortgage purchase applications are down 14%. Inventory is still 30% below pre-pandemic levels, and affordability is near a 40-year low, Redfin said in its earnings release this week.
Zillow’s residential business, which includes its Premier Agent arm that helps real estate agents connect with homebuyers, still makes up a majority of revenue. That segment was up 8% to $409 million in the second quarter.
Zillow’s rentals and mortgage businesses are showing stronger growth.
Rentals revenue was up 28%, at $117 million, and there are now 44,000 multifamily properties on Zillow, up 38% from a year ago.
Revenue from Zillow’s mortgage business was up 42% at $34 million, while purchase loan origination volume was up 125%.
Since the company ditched its ambitious “iBuying” endeavor more than two years ago, Zillow has been repositioning itself as a housing “Super App” that integrates services for home buying, selling, and renting, effectively digitizing key parts of the real estate process, and helping people move.
Speaking on the GeekWire Podcast this week, Wacksman said “we’re excited to now continue to grow and continue to deliver against what we’ve been doing, which is the result of the last couple years of hard work during what’s been a really challenging macro-environment.”
Wacksman told analysts Wednesday that Zillow remains focused on investing in technology.
“We continue to believe our most important investments are in tech innovations that improve the customer experience, which has helped us earn and maintain our strong brand position and massive engaged audience of movers,” he said.
Another macro trend to watch is the upcoming changes from the National Association of Realtors settlement that go into effect later this year, which will change commissions and how buyers work with real estate agents.
Hofmann said Wednesday that Zillow believes it will be the “the outsized beneficiaries of these changes coming in the industry.”
“We have the most customers, we work with the best partners, we provide the most technology, and we expect our [Premier Agents] will deliver and get paid because they provide great service and we think will be sharetakers in any future evolution or dispersion of the industry,” he said.
On the call with analysts, Barton said it’s “incredibly impressive how well we are executing as a company” despite the “stormy weather” in the larger real estate market.
“There is a ton of clean water in front of the company, lots of opportunity,” said Barton, who will shift to a new role as co-executive chair. “Maybe the wind will change direction and come behind us one of these days, but we certainly don’t need it. But I’m sure it’ll happen at some point.”
Related: Zillow Group has a new CEO: Rich Barton hands reins to longtime exec Jeremy Wacksman
