This post has been republished with permission from Mike DelPrete.
Like much of the industry, Zillow’s mortgage operation, which includes Zillow Home Loans, has seen a steep decline in revenue and continues to burn cash.
Why it matters: Attaching a mortgage is a key component of Zillow’s “Housing Super App” and future growth strategy; the longer it falters, the less likely Zillow is to achieve its long-term aspirations.
- Zillow’s 2025 goal includes an additional $800 million in revenue from adjacent services — primarily mortgages.
Dig deeper: Zillow’s mortgage segment, which includes its mortgage lead gen marketplace and in-house lender Zillow Home Loans, is consistently unprofitable.
- In the first half of 2022, Zillow spent $1.85 for every $1 in mortgage revenue.
- That’s a $65 million loss in the first half of 2022 and a combined loss of $180 million since 2017.
Context: The entire mortgage industry is getting hammered this year, with dropping leads, loan volumes and revenue.
- But even before the recent slowdown, Zillow Home Loans struggled with attach rates and consistent unprofitability during boom years.
- According to this Mortgage Bankers Association study, 96 percent of mortgage firms were profitable in 2021; Zillow Home Loans was not.
The bottom line: Zillow Home Loans’ path to profitability remains long, arduous, expensive and uncertain.
- Ultimately, attaching a mortgage makes a great slide on investor presentations, but it’s very hard in real life.
- Go deeper: Check out “Ecosystem Disruption in Mortgage Looking Exceedingly Traditional.”
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Mike DelPrete is a strategic adviser and global expert in real estate tech, including Zavvie, an iBuyer offer aggregator. Connect with him on LinkedIn.