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Despite a market that has been languishing under high mortgage rates and low inventory for more than a year, Zillow revealed Wednesday that it managed to increase revenue and cut losses in the third quarter of 2023.
In total, the portal giant brought in $496 million in revenue between July and September, according to a newly published Q3 earnings report. That’s up 3 percent compared to the third quarter of 2022 — a time when, notably, rising rates had already taken the wind out of the housing market’s sails.
The report also reveals that the company suffered a net loss of $28 million. That too is an improvement over the third quarter of 2022, when Zillow lost $53 million, and over the prior quarter in 2023, when losses added up to $35 million.
In the report, CEO Rich Barton touted the company’s earnings results, noting Zillow’s growth “despite a residential real estate industry that is down 14 percent from last year.”
“We have strong momentum across the board, and it’s because we’re focused on building a better, more integrated real estate transaction experience for both movers and partners,” Barton said in the report.
Barton also singled out growth in rental revenue and mortgage origination, which were up 34 percent and 88 percent year over year, respectively.
Wednesday’s report further shows that traffic to Zillow’s sites and apps averaged 224 million during the third quarter. Total visits added up to 2.6 billion. Both of those figures are down 5 percent year over year.
Heading into Wednesday’s earnings report, shares in Zillow were trading in the upper $35 range. That was up slightly for the day, but down for the week. Like many other real estate companies, Zillow shares dropped Tuesday after a jury sided with a group of homeseller-plaintiffs who accused major industry players of conspiring to inflate agent commissions and consumer costs. Zillow was not involved in the case, known as Sitzer | Burnett, but the verdict was seen as having significant potential to disrupt real estate’s status quo — something that apparently turned off Wall Street investors.
Zillow shares fluctuated, but ultimately trended down, in after-hours trading Wednesday after the company published its earnings.
Zillow had a market cap of about $8.5 billion when markets closed Wednesday afternoon.
Prior to Wednesday, Zillow had most recently reported earnings in August. The company revealed then that it had earned $506 million in revenue during the second quarter of 2023. That was a slight improvement compared to the $504 million in revenue it earned during the same period one year earlier.
Wednesday’s Q3 earnings also came the same day that Zillow announced its acquisition of customer relationship manager Follow Up Boss. The acquisition builds on the company’s efforts to create a housing “super app” that solves multiple consumers’ real estate needs.
During a call with investors late Wednesday afternoon, Barton reiterated Zillow’s commitment to building a super app that offers consumers a “single digital experience” and ecosystem where they can take care of everything from renting to buying to financing housing.
Also during the call, Barton described Follow Up Boss as “a great product” and said the plan is to grow the brand “even faster.”
“We are investing in great tech solutions that make it easier for people to move, and Follow Up Boss does just that,” he said.
In a shareholder letter Wednesday, Barton, along with Chief Financial Officer Jeremy Hofmann, also weighed in on several antitrust lawsuits, one of which is Sitzer | Burnett. The letter begins with commentary on the cases, and states that “the short version is: We believe Zillow is well-positioned to thrive.”
The letter goes on to say, “We also believe complete disruption to the existence of buyer’s agents is improbable for several reasons,” and that the Sitzer | Burnett case “will likely be tied up in court for years.”
The letter goes on to argue that “the stakes are too high for DIY to become commonplace” among homebuyers. However, the letter then goes on to speculate about “a future scenario where buyer’s agency goes away.” While the letter stresses that the company is not advocating for such a scenario — a position Barton reiterated during the investor call — it also notes that Zillow believes it could thrive if such a reality came to pass.
“We have high confidence that Zillow will remain in a strong position, and potentially even stronger,” the letter continues. “In this scenario, the U.S. market would likely transition to what we observe in several international geographies, where a few large portals offer a ‘pay to play’ digital listings marketplace. In this scenario, we believe Zillow would be an odds-on favorite to become the leading digital listings marketplace, given our brand, traffic, engagement, and unique focus on solving movers’ real pain points with our software-anchored housing super app vision.”
Barton added during the investor call that he believes both sides of a deal should be represented, and argued that dual agency is “harmful enough in the real estate transaction that it’s already been” banned or limited in several states.
Later during the investor call, Zillow leaders were also asked what might happen in a “middle scenario” in which buyers’ agents don’t disappear, but commissions shrink and there are fewer dollars to go around.
Zillow Chief Operating Officer Jeremy Wacksman replied by saying that “we feel really well positioned” for such an outcome. He went on to note that in a world with fewer dollars, the best agents would likely pull further ahead and take more share. Zillow’s “strategy is to partner with the best teams and agents,” Wacksman continued, meaning the company would “become even more valuable for the most productive agents.”
“We feel confident,” Wacksman added, “the partners strategy we have would really grab share here.”
Update: This post was updated after publication with additional information from Zillow’s earnings report, commentary from the company’s investor call, and other context.