Zillow CEO on Housing Market, Rentals and Fed Rate Cuts

Summary

In this interview, Zillow's CEO discusses the company's strategic shift from an advertising platform to a transaction-focused housing super app, aiming to capture 6% of the real estate market by 2025. Despite a 72% drop in stock price since its peak in 2021, the CEO is optimistic about growth, highlighting Q2's 13% year-over-year revenue increase. The conversation also touches on challenges in the housing market, including high prices and mortgage rates, and Zillow's efforts to enhance digital services for homebuyers and renters. The CEO anticipates that even with interest rate reductions, market dynamics like supply and demand will keep home prices elevated.

Takeaways

• 📈 Zillow is transitioning from an advertising company to a transaction-focused platform, aiming to help people buy, rent, and sell homes.
• 🏆 The company has outperformed the residential real estate industry for the last eight quarters and reported a 13% year-over-year growth in Q2.
• 🚀 Zillow's goal is to capture 6% of the transaction market by the end of 2025, leveraging its strong audience share.
• 📉 Despite the company's performance, its stock price has dropped about 72% from its all-time high in February 2021.
• 🏠 The housing market faces challenges with high prices, low inventory, and high mortgage rates, impacting first-time homebuyers.
• 🌐 Zillow is focusing on digital services to facilitate home buying and selling, including online tours and digital pre-approvals.
• 🔍 Industry changes, such as new rules around commissions, are seen as evolutionary and are expected to empower buyers and sellers.
• 💼 Zillow has pioneered an agreement for buyers, leading the industry in offering a touring agreement to educate and empower consumers.
• 💹 The rental market is booming, with Zillow's rentals business growing rapidly, now accounting for a fifth of the company's revenue.
• 📉 Interest rate reductions may have a limited impact on the housing market, with supply and demand imbalances needing more significant adjustments.
• 🏢 Policies from the Biden administration, including those proposed by Kamala Harris, aim to increase housing supply but have faced mixed reactions from real estate executives.

Q & A

Why is Zillow making changes now?

Zillow is making changes now because the business is performing well, and they are excited about the strategy ahead and future growth. They have outperformed the residential real estate industry for the last eight quarters and reported 13% year-over-year growth in Q2, expecting similar growth in Q3.

What was Zillow's strategy shift a few years ago?

Zillow's strategy shift involved moving from being an advertising company to one that focuses more on helping people buy, rent, and sell properties with Zillow and its partners.

What is Zillow's goal in terms of transaction share by the end of 2025?

Zillow's goal is to grow its share of transactions to 6% by the end of 2025.

How does Zillow plan to grow its share of transactions?

Zillow aims to convert more of its audience, who are currently using Zillow for dreaming and shopping, into actual users of its services for buying, selling, and renting homes.

What is the current state of Zillow's stock price performance?

The script mentions that Zillow's stock price is down about 72% from its all-time high reached in February 2021, despite the company's strong earnings.

What challenges does the housing market face according to the transcript?

The housing market faces challenges such as high housing prices, relatively high mortgage rates, and a low supply of homes, especially impacting first-time homebuyers.

How does Zillow address the challenges in the housing market?

Zillow is focusing on building services that facilitate digital transactions and making the home buying and selling process easier for consumers, such as online tours and pre-approvals.

What changes in the industry does Zillow anticipate due to new rules around commissions?

Zillow sees the changes in the industry as evolutionary, not revolutionary, and believes these changes will help buyers and sellers become more educated about the process and costs involved.

How does Zillow's rental market business perform?

Zillow's rental market business is booming, with a 29% increase in revenue last quarter, and it represents the largest amount of supply for renters, attracting a large audience and advertisers.

What is the impact of interest rate reductions on the housing market according to Zillow?

While interest rate reductions help, it will take more than one or two rate cuts to significantly impact the market due to the need for more inventory and sellers to trade up from their current lower mortgages.

What is Zillow's stance on the Biden administration's policies towards the housing market?

Zillow focuses on consumer education and supporting policies that increase inventory and affordability, rather than taking a specific stance on individual policies like rent caps.