Exactly one year after Zillow saw its enormous investment in iBuying implode, the real estate behemoth is seemingly plowing through the morass that is the 2022 housing market, with a strong Q3 earnings report showing the strength of its core business, as executives place a renewed emphasis on mortgage and showings.
Beating its projections with $483 million in revenue last quarter, the company has not been totally immune to the backdraft of mortgage rate increases and affordability issues that have depressed real estate activity, as Zillow CFO Allen Parker said on a conference call that he still expects a 19% revenue decline year-over-year next quarter.
But as many real estate-focused companies have dug foxholes this year, Zillow CEO and Co-Founder Rich Barton said he plans to continue hiring in the product and tech sectors of the business, as well as building out its mortgage segment despite the headwinds.
“We see a real business opportunity in a large and fragmented market where we are well-positioned to take share over time,” Barton said on the Q3 conference call.
Zillow stock skyrocketed more than 11% in early trading Thursday.
After abandoning the idea of throwing its weight around in iBuying (which also resulted in a 25% workforce reduction), Zillow continues to rely on its Premier Agent program, which makes up a majority of the company’s revenue. Despite how much more challenging this year has been, revenue from Premier Agent is down only 3% year-to-date, and 13% from Q3 of last year.
“Premier Agent revenue…outperformed both our expectations and our estimated industry decline of 15%,” said Parker. “Better than expected conversion rates, customer connections and retention rates during the quarter were the primary driver behind our slight revenue outperformance relative to the industry.”
The company’s mortgage segment brought in $26 million in revenue this quarter, a massive drop of 63% from the $70 million it earned in Q3 2021. But Zillow executives said that was a huge “growth pillar” going forward as the company launches its own mortgage arm, Zillow Home Loans.
“There are millions of customers on Zillow asking for financing help and getting connected to a lender today,” said Zillow COO Jeremey Wacksman on the conference call. “So we like the business profile. And as we talk about a lot, it is what the customer wants. It’s a business problem we want to solve because it also solves what our customer needs to buy the house. They need a great agent and they need a mortgage to buy the house, and having that integrated and digitized is what they’re asking for, and going to expect in ‘Real Estate 2.0.’”
Other focuses include the evolution of ShowingTime, the showing service that Zillow acquired last fall for $500 million, and a “strategic partnership” with OpenDoor, as the company dips its toe back in the iBuying field.
Mentioned only briefly: Zillow’s long-term goal of creating a housing “super app,” which would ostensibly integrate every step of the home search and purchase process. Other tech leaders and companies have recently touted the “super app” concept in other industries, including Elon Musk with Twitter.
Barton made it clear that this singular, integrated experience that includes buying, selling, financing and renting is still part of the company’s vision.
“Customers want this super app,” he said. “It’s a very large business opportunity. And given Zillow’s brand strength, audience and technology capabilities, we are in an advantaged position to deliver.”