While many industry incumbents are eyeing August 17 with nervousness, preparing for some level of turbulence and uncertainty, Zillow is coasting into the new real estate world on the back of a spectacular earnings report and confidence from executives that the company is well-positioned to take advantage of upcoming changes.
The portal giant’s stock popped over 18% in early trading after the report, in which Zillow saw a 13% jump in revenue to $572 million, beating guidance by almost $39 million. The company also reported major growth in its rental sector and mortgage, along with residential revenue that outpaced the industry by 20%.
“We’re pleased that we’ve outperformed the industry by 2,000 basis points in residential over the last two years, and that’s really a credit to the product experiences that we’re driving, the conversion gains we’re driving and the partner experiences that we’re driving,” said Zillow Chief Financial Officer Jeremy Hofmann on a conference call following the report.
Ahead of the report, longtime CEO and Zillow co-founder Rich Barton announced that he would be moving to a role as executive chairman, with Chief Operating Officer Jeremy Wacksman stepping into the top role. Barton had previously stepped back from the CEO job in 2011, before retaking the reins in 2019.
But running parallel to Zillow’s success this year is the National Association of REALTORS®’ (NAR) settlement agreement, set to go into effect in just over a week. How the portals would be affected by the changes—especially those whose business models rely heavily on selling leads to buyer agents—remains an open question.
Hofmann, in response to an investor question, said he sees nothing but positives from the company post-settlement.
“We believe we and our partners are the outsized beneficiaries of these changes coming in the industry,” he said. “We have the most customers, we work with the best partners, we provide the most technology and we expect our (partner 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.”
The company’s “touring agreement,” meant to satisfy the new buyer agent contract requirement, has been a major success so far, according to Wacksman, who said that the document is being used in “almost 80% of connections.”
“Our expectation is, the touring agreement will be a net benefit to conversion because it’s in the flow post-introduction. It’s just education, and it’s a helpful qualification,” he said. “Education to the consumer, done in a consumer-friendly way, helps get that consumer more informed before they get to the tour, and makes it more likely that they’ll want to work with the agent.”
Other tech-focused real estate companies, including iBuyers Opendoor and Offerpad, and virtual mega-brokerage eXp, have suggested they stand to benefit from the settlement. Opendoor CEO Carrie Wheeler claimed that commission rates are already falling ahead of the August 17 deadline—something that Hofmann did not corroborate.
“I think we can’t really speak to broad commission trends just because 80% of our Premier Agent base is in that top 20% of all producers,” he explained. “So, we’re working with the top agents versus a broad swath of professionals. That said, across our business, we’ve seen commission rates stay in a pretty tight band over the past three years. 2024 is down a few basis points versus 2023, but in line with 2022 levels.”
Zillow is also leaning into its “Enhanced Markets” initiative, meant to be an “integrated home-buying experience” including lending, touring and connections with top agents. Currently in a trial period, the program is aiming to reach 36 markets by the end of this month, according to Wacksman.
Looking at the bigger picture in housing, Zillow attributed most of its 29% increase in rental revenue to multifamily, which came in at $117 million. Mortgage revenue grew 42%, even as loan originations remained mostly flat across the industry during that same period.
“There was a headwind there (in mortgages),” said Hofmann. “We just happened to perform quite well throughout it, and that’s a great story for us.”
