How Zillow Is Changing The Housing Market
Is Zillow becoming a one-stop shop in the housing market? That appears to be its goal.
Zillow Group, which controls the widely-used real estate listing website Zillow.com, posted $789 million in fourth quarter revenue as it continues to soar in popularity. The news of Zillow’s surprisingly strong earnings comes days after it announced plans to purchase ShowingTime.com, an online home showings scheduler, for $500 million.
GeekWire says Zillow is benefiting from housing market gains, which totaled $2.5 trillion in value in 2020 — $2.2 trillion from appreciation of existing homes, and $274 billion from new construction. Zillow’s stock climbed to $200.60 a share after last week’s earnings report, which marks its fifth record close in the past six sessions.
“We are in a unique position to build an iconic company and brand that transforms one of the country’s largest, most complex, and most important industries,” Zillow CEO Rich Barton tweeted last week.
Relaunching Zillow’s Home-Buying Service
As Zillow continues to reshape the house-hunting market, it stands to make the most ground in its “iBuying” business known as “Zillow Offers,” which purchases homes to fix up and resells them. Barron’s reported Zillow paused that business model at the beginning of the coronavirus pandemic in 2020 but has since begun adding to its inventory.
“While Zillow … is likely several years out from fully achieving its goal of a seamless real-estate transaction, nearer term Zillow is benefiting from a real estate market that remains extremely active,” JMP Securities analyst Ronald Josey told Barron’s.
In short, Zillow is aiming to create a one-stop shop model where homeowners can browse, list and buy while cutting out the middle man.
“The idea is essentially to take all those costs that get spread out to a number of service providers, and boil them down to a high single-digit fee instead of 12 to 16 percent,” Seeking Alpha reports. “Eventually the model is you go to Zillow, find your new house, which they already own, and trade-in your old house. All services from mortgage to title to inspections, all in a clean, modern interface.”
Zillow has seen a rise in investor enthusiasm, according to MarketWatch.com’s Tomi Kilgore. Kilgore said the cost of selling to Zillow Offers is now comparable to using a traditional real-estate agent, but for a lot much more value.
“Stop and think about that for a second,” Deutsche Bank analyst Lloyd Walmsley told MarketWatch. “Why would anyone with a more ‘commodity’ type of home use the traditional home selling process versus getting cash from Zillow? Zillow may be on the cusp of actually becoming a true marketplace for residential real estate.”
Converting Billions of Viewers Into Buyers
Zillow’s rise in popularity coincides with the overall boom of the housing market. As the pandemic drove many to shelter in place temporarily or work from home long-term, demand for housing skyrocketed.
“Many people turned to Zillow with the legitimate purpose of buying a home, evidenced by the company’s 22 percent revenue growth in 2020,” Kevin Stankiewicz of CNBC wrote. “But another cohort emerged and turned to Zillow for a sort of pandemic escapism, perhaps searching for a dream home in a new city even though moving there wasn’t a realistic possibility.”
The venerable sketch comedy show Saturday Night Live addressed Zillow’s popularity in a recent skit, poking fun of the cult-like obsession the app has to draw users back in.
“Zillow surfing has broken through to a whole new level of pop culture, given that ‘Saturday Night Live’ did a funny and racy sketch about it this past weekend, with Dan Levy in the lead,” Barton said.
Barton told CNBC it turns a low percentage of its users into sales through Zillow, but that’s due to its massive annual amount of page views — 9.6 billion in 2020 alone.
“Our challenge is … to increasingly turn more of that shopping and dreaming traffic into transactions,” Barton told CNBC. He added: “We monetize a single-digit percentage of the people that come visit us right now. That’s potential energy for us that should fuel our growth for many years to come.”