The U.S. portal giant Zillow released its results for Q2 to the market yesterday evening. The company's missive did not make for an especially positive reading for shareholders given the downturn in the American housing market. Stated highlights from Zillow's Q2 activities included:
While overall revenue in Zillow's main IMT segment remained flat, the revenue from its flagship Premier Agent lead generation business decreased 5% year-on-year to $333 million with CEO Rich Barton telling shareholders that:
"Across the industry, we are seeing price growth meaningfully soften on pending sales and new mortgage applications, with for-sale inventory levels rising as homes spend more time on the market."
The impact of the cooling market on Zillow's Adjusted EBITDA was softened somewhat by the reduction in operating expenses for its Homes segment which saw costs decrease 67% compared to Q2 of 2021 - when the company was still actively buying houses and not just trying to sell off its remaining stock.
Despite the macro-economic outlook, Zillow is continuing to invest in marketing and technology with a 4% uptick in marketing costs for its core business segment and a 17% increase in technology and development spend. The company continues to develop its 'housing super app' and sees this as a key weapon in its push towards its goal of $5 billion in revenue and a 45% margin by 2025.
When it exited iBuying back in November, Zillow said it wanted to offer its users a complete experience when selling their homes but in a way that was less capital intensive for its business. It now seems that the framework is almost in place for Zillow to do that.
Thanks to a new partnership with iBuying leader Opendoor, Zillow now offers its users the option to either sell their home via Opendoor or sell via a Zillow Premier Agent. Zillow earns a referral fee if the lead transacts with Opendoor and a share of the commission if the lead chooses to transact with the agent. In addition, the company is also working on offering a bundle that allows sellers to buy their next home with a Premier Agent partner, finance with Zillow Home Loans, and close with Zillow Closing Services, while selling their existing home to
The lead-generation partnership with former iBuying rival Opendoor is broadly similar to the one entered into by Zillow's competitor Realtor.com back in 2020.
The immediate future of the U.S. housing market does not look good according to Zillow as the company's letter to shareholders predicted a 21% year-on-year downturn in Premier Agent revenue for Q3 as well as a downturn for its Mortgage segment. On the positive side, the company does foresee an upturn in the rentals market in the upcoming quarter and expects to complete the sell-off of all its remaining housing stock purchased through its now-defunct iBuying program.