The U.S. real estate marketplace leader Zillow has released a report for its activities for the first quarter of 2023. Highlights from a three-month period in which the company outperformed a declining housing market include:
Despite the unfavourable comparisons to 2022, Zillow's results for the first quarter of 2023 exceeded the company's outlook and caused Zillow's long-suffering share price to jump in after-hours trading.
According to a company press release total transaction dollars available in the American residential market fell 27% during the first three months of the year compared to 2022. Given the depressed market, Zillow's CEO Rich Barton was pleased with company performance which included a 14% drop in residential revenue and a 16% drop in revenue for Zillow's flagship Premier Agent product.
"We are pleased to have started the year with solid Q1 results. Moving forward, we have a lot of work to do to drive outsize gains in our share of customer transactions, and we are focused on serving our customers by delivering on our product roadmap and doing our part to bring more ease, security, transparency and efficiency to real estate."
The company's explanation for its outperformance of the broader market cited "favourable relative tailwinds", Zillow's strong brand and rare share of direct traffic (more than 80%).
As for Zillow's rental business, its 21% revenue growth in the period was in line with the increase rival CoStar's rentals business saw during the first three months of the year. Zillow's rentals segment saw revenue climb to $74 million and a 16% increase in potential tenants visiting its websites and apps.
The black sheep of Zillow's business continues to be its stubbornly unprofitable mortgage segment which was once again impacted by high interest rates.
Revenue for the segment fell 43% year-on-year to $26 million. The company is continuing to integrate its mortgage business into Premier Agent workflows and in its previous report to the market claimed to have seen a 5% uptick in the adoption of its services in one of its test markets but is yet to crack the code when it comes to mortgages.
As for those all-important test markets of Denver, Atlanta, Phoenix and Raleigh, Zillow claims that it is seeing "the early results of the big bets on our product road map" and "meaningful improvement in tour fulfilment rates and early indications of higher transaction rates".
The portal operator is trialling models in those markets which some industry commentators believe it intends to roll out nationwide if it continues to like what it sees.
For Q2, Zillow expects a decline in industry transaction dollar volume to decline between 18% and 28% year-on-year and is predicting between a 9% and 13% decline in its own Premier Agent revenue for the period.