Zillow Group CEO Rich Barton. (Zillow Group Photo)
People are spending way more time at home during the pandemic. And that’s good news for Zillow Group.
The online real estate giant on Thursday posted better than expected financial results for its second quarter with $768 million in revenue, up 28% year-over-year. The Seattle company’s stock was trading up more than 16% Friday, and has more than doubled in price since March.
Business was looking a little bleak for Zillow as companies across the globe grappled with the COVID-19 pandemic earlier this year. As part of its coronavirus playbook, Zillow slashed expenses by 25% this year, froze hiring across the company, and cut nearly all marketing spend.
But the U.S. housing market has bounced back, driven in part by record-low mortgage rates and the shift to remote work as people look for new homes.
That’s helping drive traffic to Zillow’s mobile apps and websites, which drew a record 218 million average monthly unique users last quarter, up 12% year-over-year.
On the company’s earnings call with analysts, Zillow CEO Rich Barton said this is the beginning of “The Great Reshuffling” as the pandemic changes the way we think about home. He said families are spending an average of nine more hours per day at home, while amenities such as a backyard have become more desirable than nearby parks and gyms.
Millions of people are considering upsizing, downsizing, getting closer to family, further from the office, and other home-related changes, Barton said.
“New habits and norms are forming rapidly right now. In many cases, as with working from home, we have found better, more efficient, and more healthy ways to live and work,” he added. “We’re not going to just go back to the way things were. This is a tectonic shift that we expect to play out for years to come.”
The real value of home has never been clearer. We’re grateful to post record Q2 results today but the bigger story is the tectonic shift in RE. People are moving & came to @Zillow in huge #’s. Once-in-a-generation tailwinds in RE & tech are converging w/ Z at the nexus.— Rich Barton (@Rich_Barton) August 6, 2020
Fellow Seattle real estate giant Redfin also beat estimates for its quarterly earnings last week as the U.S. housing market rebounds. Redfin and Zillow are riding a trend of increased home ownership and low home turnover, which is driving demand with decreased supply. The U.S. Census reported last week that home ownership rates increased year-over-year from 64% to 68%, the highest level since 2008 and one of the largest increases in history.
Barton said Zillow is well positioned to capitalize not only on the recent real estate tailwinds, but also with the overall shift to digital that is accelerated by the pandemic. Zillow is investing in the virtual home shopping experience with 3D home tours and other online tools that are seeing increased usage in recent months.
“No company in our industry is better positioned than Zillow to deliver on seismic shifts in technology adoption,” the CEO said. “Zillow recreated what it meant to search and find real estate, and we are now investing to recreate and digitize the transaction itself.”
Barton co-founded Zillow back in 2005 — he returned as CEO last year — as the company built a leading media business, helping connect homebuyers with realtors. But it made a big shift in 2019 with the launch of Zillow Offers, or what Barton refers to as “Zillow 2.0.”
Zillow is now buying and selling homes via Zillow Offers, which the company said can one day produce $20 billion in annual revenue.
(Zillow Photo)
Zillow paused Zillow Offers as the COVID-19 outbreak began, but the program is now active in all 24 markets where it was operating.
Zillow’s “Homes” segment, which includes Zillow Offers, brought in $454 million in revenue last quarter with a loss of $80 million, before income taxes. The company sold 1,437 homes and purchased 86 homes, ending the quarter with 440 homes on its balance sheet.
