Zillow CEO Sees Housing Affordability Crisis Driving Rentals

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00:00Your core business did well, Jeremy, and I am curious as to what drove that.

00:04Was there sort of macroeconomic factors behind that? Marketing? What?

00:10Yeah, thanks for having me. Q3 was a great one for Zillow. As you said, revenue up 16% year

00:15over year. And the growth was really across the board. Our for sale revenue, which is mortgages

00:21and agent revenue, up 10%. And our rentals marketplace, our rentals revenue up 41%.

00:27And what's driving that outperformance against a housing market that's up mid-single digits

00:33is this integrated transaction strategy, building software for buyer, sellers, and renters to use

00:40Zillow more and connect with professionals and get more transactions done with our software and

00:44our partners. That's coming to life in more places. So that's what's driving the revenue growth in for

00:50sale. That's what's driving the revenue growth in rentals. And that's what's driving a great Q3 for

00:54us. I am curious about the home loans business. I know a small part of your business. There was

00:58some decent growth there. What are your ambitions for that, Jeremy? Does that need to be bigger? Or

01:02are you comfortable with where it sits right now in your portfolio?

01:06We expect that to be a bigger business for us over time. 80% of all buyers need a mortgage.

01:12And those buyers are shopping on Zillow. They're using Zillow to find their agent, to find the home of

01:17their dreams. And they want a one-stop shop. They want the ability to transact all in one place in

01:23that Zillow app. So being able to offer them Zillow home loans as one of their choices of financing,

01:28it makes sense from a consumer experience standpoint. And then it's a great business

01:32because it's more efficient for them to use one platform and get multiple services. So you're right.

01:38It is very small today. It is growing nicely. It's growing double digits and has all year. We would

01:44love to see that business continue to grow over time. And as I said, the strategy there is really

01:48offer that service to our buyers inside of Zillow, offer it to our agents who are working with those

01:54customers and just become one of their loan offerings for more of those transactions.

01:59Jeremy, I'd love to get a little bit more detail when it comes to the breakdown of buyers versus

02:04renters, because with mortgage rates still at the levels that they are, you know, one of the

02:08narratives out there is that actually you take a look at the monthly payment. And for a lot of folks,

02:12it makes more sense to just rent versus to buy something. And I'm wondering when you take a

02:18look at the trends on Zillow, whether that's still the case, or are we starting to see that shift?

02:23Yeah, unfortunately, it is still a real affordability crisis in the housing market.

02:28And one way to think about that is just where are things versus pre-pandemic. Home prices are up

02:34nearly 100 percent from pre-pandemic levels. So we talk a lot about mortgage rates and the rise in

02:39mortgage rates from those lows. But it's really home prices that are making things unaffordable.

02:44Rent affordability, rent prices have only gone up about 30, 40 percent. So it's still more

02:49challenging from pre-pandemic, but it becomes more affordable to rent versus buy in many markets.

02:55And you're seeing many folks who are trying to be first-time home buyers. That's just out of reach,

03:00and they are choosing to rent again. The good news for Zillow is by offering both of those

03:05marketplaces. We can help them with those needs, right? You see our rentals business growing

03:09incredibly rapidly, right? And that's now more than a quarter of our revenue. Those renters are

03:15tomorrow's buyers. So yes, we're helping them find a place to rent, but we're also helping them get

03:20ready to buy. We are helping them report their rent to the credit bureaus to start building their

03:25credit score to get them ready for that home loan. We're helping them with tools where they can

03:30understand what they could afford when they go shop. Because most of those folks, as you point out,

03:34they are what we call dual tracking. They are thinking about, could I buy or should I re-rent?

03:39And having all those options in one place is really what they need to make that decision.

03:43I hear what you're saying. And in some cases, you're preaching to the choir as a renter who

03:47would like to buy. But I want to talk a little bit more about what the rentals market has meant for

03:52you. Because a lot of folks think of Zillow as a home buying app, a home buying website. But the

03:58rentals market has been a big driver of your growth. I would love a little bit more detail on that.

04:03And where do you see that evolving as it comes to your business, the rental market versus the

04:08buying market?

04:10Absolutely. Rentals is a fast-growing business for us. And it's a really great experience for

04:15our consumers. Our mission is to help more and more people get home. You can't do that if you're

04:19not helping renters get home because there's so many more renters than buyers and sellers every year.

04:23And what's great about our rentals business is it's really solving the fundamental problem a

04:30renter has. There is no one database of all the rentals. You have to scour everywhere online and

04:36off to find a place on a very compressed timeframe. So we set out to try and organize as much of the

04:42inventory as possible. And we now have the most listings. We have 2.5 million rental listings on

04:48Zillow. Everything from those big buildings to the single-family homes that are for rent in your

04:52neighborhood. That is what brings renters to Zillow. You want to find a place. You want to go where

04:58there are the most places to look for. That's why we have the largest audience now. So Zillow Rentals

05:03has 36 million unique visitors per month coming to Zillow. It's the largest audience. Those factors are

05:10now why the revenue is growing. Advertisers, big property managers who are looking to fill their

05:16vacancies, they want to tap into that audience. And so they're what's driving the revenue growth up 41%

05:22in Q3. Multifamily revenue, those advertisers are at 62% year-over-year revenue growth.

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