Market headwinds pushed Zillow Q2 revenues down 23 percent to $1 billion. Despite the declines, Zillow is pushing forward with major initiatives including a new partnership with former rival Opendoor.
Market headwinds have made their mark on Zillow’s second-quarter earnings, with rising mortgage rates, worsening affordability and tight inventory driving losses in two of the behemoth’s main segments and pushing revenues down 23 percent year-over-year to $1 billion.
The impact of a normalizing market mostly showed itself in Zillow’s Mortgage segment, where rising rates and weakened mortgage demand slashed revenues by 49 percent ($29 million) and inflated losses by 111 percent ($38 million) from Q2 2021.
Zillow’s IMT (Internet, Media and Technology) segment followed a similar track with revenues remaining flat at $475 million, with Premier Agent ($333M) and Zillow Rentals revenues ($71M) respective annual declines of five and three percent.
Nonetheless, Zillow still managed to make a profit of $69 million.
The portal continued to make progress in its Homes segment that accounts for the company’s now-defunct iBuyer venture, Zillow Offers.
In Q1, the sell-off of 8,891 Zillow Offers properties worth $3.7 billion helped push Zillow back into the black with a $16 million profit after reporting $261 million in losses during in the final three months of 2021.
However, Zillow’s losses from the iBuyer selloff have weighed less on the company’s bottom line. Its Zillow Homes segment accounted for $342 million in losses alone in the waning months of 2021. In the first quarter of this year, its iBuyer losses shrank to $68 million.
Homes segment losses continued their descent in Q2, with losses shrinking 76 percent year-over-year to $14 million as the company makes “faster than anticipated” progress with offloading the final 71 homes left within its Zillow Offers stock.
Despite the hills and valleys within its individual segments, Zillow still managed to remain profitable with a consolidated GAAP (Generally Accepted Accounting Principles) net income of $8 million. The company’s Consolidated Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) declined 10 percent to $164 million.
In a prepared statement before the company’s earnings call on Thursday, CEO and co-founder Rich Barton said he was confident about Zillow’s “long-term growth” and ability to weather coming market shifts.
“Zillow stands on solid ground and is well-positioned for long-term growth, with a healthy balance sheet, positive operating cash flow, and a trusted household brand,” Barton said. “Despite the challenges of the macroeconomic environment, we’re making strides in key growth areas — including financing, touring and seller solutions — that get us closer to our vision of an integrated digital experience to help customers with all their real estate needs in our ‘housing super app.’”
Zillow’s current cadre of mobile apps and websites drew in 234 million average monthly unique users in Q2, for an increase of 2 percent year-over-year. Visits to the Zillow site increased 5 percent year-over-year to 2.9 billion.
Although the portal giant expects an equally downcast Q3 with double-digit declines in its Premier Agent, Zillow Rentals and Mortgages segment, Zillow is charging forward with a new partnership with Opendoor that will enable homesellers to request an offer.
Zillow Chief Operating Officer Jeremy Wacksman said the partnership is an integral part of the portal’s quest to create a housing super app, and will enable homesellers to seamlessly evaluate all of their options without ever leaving the Zillow platform.
“Zillow is the most visited brand in online real estate. As we bring the housing super app to life, we’re empowering our millions of visitors to understand all their options and transact in the way that best meets their housing needs,” Wacksman said in a written statement on Thursday.”We know choice is important for customers and they can make the best decision when they see all of their selling options up front — including selling on the open market with a Zillow Premier Agent partner and getting a cash offer from Opendoor.”
Sellers can use the service as a “standalone offering,” Wacksman said, or choose a bundled experience by using Zillow’s financing and closing services and enlisting a licensed Zillow advisor to guide them through their options.
Wacksman and Opendoor President Andrew Low Ah Kee said the partnership will yield additional updates in the coming months and years, with the once-fierce rivals aiming to capture the loyalty of millions of consumers.
“By bringing together Zillow’s market-leading audience and Opendoor’s e-commerce platform, more consumers will have the option to sell to Opendoor and save themselves the stress and uncertainty of a traditional sale process,” Ah Kee said.