Zillow’s Fourth-Quarter Earnings Show Resilience Amidst Housing Market Challenges
The housing market faced significant challenges in the second half of 2023, which resulted in potential issues for Zillow’s earnings. However, analysts predict that the company’s fourth-quarter earnings might not be as negatively impacted as initially anticipated.
During this tough market period, existing-home transactions dropped to a near 30-year low, mainly due to rising mortgage rates that peaked at 8% in October. These higher rates limited buying capabilities, discouraging homeowners from selling.
In the third quarter, Zillow experienced a setback in its most significant segment, but the growth of its rental segment led to an increase in revenue. Zillow’s residential revenue decreased by 3% compared to the previous year, reaching $362 million. However, the company outperformed the industry decline of around 14%, showcasing a stronger performance relative to the market conditions.
Analysts expect Zillow to report fourth-quarter earnings ranging between $430 million and $455 million in revenue, indicating a moderate increase. This forecast comes at a time when the housing market has faced industry challenges and a significant decline in home sales towards the end of 2023. However, experts believe that Zillow might surpass expectations, thanks to the decreasing mortgage rates in the latter part of the year.
Analysts are preparing for Zillow to announce a net loss of $77 million on $452 million in revenue for the fourth quarter. This is in comparison to a net loss of $72 million on $435 million in revenue during the same period the previous year. Despite ongoing challenges in the housing market, such as high mortgage rates and low housing inventory, Zillow remains focused on strategic initiatives to enhance its service offerings and aims to continue growing.
The inventory of homes for sale currently remains significantly lower than the 10-year average, reflecting homeowners’ hesitation to list their properties due to favorable existing mortgage rates compared to current market conditions. Additionally, rising home prices are also expected to limit transaction volumes in the housing market going forward.
Analyst comment
Positive news: Zillow’s fourth-quarter earnings show resilience amidst housing market challenges.
As an analyst, I predict that Zillow’s fourth-quarter earnings will be moderately positive, with revenue ranging between $430 million and $455 million. Despite industry challenges, Zillow’s performance is expected to be stronger than anticipated, thanks to decreasing mortgage rates and the company’s focus on strategic initiatives to enhance its services. The low inventory of homes for sale and rising home prices may continue to impact transaction volumes in the housing market.
