Rich Barton sees light at the end of the COVID-19 tunnel.
The Zillow Group CEO expressed optimism for the future of real estate despite a global pandemic that has slowed home sales and leaves the industry with an uncertain future.
In a letter to shareholders as part of the company’s first quarter earnings report, Barton cited increasing buyer demand in certain markets and traffic to Zillow’s web properties returning to pre-COVID-19 levels.
“One thing we’ve always believed, and confirmed again over the past two months, is real estate is resilient,” Barton said in the letter, co-written with Zillow CFO Allen Parker. “People still need to move — and dream of moving, perhaps now more than ever.”
As Barton outlined in March, Zillow is confident it can weather the COVID-19 storm thanks to a record amount of cash and investment balances, and other cost-cutting measures. It is leaning on technology such as virtual home showings in the meantime.
“Our leading brand and virtual innovations are providing solutions that are today’s necessities, and will soon be tomorrow’s expectations,” the letter reads. “We are working closely with our partners and industry leaders to move the industry forward and address antiquated processes and inefficiencies while enabling and accelerating innovation to ensure real estate is always on.”
The Seattle real estate giant posted Q1 revenue of $1.1 billion, up 148% year-over-year and ahead of the $1.02 billion expected by analysts. The company reported a non-GAAP loss of $0.25, which beat expectations of -$0.38.
Shares of Zillow spiked Thursday more than 12 percent, but fell more than 4% in after-hours trading. Its Q2 revenue guidance came in at $577-to-$620 million, below analyst estimates. The company did not provide full-year guidance.
Zillow stock is down about 25% since February.
The Q1 revenue growth was driven in part by the company’s new Zillow Offers business of buying and selling homes, a strategy that rolled out last year.
Zillow’s “Homes” segment brought in $770 million in revenue, up 27% percent from the fourth quarter, and took a net non-GAAP loss of $75 million. The company sold 2,394 homes and purchased 1,479 homes, ending the quarter with 1,791 homes on its balance sheet.
Zillow paused the Zillow Offers business in March. It said today that it will restart home-buying within the next few weeks, depending on various factors including local orders and “confidence in our ability to consistently price and transact.”
As part of its coronavirus playbook, Zillow is also slashing expenses by 25% this year, freezing hiring across the company, and cutting nearly all marketing spend.
Revenue from the company’s Premier Agent business was up 11% to $242 million. Traffic to its mobile apps and websites were up 5% to 2.1 billion visits.
Zillow published its latest housing market projections Monday, outlining three scenarios for home prices and sales over the next year-and-a-half.
Using a baseline prediction that GDP will decrease 4.9% in the U.S. this year, and go up 5.7% next year, Zillow estimates a 2-to-3% drop in prices through the end of 2020 compared to Q4 2019 levels, with normalcy returning by Q3 2021. It also projects as much as a 60% decline in home sales this quarter measured from the end of 2019. Sales volume will bounce back by the end of 2021.
The company also laid out two other estimates — optimistic and pessimistic — based on varying scenarios related to how long the pandemic lasts and the country’s economic recovery. It believes the pessimistic option is more likely than optimistic.
Zillow used a mix of published and proprietary macroeconomic and housing data to calculate its projections. See the full appendix and methodology here.
Last month the company told its employees that they can work from home until at least the end of 2020.
