Zillow’s mortgage revenues are rising due to lower interest rates
A stagnant housing market has not held back Zillow‘mortgage company.
On its third-quarter earnings call Wednesday evening, the real estate portal giant reported that its mortgage revenue rose 63% year over year, driven by an 80% jump in purchase volume to $812 million. Compared to the first nine months of 2023, revenue from Zillow’s origination channels grew 41% to $104 million.
Zillow’s shareholder letter attributes the growth to its “integrated financing experience.” According to the company, 40% of shoppers start the process by looking for a lender and 80% don’t have a real estate agent. Zillow believes its end-to-end service options will make it possible to convert more of these types of homebuyers.
A more immediate factor is that mortgage rates approached 8% in the third quarter of 2023, while rates fell to near 6% for much of the third quarter of 2024.
While Zillow’s growth has been significant, as the company only launched its mortgage business in late 2018, falling interest rates benefited all players in the mortgage industry. Many major lenders that lost money returned to profitability in the third quarter of this year.
While Zillow shares On Wednesday after Donald Trump’s victory in the presidential election, shares fell 6.5%, while shares rose 14% in after-hours trading.
Zillow also addressed issues facing the real estate industry, including its Clear Cooperation Policy (CCP). National Association of Real Estate Agents‘ (NAR) rule requiring real estate agents to list properties on a NAR-affiliated multiple listing service within one day of signing a listing agreement with a home seller.
Real estate agents like The Agency And Compass have spoken out in their opposition to the CCP. Compass in particular has been vocal about its intention to build an exclusive inventory of listings, to which CCP is a major barrier.
Zillow receives listings through MLS feeds, so the company obviously supports the policy and wants it to be enforced.
“The US real estate market is the most transparent market in the world because of policies like this, and we would like to see these policies strengthened so we can build great businesses and consumer experiences on top of it, rather than weakened [policies] which some can take advantage of by trying to pull a fairly small portion of quotes behind a velvet rope for their own benefit,” CEO Jeremy Wacksman said during the earnings call.
The company has also introduced a form of buyer agent agreements that can be used prior to a home tour, and are tailored to each state. Wacksman said on the earnings call that the agreements help agents set expectations for buyers throughout the transaction process, not just while touring homes.
“We see this as a very healthy evolution in working through all of these settlement changes to help educate the buyers on how this process works, to ensure that when they meet with these great agents, they are even better informed about what to expect , both during the first tour and then on what to expect in the relationship if they choose to move forward,” he said.
