Zillow Group posted $10 million in net income in the third quarter, turning around a $20 million loss from the year ago period, as its mortgage revenue rose 36% during the time frame.
The growth in its mortgage line, which includes both Zillow Home Loans and
"Our mortgage strategy is making it easier for more buyers to choose financing through Zillow Home Loans, which is the main growth driver of our overall mortgage revenue," Jeremy Hofmann, chief financial officer, said during the earnings call.
Consensus estimates for mortgage revenue growth was 28.8%, according to a Keefe, Bruyette & Woods report.
What was Zillow Home Loan's production
Total mortgage loan volume was $1.28 billion, nearly all of it purchase activity. This compared with $819 million one year ago, again nearly all purchase.
This beat KBW and consensus estimates of $1.17 billion and $1.18 billion respectively.
"Zillow aims to narrow the gap between its audience share and mid-single-digit transaction share via its 'housing super app' strategy, which the company embarked upon in 2022 following
"While early data from initial 'enhanced markets' is promising, and Zillow's financial targets suggest upside could be meaningful with successful execution, the strategy's scalability is a show-me story, in our view," he continued. Enhanced markets include Zillow Home Loans.
What is Zillow's mortgage strategy?
Hofmann said the enhanced markets businesses are performing well for the parent company.
"Zillow Home Loans continues to grow share alongside that enhanced market expansion," Hofmann said, adding Showcase is expanding and Follow-up Boss is being used by more people across Zillow's agent base. Plus, new construction is doing well "So it's a really nice formula, and it's one that we're looking forward to continuing to roll out in Q4 and then into 2026," Hoffman said.
Jeremy Wacksman, Zillow Group CEO, described how the strategy works.
"If a consumer is interested in touring homes, whether that's virtual or booking a real-time tour and they start with an agent, making sure a Zillow Home Loans loan officer is ready for that agent and can be a choice for that customer, that's a big part of the growth," Wacksman said. "We can do that in enhanced markets, and that's how we're rolling out this formula is giving access to more and more agent teams, a Zillow Home Loans team for them to work with for us."
Why is BTIG maintaining its current rating on Zillow?
BTIG analyst Jake Fuller maintained his neutral rating on Zillow Group even with the third quarter performance.
"Lower mortgage rates are leading to a pick-up in the housing market," Fuller said. "That, coupled with benefits from the expansion of enhanced offerings and strength in
the rental-mortgage segments, is leading out-year estimates modestly higher."
But BTIG believes "more traditional" residential real estate brokers as "more leveraged" than Zillow Group at half the earnings multiple. Fuller also noted
Finally, at 23 times next year's projected EBITDA, he sees Zillow's valuation "as fair-to-full."
