Zillow stock slumps on first-time buyer, mortgage rate headwinds

Zillow
Group
Inc.
shares
fell
after
the
real
estate
company
published
a
second-quarter
outlook
that
called
for
lower
revenue
in
its
core
business
and
predicted
stalling
growth
in
the

broader
U.S.
housing
market.

Zillow,
led
by
Chief
Executive
Officer
Rich
Barton,
expects
revenue
from
its
residential
business
to
be
between
$372
million
to
$382
million
in
the
second
quarter,
according
to
a
shareholder letter Wednesday.
That’s
less
than
the
$393
million
that
the
company
took
in
during
the
first
three
months
of
the
year. 

Zillow
based
that
projection
on
tepid
first-time
home
buying
activity
and

a
recent
rise
in
mortgage
rates,
predicting
that
overall
U.S.
transaction
volumes
in
the
residential
real
estate
market
would
be
little
changed
from
the
second
quarter
of
last
year. 

Shares
plummeted
as
much
as
12%
to
$36.63
before
paring
losses
in
after-market
trading
Wednesday
at
4:55
p.m.
in
New
York.
Shares
had
fallen
27%
from
the
start
of
the
year
through
Wednesday’s
close,
before
earnings
were
released.

Zillow’s
disappointing
outlook
comes
as
the
company
reported
first-quarter
earnings
that
beat
analysts’
expectations.
The
company’s
dominant
consumer
brand
helped
it
muddle
through
a
period
of
slow
sales
and
looming
changes
in
the
US
housing
industry.
Zillow
had
revenue
of
$529
million,
more
than
the
$509
million
analysts
estimated,
on
average,
in
a
survey
compiled
by
Bloomberg.

Zillow
continues
to
attract
eyeballs
even
as
home
sales
and
available
listings
remain
near
historic
lows.
About
217
million
unique
users
visited
the
company’s
websites
and
apps
on
the
average
month
in
the
quarter.
The
company,
whose
main
business
revolves
around
connecting
prospective
homebuyers
with
real
estate
agents,
reported
$125
million
in
adjusted
earnings
before
interest,
taxes,
depreciation
and
amortization,
beating
the
average
analyst
estimate
of
$104
million.

The
residential
real
estate
industry
has
been
jolted
in
recent
months
by
antitrust
litigation
that
seeks
to
upend
a
decades-old
status
quo.
In
March,
the
National
Association
for
Realtors
agreed
to
a settlement that
would
change
the
way
agents
are
paid,
potentially
slashing
commission
income
for
the
agents
who
remain
Zillow’s
core
customers.

Zillow
is
positioned
to
thrive
amid
industry
changes
because
of
its
large
audience
of
high-intent
homebuyers,
and
because
it
caters
to
the
most-productive
agents,
Barton
and
Chief
Financial
Officer
Jeremy
Hofmann
said
in
a
letter
to
shareholders
Wednesday.