Zillow CEO Jeremy Wacksman on the Housing & Affordability Crisis

Hello.

I'm doing great. How are you?

Yeah, small world. Today, December 1st, 16 years ago, 2009 is when I joined Zillow. So, a lot has happened in that time. And in a couple of months, Zillow will be celebrating 20 years as a public-facing service, which is a long time to be overlooking the housing market. And I think a lot of us use Zillow. We use it as a lens, whether it's to look for housing for ourselves or maybe to stalk our exes. Not saying that I do that, but maybe sometimes I might.

Absolutely. So hopefully there's a lot of Zillow fans in the audience who use the app. There's more than a hundred million people that come to our website or our apps every month. There obviously aren't 100 million people that move every month, right? So many people are doing what Hope is doing and dreaming or stalking or shopping or thinking about it someday. And that is a fantastic service for all. And then there's a few million people that actually are going to move. They're going to rent their next place. They're going to buy their next place. They're going to list their home to sell. And our business is actually helping those folks find professionals. So many folks may already have a real estate agent, but many more don't. First-time home buyers often don't. Renters who are trying to buy don't. And so we help connect people with agents everywhere in the country or with property managers or with loan officers to help them get started. And that's the business. So, we love everyone using Zillow for any purpose and when you're ready, we're ready for you.

I mean the big evolution really in all of our technology services is the smartphone we all use. When Zillow was founded, when I joined Zillow, there was no iPhone, right? There was no app store. And so the internet was really the way we all got information however we could get it. And that's what led to the founding of Zillow. Zillow was founded because the co-founders couldn't find real estate information online. You had to go to a brokerage office. You had to maybe use a book to see what was for sale or what things had sold for. And they thought, well, there has to be a better way to do that. So, that's how they built Zillow. Um, but like you said, 20 years has gone by. The smartphone has come. We expect all these apps to just work and give us the information on our phone in our pocket 24/7. Now, AI is coming and is going to be a technology revolution. And Zillow's business has evolved with that. And and so, as we talked about, we're not just about helping you look for what's for sale. It's can we help you find the best agent? Can we get you pre-approved for a mortgage? Can we help you figure out how to list your home? And that's really where the industry is headed. It's headed towards technology doing more of the work for all of us to make it easier to do.

Yeah. Uh the big picture is the housing market is lousy but like less lousy than last year. That's like the short answer. Uh and what I mean by that is as you all know it's an incredibly challenged housing market. Affordability. I mean, we would really call it an affordability crisis. Uh, mortgage rates have gone up a lot. That's part of the story, but it's really home prices have gone up so much over the past few years that it makes it very hard for a renter to be a first-time buyer to be able to afford what's for sale in many, many markets. So, it is getting incrementally better this year versus last year versus the year before. But, we have a long way to go to get back to a more normal housing market.

I think unfortunately some of it's here to stay, but it's just time is going to help catch up. So, I'll give you a stat as an example. Home prices on average are up almost 100% today versus before the pandemic. Obviously, our wages and income is not up 100%. Right? So, that's why it's less affordable generally. Atlanta is a great example. There was a period in Atlanta where home prices went up 25% in one year through that pandemic and that is a crazy runup in appreciation. So that's why we are still dealing with really the hangover of affordability and what's driving that now is lack of supply. So really for the last 15 plus years since the global financial crisis 2008 2009 we as a country have not built enough housing and so we've accumulated this deficit of Zillow estimates about 5 million homes that we should have been building if we were building at the same rate of household formation. And so what that means is when anyone wants to come and buy there's less available than there should be and so that's what pushes prices up and that's what keeps things so unaffordable.

Yeah, the maybe counterintuitive thing is everyone just looks at mortgage rates and says, 'Oh, when mortgage rates come down, the housing market will get more affordable.' It's not directly that, but when mortgage rates come down, many sellers who are sitting on a very low mortgage rate and waiting to move will finally decide to sell and we'll bring more inventory online. And that will start to solve the supply problem which will then make things more affordable which will then make buyers come into the market at a higher rate.

Yeah. People are mortgage hugging.

Yeah. So when you're in a market like this, we are a technology company. We love to just build the software you use, the software your agent uses, that your loan officer uses, but we also have to advocate for policies that help solve these problems. So we spend a lot of time lobbying for zoning and permitting reform to get building online. We spent a lot of time working on making sure access to information for all the buyers, sellers, and renters out there remains available on the internet because that's not something that is assured. Um, so we spend a lot of time on the policy side of things, not just on the technology side of things as a company.

I mean, the big reason is it's what our buyers, sellers, and renters want. Uh, one of the things I love so much about working at Zillow is we wake up every day and think about how can we innovate for a first-time home buyer, for a renter making a decision whether they want to rent or buy or for a seller. And when we do that, that's what lets us build the product that you hopefully all love as a user that I love using. But it also has us look at the things, well, how do we make it available so people can buy? And that can be things like access to information. Right? When Zillow was founded, you couldn't get access to information online. And we really helped turn on the lights for the entire industry to say, okay, listings should be available on all these platforms. And we all in this room, I think, probably take that for granted as the way the industry works. But it's you can't take it for granted. There are companies that want to take information back offline and make it harder for buyers and sellers to get access to information.

I mean, for us, we feel like it's easy because we know who we build for first. So, if you put the buyer or the seller in the room with you, and we do that every day at Zillow, you try and solve the problem they're having, and then everyone else in the market exists to serve them. And so, a great example of that is we build a lot of software for real estate agents. If any of you have worked with a real estate agent, they're probably using Zillow software. Um, and they may not show it to you, but they're using it to manage the showings on your listing or they're using it to manage their conversations that they're having with their clients. But we do all that in service of the buyers they're talking to or the sellers they're talking to. And so that that really lets us be cleareyed on how we build something because it's like if it's not solving a problem that our users are asking for then it's not worth our time or it's maybe not the right thing to build.

I mean part of what we love about what this organization is doing at large is financial education and empowerment is a huge part of that. So many people are making these decisions or trying to figure out how to make these decisions and they don't know where to go. And so education is one of the biggest things we can all do. And I I'll give a Zillow example and a non-Zillow example for our renters. You know, we have the largest rental network in the country. We have more rentals than anyone. And we are trying to create a reusable portable application that you can use on more and more of them. And we have that now. So renters can come to Zillow, they can pay an application fee once, they can pull credit and build that application once, and they can apply to multiple places. And so that's great for the renter. Of course, you can kind of understand as a renter. It's also great for the landlord because now this landlord, this individual small business owner can compete with the big property managers for those renters. They have a more modern digital tool to use because they aren't building software systems the way their competitors are. So, that's a great example of like the education that the renter gets actually benefits the landlord as well.

Let's turn to another part of your business which is helping the agents and property managers. Real estate is a relationship business at the end of the day. These are small business owners, you know, they're they're entrepreneurs. What is your role right now? Zillow's role in supporting this ecosystem.

Uh, real estate agents are some of the hardest working small business professionals I've ever encountered and our job is to make their job easier.

And it's I mean, it's true. They work incredibly hard and they are basically running their business on their own. And so our job is to give them the software and tools to make their job easier and to help hand them customers that are ready to transact to make them more efficient. And I'll give you a couple examples of how we do that. Um, we provide software that they use to run the front office of their business. We provide software they use to run their clients listings and relationship management. And part of why we do that is because that's what our buyers and sellers want. Uh, one of my favorite stats about this industry that I tell my family that they're always surprised by is the percentage of buyers that say they want to hire a real estate professional is higher now than it was when Zillow was founded.

And you would think, oh, technology, it's coming. It can automate. I can do more myself. Doesn't that mean And not in this category. In this category, it data and technology overwhelms us all. And you're only doing this once a decade. And it's the biggest financial decision you'll ever make. So you definitely want help. And it turns out every generation wants help and wants help more. Now what help is has changed. Right? Before Zillow, a professional was an arbiter of information. They had a book of stuff you didn't have. So you were hiring them for access. Well, that's gone. Right? We all have access to the same amount of stuff. So now you get to hire the best professional. You get to hire a negotiator. You get to hire a local market expert. You get to hire a consultant. Many times they're a therapist, right? And so it elevates the profession. It allows people to compete and show what they do best.