All right, want to get to a name that is certainly on our radar. Shares of Zillow down the most in nearly one year. The stock off more than 9%, was down 17.7% at its low. The online real estate firm delivered a revenue forecast for the first quarter that fell short of the average analyst estimate. Meantime, the company expects 2025 to be its first profitable year since 2012. Keep in mind it posted a net loss of $112 million back in 2024. With more on the business and the U.S. housing market, with us is Zillow CEO Jeremy Wacksman, joining us from Seattle.
Jeremy, thanks for joining us today. Likely I would imagine a tough day when the stock is down as much as 17.7%, down 9% right now. The housing market, it just hasn't recovered in the way that you want to see. What's the biggest thing holding it up?
Thanks for having me. The housing market remains challenged. It was challenged in 2024 and we're expecting it to be so again in 2025. Zillow reported great results yesterday. Q4 revenue up 17% and we hit our goals of growing revenue double digits last year and expanding our margins. And we also guided yesterday that we expect to continue to do that again this year with revenue growth in the low to mid-teens, more margin expansion, and positive GAAP net income for the first time in a long time. And as you said, that's against a persistently challenged housing market. So we're able to grow and gain share both in '24 and we plan to do that again in 2025 while the market remains depressed for volume and challenging for buyers.
Jeremy, do you think investors have it wrong in terms of pushing your share price down a lot in reaction to what they got on the quarter and the outlook?
We don't really focus on the day-to-day voting machine of the stock market. If you zoom out and look over the long, the long couple quarters or couple years, we made great progress on our integrated super app strategy. We're growing revenue nicely. We're outgrowing the category and we plan to continue to do that in 2025. And so over time, the stock will take care of itself. The company grows in value as we really deliver on our promise of helping more buyers and sellers get home. That's really our goal at Zillow, is to help more of our audience turn into transactions.
Yeah, and I will point out the stock was up about 28% last year and up about almost 80% in 2023. In terms of the stress though, or maybe your kind of cautious outlook in terms of the housing market, is it all about mortgage rates and higher mortgage rates?
Yeah, the challenge of the housing market starts with mortgage rates but it's really about availability and supply. We are expecting flattish total dollar value housing market in Q1 and low to mid single digit growth for the year. And as you said, if you look, it's not like 2024 was that much better from a volume standpoint. The real challenge is with more mortgage rates staying high, affordability is a challenge for buyers, but that really locks a lot of sellers into their homes as well, right? A seller is thinking about do they want to trade out of that mortgage or do they feel locked into that mortgage, and many are forgoing listing their home and making that move. So you're seeing still very low inventory. Inventory is up 18% from last year, but it's still down sharply from pre-pandemic norms. And so lack of supply really makes it challenging for buyers, and then you add elevated rates and what they afford of what there is to buy.
Jeremy, the cost of housing certainly a theme on and last year's presidential race. I'm wondering if you think that the federal government will be able to achieve bringing more supply of housing online. This came up, the vice presidential debate, when JD Vance talked about using federal lands to build homes. Do you think the federal government will have a meaningful effect on housing supply?
The real challenge was supply. We talked about existing home inventory and what sellers are doing, but we are chronically underbuilt. Zillow estimates about 4.5 million homes have not been built to keep up with the demand needed since the global financial crisis. And the solution to those problems really is at the state and local level. You need things like permitting reform and removing red tape in the process to get starts done quickly. You need tax incentives and financing options so that builders can get their projects online more quickly. So the totality of the problem, you know, all nearly 4.5 million homes that we need to catch up on, we're not going to do that overnight, but slow and steady will definitely bring more supply to the market.
I do wonder though too, Jeremy, how much though, yep I get that the permitting, I mean these are problems that have plagued certainly the housing market I feel like forever in terms of supply, but having said that, how much too is there some cautiousness on the part of home builders who still, everybody still remembers 2008 and the overbuilds. So is there also a part of that as some of the components in terms of supply?
Well, you're seeing places where it works well, right? I mean, Austin, Texas is one good example that we've highlighted, where a lot of multifamily inventory in the rental market has come online and you've actually seen rent prices come down even with the population growth in Austin. And so you have to remember, if you zoom out, there are still the counter forces of for-sale and rentals working together. And when folks can't get it done and find the home to buy, they end up renting, and you're seeing rental inventory grow to satisfy that demand as well. So it is as you said, it's a local issue, but there are places where it's working well, and there are places where it can work even better.
We got a hotter than expected CPI print earlier today, and my question is about how that changes the outlook for rates for the year, and then in turn how that affects your business. Does your outlook for 2025 change if rates don't come down?
No, our outlook that we put out yesterday assumes a pretty lousy housing market, and I think today's print probably just kind of confirms that fact, right? We are expecting flattish housing market in Q1 and low to mid single digits for the year. And I think we were maybe a little bit more bearish than most heading into the year on how the housing market's going to do. Now, the good news for Zillow is we're outgrowing the category and we're gaining share. We did that in 2024 and we expect it again in 2025. And that's in our for-sale business where we're helping more buyers meet their agents, we're helping originate more mortgages. That's also in our rentals business. Our rentals business grew 25% in Q4. We expect that to accelerate in Q1 as we bring more rental inventory to more renters across Zillow.
Hey, one thing I do wonder in our conversation, coming off of the hot CPI print, Jeremy, is that maybe we saw certainly the rates market, the U.S. rates market, the treasury market react and move up today, but now the talk has moved to maybe even the next move. We need to start thinking about the Fed raising rates. If we see the Fed start to raise rates, what does that do in your view to the housing market, and how might that impact your business?
Well, as I said, we're kind of near all-time lows on volume. We're down to basically folks who have to move and can get it done, get it done. And that's the thing about this market. Long term, real estate is a growth industry. You see volumes and total value grow. Right now you're seeing depressed volumes because of all the challenges, especially in the financial market with affordability for buyers. But folks are getting it done and they will get it done. And what we're here at Zillow to do is help them, right? Buyers who need to buy, many of them are starting that conversation with financing rather than just dreaming. We now see about as many buyers start with what can I afford and can I even buy right now as they do dreaming, shopping, and going meeting an agent. And so we've brought online tools like Affordability to help them truly understand their personalized payment information, what can they actually afford for themselves given their financial information, so they can have confidence to go get a pre-approval letter, to actually go make an offer, and win a house. So it is tough out there. It will remain challenging in 2025, but folks can get it done. We're there to help, and that's exactly what's driving the results you saw from us in Q4 and why we expect to continue to grow and outgrow the category in 2025.
