Zillow wins on paper, but faces difficult housing realities

Zillow's third-quarter results looked good on paper. Revenue was above forecasts, driven by growth in rental and mortgage business. But even as CEO Rich Barton emphasized the momentum of the company's “housing super app” vision, the stock fell sharply following the earnings release. The problem is not performance, but the market itself. High interest rates, falling transaction volumes and fewer offers continue to weigh on the entire real estate ecosystem. As Barton put it, Zillow is operating “in a tight real estate market that still shows no clear signs of easing.”

Investors may also be wary of Zillow's competitive position. The ongoing feud with Compass and escalating rivalry with CoStar have turned the once clear leader in digital real estate into a company fighting on multiple fronts. Compass has accused Zillow of misusing data, while CoStar continues to pour resources into Homes.com, directly challenging Zillow's dominance of listings. These battles may help Zillow defend market share, but they also increase costs and regulatory scrutiny.

Zillow's strong sales performance wasn't enough to offset these risks. With the real estate market in a downturn and competition increasing, investors are wondering whether the company can achieve sustained growth — or whether it is just winning short-term battles in a long, expensive war.

Investing.com