WEBVTT - Zillow Group CEO Jeremy Wacksman Talks US Housing Market

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>All right, want to get to a name that is

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<v Speaker 2>certainly on our radar. Shares a Zillo down the most

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<v Speaker 2>in nearly one year. The stock off more than nine percent,

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<v Speaker 2>was down seventeen percent at its low. Today, the online

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<v Speaker 2>real estate firm delivered a revenue forecast for the first

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<v Speaker 2>quarter that fell sure the average analyst estinmate. Meantime, the

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<v Speaker 2>company expects twenty twenty five to be its first profitable

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<v Speaker 2>year since twenty twelve. Keep in mind it posted a

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<v Speaker 2>net loss of one hundred and twelve million back in

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<v Speaker 2>twenty twenty four.

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<v Speaker 3>With more on the business and the US housing market

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<v Speaker 3>with us as Zillo CEO Jeremy Waxman joining us from Seattle. Jeremi,

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<v Speaker 3>thanks for joining us today. Likely I would imagine a

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<v Speaker 3>tough day when the stock is down as much as

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<v Speaker 3>seventeen percent, down nine percent right now. The housing market,

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<v Speaker 3>it just hasn't recovered in the way that you want

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<v Speaker 3>to see. What's the biggest thing holding it up?

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<v Speaker 1>Thanks for having me. The housing market remains challenged. It

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<v Speaker 1>was challenged in twenty twenty four, and we're expecting it

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<v Speaker 1>to be so again in twenty twenty five. Zillo reported

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<v Speaker 1>great results yesterday. Q four revenue up seventeen percent, and

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<v Speaker 1>we hit our goals of growing revenue double digits last

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<v Speaker 1>year and expanding our margins, and we also guided yesterday

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<v Speaker 1>that we expect to continue to do that again this

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<v Speaker 1>year with revenue growth in the low to mid teens,

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<v Speaker 1>more margin expansion, and positive gat and income for the

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<v Speaker 1>first time in a long time. And as you said,

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<v Speaker 1>that's against a persistently challenged housing market. So we're able

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<v Speaker 1>to grow and gain share both in twenty four and

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<v Speaker 1>we planned it again in twenty twenty five, while the

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<v Speaker 1>market remains depressed for volume and challenging for buyers.

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<v Speaker 2>Jeremy, do you think investors have it wrong in terms

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<v Speaker 2>of pushing your share price down a lot in reaction

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<v Speaker 2>to what they got on the quarter? In the outlook, we.

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<v Speaker 1>Don't really focus on the day to day voting machine

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<v Speaker 1>of the stock market. If you zoom out and look

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<v Speaker 1>over the long the long couple quarters, a couple of years,

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<v Speaker 1>we've made great progress on our integrated super apps strategy.

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<v Speaker 1>We're growing revenue nicely, we're outgrowing the category, and we

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<v Speaker 1>can plan to continue to do that in twenty twenty five,

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<v Speaker 1>and so over time the stock caacre of itself. The

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<v Speaker 1>company grows in value as we really deliver on our

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<v Speaker 1>promise of helping more buyers and sellers get home. That's

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<v Speaker 1>really our goal at Zillo is to help more of

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<v Speaker 1>our audience turn into transactions.

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<v Speaker 2>Yeah, and I will point out the stock was up

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<v Speaker 2>about twenty eight percent last year and up about almost

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<v Speaker 2>eighty percent and twenty twenty three. In terms of the

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<v Speaker 2>stress though, or maybe you're you know, kind of cautious

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<v Speaker 2>outlook in terms of the housing market, is it all

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<v Speaker 2>about mortgage rates and higher mortgage rates?

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<v Speaker 1>You have the challenge or the housing market starts with

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<v Speaker 1>mortgage rates, but it's really about availability and supply. We

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<v Speaker 1>are expecting flat ish total dollar value housing marketing Q

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<v Speaker 1>one and load mid single digit growth for the year.

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<v Speaker 1>And as you said, if you look, it's not like

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<v Speaker 1>twenty twenty four was that much better from a volume standpoint.

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<v Speaker 1>The real challenge is with mortgage rates. Staying hi affordability

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<v Speaker 1>is a challenge for buyers, but that really locks a

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<v Speaker 1>lot of sellers into their homes as well. Right a

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<v Speaker 1>seller is thinking about to do they want a trade out

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<v Speaker 1>of that mortgage? Do they feel locked into that mortgage,

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<v Speaker 1>and many are foregoing listing their home and making that move.

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<v Speaker 1>So you're seeing still very low inventory. Inventory is up

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<v Speaker 1>eighteen percent from last year, but it's still downs sharply

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<v Speaker 1>from pre pandemic norms, and so lack of supply really

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<v Speaker 1>makes it challenging for buyers. And then you add elevated

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<v Speaker 1>rates and what they can afford of what there is

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<v Speaker 1>to buy.

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<v Speaker 3>Jeremy, the cost of housing certainly a theme in last

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<v Speaker 3>year's presidential race. I'm wondering if you think that the

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<v Speaker 3>federal government will be able to achieve bringing more supply

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<v Speaker 3>of housing online. This came up with the vice presidential

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<v Speaker 3>debate when Jade Vance talked about using federal lands to

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<v Speaker 3>build homes. Do you think the federal government will have

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<v Speaker 3>a meaningful effect on housing supply?

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<v Speaker 1>The real challenge was supply. We talked about existing home

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<v Speaker 1>inventory and what sellers are doing, but we are chronically

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<v Speaker 1>underbuilt right we. Zilo estimates about four and a half

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<v Speaker 1>million homes have not been built to keep up with

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<v Speaker 1>the demand needed since the global financial crisis, and the

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<v Speaker 1>solution of those problems really is at the state and

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<v Speaker 1>local level. You need things like permitting reform and removing

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<v Speaker 1>red tape in the process. To get starts done quickly,

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<v Speaker 1>you need tax incentives and financing options so that builders

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<v Speaker 1>can get their projects online more quickly. So the totality

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<v Speaker 1>of the problem, you know, all nearly five million homes

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<v Speaker 1>that we need to catch up on. We're not going

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<v Speaker 1>to do that overnight, but slow and steady will definitely

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<v Speaker 1>bring more supply to the market.

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<v Speaker 2>I do wonder though, to you know, Jeremy, how much

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<v Speaker 2>the YEP I get that, the permitting I mean, these

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<v Speaker 2>are problems that have played certainly the housing market I

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<v Speaker 2>feel like forever in terms of supply. But having said that,

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<v Speaker 2>how much too? Is there some cautiousness on the part

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<v Speaker 2>of home builders who still everybody still remembers two thousand

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<v Speaker 2>and eight and the over bill. So is there also

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<v Speaker 2>a part of that as some of the components in

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<v Speaker 2>terms of supply.

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<v Speaker 1>Well, you're seeing places where it works well, right, I

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<v Speaker 1>mean Austin, Texas is one good exams sample that we've

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<v Speaker 1>highlighted where a lot of multi family inventory and the

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<v Speaker 1>rental market has come online and you've actually seen rent

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<v Speaker 1>prices come down even with the population growth in Austin

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<v Speaker 1>and so you know, you have to remember if you

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<v Speaker 1>zoom out, there are still the counter forces of for

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<v Speaker 1>sale and rentals working together, and you know, when folks

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<v Speaker 1>can't get it done and find the home to buy,

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<v Speaker 1>they end up rere renting, and you're seeing you know,

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<v Speaker 1>rental inventory, you know, grow to satisfy that demand as well.

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<v Speaker 1>So it is, as you said, it's a local issue,

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<v Speaker 1>but there are places where it's working well and there

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<v Speaker 1>are places where it can work even better.

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<v Speaker 3>We got a hotter than expected CPI print earlier today,

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<v Speaker 3>and my question is about how that changes the outlook

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<v Speaker 3>for rates for the year and then in turn, how

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<v Speaker 3>that affects your business. Does your OUTLOK for twenty twenty

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<v Speaker 3>five change if rates don't come down.

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<v Speaker 1>No. Our outlook that we put out yesterday assumes a

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<v Speaker 1>pretty lousy housing market, and I think today's print probably

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<v Speaker 1>just kind of confirms that fact. Right, we are expecting

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<v Speaker 1>flatish housing market in Q one and load of single

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<v Speaker 1>digits for the year, and I think we were maybe

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<v Speaker 1>a little bit more embarrassed than most heading into the

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<v Speaker 1>year on how the housing market's going to do. Now,

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<v Speaker 1>the good news for ZILLO is we're out growing the

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<v Speaker 1>category and we're gaining share. We did that in twenty

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<v Speaker 1>twenty four and we expected to again in twenty twenty five.

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<v Speaker 1>And that's in our for sale business, where we're helping

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<v Speaker 1>more buyers meet their agents, we're helping originate more mortgages.

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<v Speaker 1>That's also when our rentals business. Our rentals business grew

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<v Speaker 1>twenty five percent in Q four. We expect that to

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<v Speaker 1>accelerate in Q one as we bring more rental inventory

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<v Speaker 1>to more renters across slow Hey.

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<v Speaker 2>One thing I do wonder in our conversation coming off

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<v Speaker 2>of the hot CPI print Jeremy, is that maybe we

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<v Speaker 2>saw certainly the rates market, the US rates market, the

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<v Speaker 2>treasury market react and move up today. But now the

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<v Speaker 2>talk has moved to maybe even the next move. We

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<v Speaker 2>need to start thinking about the Fed raising rates. If

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<v Speaker 2>we see the FED start to raise rates, what does

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<v Speaker 2>that do in your view to the housing market and

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<v Speaker 2>how might that impact your business?

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<v Speaker 1>Well, as I said, we're kind of near all time

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<v Speaker 1>lows on volume right. We're down to basically folks who

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<v Speaker 1>have to move and can get it done, get it done.

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<v Speaker 1>And that's the thing about this market. Long term, real

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<v Speaker 1>estate is a growth industry. You see volumes and total

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<v Speaker 1>value grow Right now, you're seeing depressed volumes because of

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<v Speaker 1>all the challenges, especially in the financial market with affordability

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<v Speaker 1>for buyers. But folks are getting it done and they

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<v Speaker 1>will get it done. And what we're here at Zilla

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<v Speaker 1>to do is help them. Buyers who need to buy,

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<v Speaker 1>many of them are starting that conversation with financing rather

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<v Speaker 1>than just dreaming. We now see about as many buyers

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<v Speaker 1>start with what can I afford and can I even

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<v Speaker 1>buy right now as they do dreaming, shopping and going

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<v Speaker 1>media an agent. So we've brought online tools like Buyability

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<v Speaker 1>to help them truly understand their personalized payment information, what

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<v Speaker 1>can they actually afford for themselves given their financial information,

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<v Speaker 1>so they can have confidence to go get a pre

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<v Speaker 1>approval letter, to actually go make an offer and win

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<v Speaker 1>a house. So it is tough out there, it will

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<v Speaker 1>remain challenging in twenty twenty five, but folks can get

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<v Speaker 1>it done. We're there to help and that's exactly what's

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<v Speaker 1>driving their results from us in Q four and why

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<v Speaker 1>we expect to continue to grow and not go the

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<v Speaker 1>category in twenty twenty five.

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<v Speaker 2>Jeremy, you mentioned those buyability tools that you guys have

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<v Speaker 2>on your platform. What does that show you about. Is

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<v Speaker 2>it the first time home buyer that continues to find

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<v Speaker 2>it really difficult, is it the trade up home buyer?

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<v Speaker 2>What does it tell you about kind of the home

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<v Speaker 2>buyer and in essence, the US consumer out there when

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<v Speaker 2>it comes to buying a house.

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<v Speaker 1>Yeah, I mean the demand and desire to buy a

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<v Speaker 1>home still persists and exists across all demographics. You're seeing

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<v Speaker 1>folks having to wait longer, save up more to make

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<v Speaker 1>that down payment, and so it gets tougher. But you

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<v Speaker 1>see the strong desire to buy a home really persist

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<v Speaker 1>across all demographics, and we see that in folks who

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<v Speaker 1>are using Zillo. Again. As I said, one of the

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<v Speaker 1>things that is interesting to us is how much more

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<v Speaker 1>financing and total cost of ownership is front and center

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<v Speaker 1>for a buyer before they even start. You know, five

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<v Speaker 1>ten years ago, everyone wanted to start by shopping, by touring,

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<v Speaker 1>by virtual touring, by going into open houses, and now

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<v Speaker 1>it's kind of a balance as many folks want to

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<v Speaker 1>start in that state, as they want to start with

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<v Speaker 1>just the reality of what's my budget look like? How

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<v Speaker 1>do I set my budget and work with an agent

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<v Speaker 1>to make sure the homes I fall in love with

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<v Speaker 1>the ones that can actually buy hey.

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<v Speaker 3>One thing we also learned recently from you guys is

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<v Speaker 3>that Redfinn is teaming up with Zillo for rental listings.

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<v Speaker 3>This partnership, to me, it sort of looks like frenemies

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<v Speaker 3>teaming up. Like you guys are competitors here. Redfinn's market

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<v Speaker 3>cap is about two billion dollars year, about eighteen billion dollars.

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<v Speaker 3>Do you end up buying redfin at a certain point.

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<v Speaker 1>We're really excited about this partnership we just announced with Redfinn.

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<v Speaker 1>It's a big step in our overall rental strategy. It's

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<v Speaker 1>important to zoom out and remember, unlike the FIRS sale marketplace,

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<v Speaker 1>there's no national database for rentals. The big challenge a

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<v Speaker 1>renter has is they can't find all the supply. They

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<v Speaker 1>have a very short timeframe to find a place to rent,

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<v Speaker 1>and so they scour the internet, they scour offline looking.

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<v Speaker 1>So that's zilla strategy. Can we organize more and more

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<v Speaker 1>of the rental listings out there nationwide so that renters

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<v Speaker 1>on Zillo and on our partner sites can find them.

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<v Speaker 1>That strategy is working great. That's what's driving having the

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<v Speaker 1>leading audience and growing audience of renters, and that's bringing

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<v Speaker 1>more property managers to Zillo and our partner sites to

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<v Speaker 1>want to advertise that audience. So this partnership with Redfin

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<v Speaker 1>to power their rentals business is just the next step

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<v Speaker 1>in that strategy. Adding on to this great partnership we

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<v Speaker 1>forged with real to dot com last year, it allows

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<v Speaker 1>advertisers to come to Zilo and get advertising in front

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<v Speaker 1>of Zillo sites, Redfin sites and realtor sites to reach

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<v Speaker 1>an even bigger set of renters. And then renters get

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<v Speaker 1>more choice, right, they see more inventory, which, again, as

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<v Speaker 1>I started, that's the big problem in rentals is you

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<v Speaker 1>cannot find all the inventory.

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<v Speaker 3>And forgive me that Redfin market cap about one point

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<v Speaker 3>one billion dollars, so shy of two billion dollars. I

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<v Speaker 3>didn't hear a yes or a no, and no answer

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<v Speaker 3>to my question about whether or not.

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<v Speaker 1>Oh no, have no plans now, no plans. We're very

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<v Speaker 1>excited about the partnership. We've worked with them on some

0:10:49.240 --> 0:10:52.120
<v Speaker 1>other things before and we love how culturally aligned they

0:10:52.120 --> 0:10:54.280
<v Speaker 1>are and just digitizing the transaction in real estate.

0:10:54.360 --> 0:10:57.240
<v Speaker 2>Well, along those lines, how are real estate companies holding

0:10:57.280 --> 0:10:58.880
<v Speaker 2>up through this extended housing market?

0:10:58.880 --> 0:10:59.160
<v Speaker 3>Trough.

0:10:59.240 --> 0:11:01.680
<v Speaker 2>I mean, any opportun ortunities for you guys to do

0:11:01.720 --> 0:11:04.360
<v Speaker 2>some acquisitions as a result, along maybe the lines of

0:11:04.520 --> 0:11:07.120
<v Speaker 2>I don't know, partnerships, but maybe even acquisitions.

0:11:08.559 --> 0:11:11.240
<v Speaker 1>Yeah, the bright side of a challenge real estate market

0:11:11.280 --> 0:11:14.640
<v Speaker 1>is it really allows the best professionals to gain share.

0:11:14.800 --> 0:11:17.280
<v Speaker 1>Right when it's rainy and cloudy outside, those that do

0:11:17.360 --> 0:11:20.160
<v Speaker 1>best sometimes come out ahead. And what's great about that

0:11:20.240 --> 0:11:22.720
<v Speaker 1>is that aligns so nicely with Zillo strategy, Right. Zillo

0:11:22.800 --> 0:11:26.079
<v Speaker 1>strategy is to partner with the best agents and agent

0:11:26.080 --> 0:11:29.079
<v Speaker 1>teams in the industry. Eighty percent of the agents that

0:11:29.160 --> 0:11:31.480
<v Speaker 1>we partner with are in that top twenty percent of

0:11:31.520 --> 0:11:35.520
<v Speaker 1>producers nationwide. So these are the folks that are operating

0:11:35.559 --> 0:11:39.760
<v Speaker 1>businesses at scale, training great agent teams to help delight customers.

0:11:39.960 --> 0:11:42.960
<v Speaker 1>So even when there's less transactions to do, and even

0:11:42.960 --> 0:11:45.480
<v Speaker 1>when it's a challenging conversation with many buyers and sellers,

0:11:45.679 --> 0:11:49.160
<v Speaker 1>those folks command great price hold share and grow their business.

0:11:49.400 --> 0:11:52.360
<v Speaker 1>And so in some ways having a choppier or a

0:11:52.360 --> 0:11:55.200
<v Speaker 1>depressed housing market can advantage some of the best professionals.

0:11:55.360 --> 0:11:58.120
<v Speaker 3>Hey, we're asking every CEO we talk to these days

0:11:58.320 --> 0:12:02.320
<v Speaker 3>a couple of different questions about politics about AI politics

0:12:02.360 --> 0:12:04.240
<v Speaker 3>is where I want to go and just hear from

0:12:04.240 --> 0:12:08.040
<v Speaker 3>you about how you view this new Trump administration in

0:12:08.160 --> 0:12:10.559
<v Speaker 3>terms of changes that you've made at the company as

0:12:10.600 --> 0:12:13.320
<v Speaker 3>a result, or what it means for you as a business.

0:12:15.240 --> 0:12:17.280
<v Speaker 1>One of the things youill focuses a lot on is

0:12:17.360 --> 0:12:20.360
<v Speaker 1>AI and AI as it comes to relisted industry, right,

0:12:20.400 --> 0:12:24.000
<v Speaker 1>both for us as employees, but more so for our

0:12:24.040 --> 0:12:27.280
<v Speaker 1>customers and our partners, our agents, our loan officers. And

0:12:27.360 --> 0:12:31.600
<v Speaker 1>we've been investing in and innovating around AI for decades

0:12:31.960 --> 0:12:34.439
<v Speaker 1>and so now as general of AI comes to the forefront,

0:12:34.679 --> 0:12:38.440
<v Speaker 1>you know, we've been really advocating for responsible regulation around

0:12:38.440 --> 0:12:41.240
<v Speaker 1>AI that encourages and supports innovation so that companies like

0:12:41.360 --> 0:12:44.160
<v Speaker 1>Zilo can continue to innovate on behalf of the customer.

0:12:44.360 --> 0:12:46.520
<v Speaker 1>So one thing we're very excited about is to continued

0:12:46.600 --> 0:12:50.520
<v Speaker 1>progress on the ability to progress with AI. And you know,

0:12:50.600 --> 0:12:53.480
<v Speaker 1>AI for us is a feature, it is a tool

0:12:53.480 --> 0:12:56.280
<v Speaker 1>for our customers, for our employees, but in the REALISTM industry,

0:12:56.360 --> 0:12:59.760
<v Speaker 1>it's really about making the professionals more efficient and effective. Right.

0:12:59.800 --> 0:13:05.000
<v Speaker 1>There's there's so much wasted work, busy work, paperwork, back

0:13:05.040 --> 0:13:06.880
<v Speaker 1>office work, and when you talk to a great real

0:13:06.960 --> 0:13:08.880
<v Speaker 1>estate agent or a great loan officer. That's not what

0:13:08.880 --> 0:13:11.360
<v Speaker 1>they want to be doing. They want to be delighting customers.

0:13:11.480 --> 0:13:13.120
<v Speaker 1>They want to be winning more business, they want to

0:13:13.160 --> 0:13:16.120
<v Speaker 1>be getting more transactions done. So we're really excited about

0:13:16.160 --> 0:13:18.560
<v Speaker 1>the ability to continue to lean in and innovate, not

0:13:18.720 --> 0:13:22.079
<v Speaker 1>just on our tech platform generally, but on AI specifically,

0:13:22.280 --> 0:13:25.520
<v Speaker 1>to really bring more of this transaction into your smartphone,

0:13:25.520 --> 0:13:27.680
<v Speaker 1>make it more delightful and faster for the customer.

0:13:27.760 --> 0:13:30.440
<v Speaker 2>All right, Jeremy, one last question is also a question

0:13:30.480 --> 0:13:34.360
<v Speaker 2>we are asking too, heads of company CEOs and the like,

0:13:34.920 --> 0:13:37.000
<v Speaker 2>anything that could come out of Washington and the new

0:13:37.040 --> 0:13:39.760
<v Speaker 2>administration that could help or hurt your business. And just

0:13:39.760 --> 0:13:40.960
<v Speaker 2>got about thirty seconds.

0:13:43.080 --> 0:13:46.800
<v Speaker 1>Zillo is really focused on ensuring that real estate stays

0:13:46.920 --> 0:13:51.640
<v Speaker 1>accessible for the customer. We've outlined our principles for the consumer,

0:13:51.640 --> 0:13:57.199
<v Speaker 1>which are around transparency, access, and affordability, and any policies

0:13:57.200 --> 0:13:59.440
<v Speaker 1>that come we look to help make sure they push

0:13:59.480 --> 0:14:02.080
<v Speaker 1>forward and sure that consumers have access to all the

0:14:02.080 --> 0:14:05.280
<v Speaker 1>information that's out there, have access to great professionals, and

0:14:05.360 --> 0:14:07.360
<v Speaker 1>have better education on how the real estate industy works.

0:14:07.360 --> 0:14:09.760
<v Speaker 1>Real estate is one of the largest industries that there

0:14:09.840 --> 0:14:12.880
<v Speaker 1>is and it's the single biggest decision that most individuals

0:14:12.920 --> 0:14:15.600
<v Speaker 1>are going to make, So making sure that people understand

0:14:15.640 --> 0:14:18.679
<v Speaker 1>how it works, making sure that they have access to

0:14:19.000 --> 0:14:21.520
<v Speaker 1>hiring the best professionals, that's one of the things we're

0:14:21.640 --> 0:14:23.680
<v Speaker 1>very focus on Zilla and we continue we will continue

0:14:23.680 --> 0:14:24.280
<v Speaker 1>to be so you're.

0:14:24.200 --> 0:14:26.600
<v Speaker 2>Hopeful that the administration the policies will be supportive of

0:14:26.600 --> 0:14:27.280
<v Speaker 2>the housing market.

0:14:27.320 --> 0:14:31.720
<v Speaker 1>Just quickly. Yeah, We've been around for twenty years and

0:14:31.760 --> 0:14:35.440
<v Speaker 1>have been fortunate to work with both both administrations. And again,

0:14:35.440 --> 0:14:37.360
<v Speaker 1>as we talked about earlier, one of the real challenges

0:14:37.400 --> 0:14:39.080
<v Speaker 1>in our industry is so much is done at the

0:14:39.120 --> 0:14:42.120
<v Speaker 1>state and the local level to make sure that real

0:14:42.240 --> 0:14:44.800
<v Speaker 1>estate can flow for the benefit of the buyer and seller.

0:14:44.880 --> 0:14:46.760
<v Speaker 2>Really good point, Jeremy, Thank you for all this time.

0:14:46.840 --> 0:14:49.000
<v Speaker 2>Jeremy Waxman, he's chief executive officer of Zillo.