Home Selling Site Zillow Sees Rapid Growth During COVID-19 Pandemic

The website Zillow, which is owned by Zillow Group Inc., reported its third-quarter earnings late on Thursday, November 5. It stated that its earnings beat expectations, and this sent shares of its stock soaring. Zillow stocks increased 13% as of 10:00 am on Friday, November 6. Zillow plays a big role in helping people shop for homes online. In the pandemic economy, it has a booming business that is likely to keep growing well into 2021.

Housing Is a Breakout Industry in the COVID-19 Economy

The housing market was strong before COVID-19, and the fallout of the pandemic has not slowed its growth. Zillow saw its lowest stock value in March. Since then, its value has increased by 400%. This is similar to the boom that Zoom Video Communications Inc. has seen since the World Health Organization declared COVID-19 to be a pandemic on March 13, 2020.

Why Housing Has Been a Strong Economic Sector

The demand for housing far exceeds its availability. In a healthy, balanced housing market, there is a six-month supply of available housing units. The national average housing supply is about two months. In busy markets, the supply is one to 1.5 months. The longer the pandemic goes on, the more people are thinking about their housing. Their needs are changing. Maybe they don't need to live close to work and can move to a lower-cost area. Maybe they need another bedroom or a home office. If people have kids, they may need more space to set up desks or workstations for remote learning.

Changing Housing Needs Caused by COVID-19

According to Zillow Chief Executive Officer Rich Barton, these housing changes are not just a snapshot in time. Although home sales nearly stopped because of the springtime shutdowns, buyers have rushed back into the market as soon as they could. The historically low interest rates for mortgages are a huge factor in this situation. With lower interest rates, people can afford to buy a bigger home that has an extra den, office or bedroom.

What Zillow Is All About

Zillow allows people to digitally search available homes for sale. Its tool allows a person to enter criteria for the search, such as zip code, price range, number of bedrooms and other features. Based in Seattle, the company's main focus is real estate marketing. It charges real estate agents to connect a visitor with their site where the home is listed for sale. Its revenue increased by 21% in the third quarter of 2020 compared to the second quarter. Its revenue was 24% higher for the year as a whole. The company's third-quarter revenue was $299 million.

Why Zillow Is More Popular Now

Many state governors shut down certain types of events, such as open houses for real estate sales. The housing market had to respond with alternatives. Zillow offers a way for real estate agents to upload dozens of images or a video tour of the home. While it is not quite the same as walking through the place, it is a close option. People can use the Zillow app on their phone or visit the website on any device. They can also set up accounts that alert them when a home that meets their search criteria is newly listed for sale.

Analysts Disagree on Whether Zillow's Growth Will Persist

The housing market is expected to remain robust well into 2021. The low interest rates and low supply, high demand and changing demographics mean that people will still be buying homes even if there is no end in sight for the COVID-19 crisis. For Zillow, the only limitation seems to be its ability to get new agents to list homes for sale on the site.

Nothing Lasts Forever

Zillow's CEO is mindful that such robust growth is unlikely to continue. The growth may slow if interest rates increase, the pandemic worsens or there are more lockdowns and job losses. A slowdown could also occur if consumers feel nervous and do not feel confident about taking on mortgage debt. One analyst even went so far as to say that the growth in home sales could grind to a halt even more quickly if states are not able to finish the ballot counting for the 2020 election. Civil unrest could upend the strong home sales growth and the hot performance of Zillow.

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