Zillow’s profits soared during the third quarter as iBuying deals dried up.
The Seattle-based real estate giant reported $40 million in profits, compared to a loss of $64.6 million during the third quarter of 2019. On the company’s Thursday earnings call, co-founder and CEO Rich Barton said he was “pleased to offer some counter-programing to the election news drip torture.”
During the third quarter, the company’s total revenue dropped 12 percent year over year to $656.7 million thanks to fewer iBuying deals.
The pause in home-buying during the first half of 2020 drove Zillow Offers’ revenue down to $186 million, a 52 percent year-over-year drop. That “resulted in lower inventory available for resale during Q3,” the company said in a letter to shareholders. Still, that resulted in a boost for Zillow’s balance sheet as the capital-intensive home-buying segment has yet to turn a profit.
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Zillow bought 808 homes and sold 583 during the third quarter. It paid an average of $290,369 per home and sold each for an average $318,875, according to a shareholder letter. It lost an average of $2,868 per home.
Last month, Zillow said it would hire in-house agents to represent it on home buying to help its unit economics. (Previously, it worked with third-party agents to buy and sell homes.) Barton said the deals are “cut-and-dry” transactions. “We are basically trying to optimize for customer experience and cost,” he said.
The Homes segment, which includes iBuying, lost $75 million during the quarter, compared to $87.9 million during the same period last year.
Barton said in an earlier statement that the “Great Reshuffling” in the residential market was leading homeowners to reevaluate where they live and work. “This is driving record demand for housing,” Barton said. “When combined with level-headed cost decisions, the result has been profitable growth.”
During the call, Barton said the country’s new, distributed workforce culture is here to stay. He described it as “the defining cultural trend” of the decade. “This doesn’t feel temporary,” he said. “It feels like it will take years to play out.”
Zillow is among the tech companies that now allows most employees to work from home permanently.
The company finished the quarter with a massive war chest — $3.8 billion in cash and investments, up from $3.5 billion at the end of the second quarter.
Traffic to the listing portal’s mobile apps and websites increased 21 percent year-over-year, hitting a record 236 million average monthly unique visitors. Zillow said its Premier Agent revenue rose 24 percent year over year to $298.7 million.