Specialist
Former Senior Director at Zillow Group Inc
Agenda
- Zillow Group's (NASDAQ: ZG) operating environment – key behavioural trends at consumer and agent level and macro housing market dynamics for the next 12-18 months
- Competitive dynamics vs iBuyers, rental ILS (internet listing service) platforms and traditional brokers
- Business segment overviews – PA (Premier Agent) and Flex, Zillow Offers, mortgage, title and escrow
- Outlook for Q4 2021 and beyond – downside risks and uncertainties
Questions
1.
There are a few different perspectives on the end users and influencers of the Zillow model. What key behavioural trends are impacting the market, whether on the consumer or agent side? What’s driven the strategic decision-making from the various players over the last few years?
2.
The top 10%-performing agents seem to represent a disproportionate amount of the overall residential real estate transactions in US homebuying. Could the introduction of tech tools democratise the historically less productive agent, or will it offer greater leverage to the high-producing agents?
3.
We’re in a peak home price environment – housing turnover rates are at unprecedented velocity and inventories are falling behind. How do you expect those factors to sustain? How should we frame the resulting impact on the Premier Agent and Offers businesses?
4.
What do you think about Zillow’s decision to pause on subsequent iBuying purchases? The company suggested it was due to labour shortages, but companies such as Opendoor and Offerpad are continuing to purchase.
5.
The iBuying concept is driven primarily by the speed at which the transaction can occur. You mentioned some conflicts of interest on the agent side, and that Zillow is having a tougher time offloading inventory than Opendoor and Offerpad. Is that a detriment to the company long term, given that transaction speed is one of the biggest competitive differentiators within the iBuying sector?
6.
Do you think Zillow being more conservative about its buy box than some peers stems from a fear of having too much overpriced inventory? Do you think the company is concerned, if the market is cooling, that flipping these properties could be return dilutive, given that iBuyer returns are already extremely thin?
7.
Can the fact that Zillow’s buy box is more conservative be perceived as a weakness, compared to Opendoor and Offerpad which have figured out how to drive a return on broader buy boxes? How attractive is that in terms of the longer-term iBuyer trajectory? If Zillow can’t tap into the broader aspects of the market, is that to its detriment?
8.
How challenging is it for the PA [Premier Agent] business to grow during a hypothetical down-pricing period or a flat-transaction home sales period? Is it cyclical, meaning that a tough macro environment in turn is a tough time for PA to perform well?
9.
Could you give an overview of the competitive landscape? What are the major competitive drivers across Zillow’s end markets?
10.
Do you think Zillow’s original move into offers was proactive? You mentioned the company pursuing more of a flywheel or ecosystem model. Was the move more reactive, given the rise of Opendoor in particular?
11.
What do you think about the serviceable portion of the TAM for iBuying? Is it a double-digit percentage of the USD 1.6tn of residential real estate transactions? Is it a referral-based tool that can partake in more than 10% of transactions, even if it’s not closing the actual deals? How big could this concept become?
12.
Are there home price ceilings beyond which iBuying will probably never work, even from an appraisal data standpoint?
13.
What do you think about key person risk with Zillow’s CEO Spencer Rascoff, President of Media and Marketplace Greg Schwartz, Senior Director of Real Estate Sales and Strategy Nick Taylor, VP of PA Carey Armstrong and Senior Director of Strategy and Operations Caroline Stanford all departing? Is such a concentrated portion of senior leaders departing and in a short time period a concern?
14.
Are there ceilings for Flex in the overall PA business longer term? It’s driven by high-quality leads that convert well, so I presume it can’t turn into 100% of the PA business, there will always be a need for cheaper market-based pricing or regions where market-based pricing exists. How do you expect Flex to grow as part of the PA mix longer term?
15.
What are your thoughts on the nascent ancillary products? What are the obstacles to title, escrow, mortgage and closing services being scalable?
16.
What streamlining could make sense and unify Zillow’s focus, even from an organisational hierarchy standpoint?
17.
Is there anything else you would like to discuss? What are your thoughts on Zillow’s relationships with big brokers or the ever-ageing demographic of the agent in general?
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