This week Intel explores the financial data behind three real estate companies that thrilled investors amid a stagnant market that stymied the competition: Compass, Zillow and The Real Brokerage.
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When real estate revenues are on an upswing, almost everyone gets to report rosy numbers.
But in a down market, the companies that are able to grow market share while controlling costs truly begin to stand out — and claim a bigger stake of the market recovery to come.
That’s where several of the giants of real estate, as well as some of the industry’s fastest-growing upstarts, find themselves today.
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Last week, Intel identified the real estate companies that investors have pegged as the biggest winners of the extended market slowdown of 2024.
This week, Intel explores how these companies have so far successfully navigated what has been, for the industry as a whole, a painfully slow market recovery.
Zillow strikes back
For the first half of the year, it appeared that momentum (and a new slate of NAR rules) might be favoring CoStar’s Homes.com platform in its bid to claw into Zillow’s market share in the long run.
But in recent months Zillow stock has bounced back in a big way — and it’s done so on the back of cold, hard financial results.
Most recently, Zillow reported third-quarter mortgage revenue that was 63 percent higher than at the same time last year, and rental revenue that was up 24 percent over the same period.
Zillow’s flagship residential segment wasn’t left out of the growth either, reporting revenues that were up 12 percent year over year.
In the context of a broader housing market that has essentially been flat over the same period, these numbers reflect a reality that Zillow is simply growing its footprint within the residential real estate world.
Perhaps just as important to investors has been Zillow’s ability to pursue these growth initiatives while trimming its losses at the same time, both in real terms and as a percentage of revenue.
Zillow Group
First 9 months of 2023 → first 9 months of 2024
- Revenue: $1.5 billion → $1.7 billion
- Profit margin: -5.8% → -3.6%
The fight between Zillow and CoStar — as well as more established Zillow competitors like Realtor.com and Redfin — is far from over.
But using stock value as a barometer for a healthy growth trajectory, the latest round has gone to Zillow.
Compass points true north
Much like Zillow, the brokerage giant Compass has grown at a time that its competitors have treaded water.
And like its listing portal counterpart, Compass has done so while substantially trimming its losses as a share of total revenue.
Compass
First 9 months of 2023 → first 9 months of 2024
- Revenue: $3.8 billion → $4.2 billion
- Profit margin: -6.2% → -2.7%
As discussed in last week’s report, Compass finally reported a profit in the second quarter of 2024, and nearly broke even in the third quarter.
This new path marks a significant milestone for a company whose initial growth phase involved absorbing heavy planned losses year after year.
In addition to the financial picture, investors may be responding positively to Compass CEO Robert Reffkin’s stated vision for an expansive platform of private listings.
In recent weeks, Reffkin has positioned his company as one of the chief opponents of the National Association of Realtors’ Clear Cooperation Policy, which requires members to list their homes on the MLS within one business day of marketing it publicly.
As a rising behemoth in the brokerage world with a large network of affiliated agents, Compass may be in a unique and improving position to wage this fight.
New disruptor verdict: Real
For much of the last two years, Intel has kept tabs on the rise of the Real Brokerage as it continued its ambitious expansion in agent count and revenue.
But it wasn’t until the calendar turned the page to 2024 that investors went all in on the low-fee brokerage’s future.
In the first nine months of the year, Real has narrowed its losses, nearly doubled its revenues and more than tripled its stock value to shareholders.
The Real Brokerage
First 9 months of 2023 → first 9 months of 2024
- Revenue: $535 million → $914 million
- Profit margin: -2.9% → -2.2%
This company’s progress is notable for how much it resembles the rapid rise of competitor eXp Realty during the pandemic boom years.
Real’s growth also stands out for how it has coincided a major housing downturn, when many real estate companies have been forced to hit pause on their once-ambitious growth goals.
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