Welcome to the third and final installment in this week’s Real Estate Rebound series, where we’re highlighting three stocks set to benefit from a massive release of pent-up housing demand.
Part One featured home furnishings retailer Williams-Sonoma (WSM), whose just-right price point and sustainable design resonates with first-time home buyers.
Part Two was all about fully digital mortgage lending platform Rocket Companies (RKT), whose easy-to-use app revolutionizes the financing experience.
And today, in Part Three, we’ll home in on an online real estate listing site experiencing a flurry of consumer activity.
Mortgage rates dipped below 6% in September for the first time since early 2023, making home buying more affordable:
While this gave some hesitant home buyers the green light they needed to finally act, many could continue to hold off for further rate drops in 2025.
That’s actually a good thing for the stock we’re bringing you today.
If these buyers remain on the sidelines, a second wave of pent-up demand could hit the market early next year, creating another massive surge in activity.
As mortgage trends stabilize lower, companies that capture this renewed buying interest could see sustained growth.
Here’s one such name that presents an interesting opportunity for long-term investors.
Stock No. 3: Zillow Group (Z)
Zillow Group (Z) operates the country’s most visited online real estate marketplace with 2.5 billion visits and 231 average monthly unique users. Its database of over 160 million homes connects Americans with partners, agents, and digital solutions to make home buying, selling, renting, and financing easier.
Zillow Group has two fast-growing businesses outside of its core Residential segment – Rentals and Mortgages. Strong multi-family demand drove a 29% jump in Zillow’s Rentals revenue last quarter, while a sharp increase in purchase loan originations led Mortgages revenue 42% higher.
A recent Zillow Home Loans study found that monthly mortgage payments are lower than rent in 22 of the 50 largest U.S. cities including New York City, Chicago, and Houston. Combined with falling mortgage rates, this holds the potential for higher homeownership attainability and interest in Zillow tools like BuyAbility.
The company also added new natural language features to its AI-powered home search tool in September, enabling homebuyers and renters to search by affordability, commute, schools, and points of interest on the Zillow app.
Serious Pent-up Demand
A flurry of home buying activity could directly benefit real estate platforms like Zillow, leading to increased listing traffic and engagement. Already, the pent-up demand among consumers considering a housing move is palpable.
Zillow app users hit a multi-year high in August, with monthly active users up 85% year over year, compared to the 16% decline recorded a year ago:
This is a massive swing in consumer interest, suggesting falling interest rates could actually push a large swath of consumers who have been on the fence over the new-home-buying edge.
Untapped Rental Market
Zillow sees a significant opportunity in the rental market. Renters make up a much larger pool of movers than homebuyers, yet no existing marketplace offers complete rental listing coverage. Zillow currently captures only 35% of listings and 30% of the multi-family rental audience.
Zillow aims to growth this share, estimating a more than $1 billion revenue opportunity in rentals over time, driven by deeper market penetration, expanded listings, and increased monetization of its platform.
Z: The Bottom Line
Zillow operates a real estate marketplace that connects buyers, sellers, and renters, while also offering services like home valuations, rentals, and mortgage origination.
As housing demand rebounds, we believe Zillow’s diversified business model positions it to capture increased activity across multiple segments of the housing transaction process, from property search to financing.
Real Estate Rebound: Full Series Available Now
Remember, this was part three of our special Real Estate Rebound series, where Derby City Daily readers got a complete look at three stocks that could benefit directly from a home buying spree.
Part One was all about home furnishings retailer Williams-Sonoma (WSM), whose just-right price point and sustainable design resonates with first-time home buyers. The company leads in LikeFolio’s most predictive metric for long-term growth: Consumer Happiness. Lowered expectations from a weak second-quarter report could mean a surprise to the upside is in the cards. Access Part One here.
And in Part Two, we shifted focus to fully digital mortgage lending platform Rocket Companies (RKT); as refinancing and home buying activity surges, so do Rocket app users, which more than doubled in August. With just 12.1% of the refinance market, RKT has serious room for growth. Check out Part Two now for the details.
Until next time,
Andy Swan
Founder, LikeFolio