Zillow CEO: Real Estate is a Sellers's Market Right Now
Spencer Rascoff dishes on Zillow’s business model and industry trends.
Spencer, how does the real estate market look to you right now? I mean, what is your forecast for this year? Real estate looks very hot. Home values are appreciating about 7%, year over year, in certain parts of the country are appreciating over 10%, Orlando, Detroit, Seattle, Nashville. So housing is hot. Now, we've come back to peak value. However, don't worry, this isn't a housing bubble. By our data, the last peak in 2007, 2008 was built on a foundation of sand, the credit bubble. 10 million people got mortgages they really shouldn't have gotten. This housing peak is really built on something much more-- a firmer foundation. It's limited inventory. It's a seller's market. There just are not that many homes out there to buy. So you're saying it's a hot market. How does that impact Zillow? We grew really well through the downturn also. '08 and '09, we grew incredibly well. So I think people are always interested in real estate. They're always looking to buy and sell. The way we make money, though, the proximity billion dollars of revenue that we'll do this year, is from real estate agents buying advertising. So clearly, when agents are doing well and homes are selling, they invest more in their advertising. But I tend to think that we'll also do well in a down market, just like we did during the last recession. You have information about-- on every single house in the country, over 100 million, is that right? Yes. OK. So what are the trends you're seeing? Well, the biggest trend we're seeing is just the home price appreciation. So home values are increasing really quickly because of limited inventory. We also see a much more fluid consideration of buying versus renting. You know, for a long time, it was-- people would really put themselves in bucket of, like, I'm a buyer, I'm a renter. People now are much more willing to sort of consider one or the other at the same time. So it sounds like this is a seller's market, not a buyer's market. It is a seller's market, yeah, for sure. You know, a buyer shopping for homes this season is going to find competitive situations, where most times they're going to write offers on are going to have two, three, 10, maybe 20 other bidders looking for that same home. What about mortgage rates? We're seeing that they're beginning to notch up a little bit. Is that making a difference on people in the mood to buy or not? Mortgage rates are finally starting to tick up. We've been talking about this for two years. I think our forecast has 4.75% forecast by the end of the year on a 30-year mortgage. By historical standards, that's still incredibly low. So our data just doesn't predict that increases in mortgage rates between now and the end of the year are going to have much of an impact on housing because there's still so historically low. Is there a point that interest rates reach maybe double digits-- I don't know what the number is-- where it does make a difference and people stay away? Yes, absolutely. I think the data is that something like every point of mortgage rates adds another couple hundred dollars on the average-- a couple hundred dollars per month on the average mortgage. So there's absolutely a point that-- where it starts to be-- starts to really factor in. What we've seen, though, is that the small changes so far just drive people to trade down a little bit on price. So if mortgage rates tick up by 50 basis points, you know, half a percent, then maybe they just slightly move down their price criteria to solve for the same monthly rate. So there's not a number that you'd say that it hits 6%, 7%. No. There's no cliff that if mortgage rates hit a certain amount that really spells trouble for housing. But you know, even though you say it's a seller's market, it seems like people are feeling more confident. Wages are going up a little bit, unemployment is very, very low. What's the mood? I mean, the overall mood for home buyers and sellers is really strong. It seems like if you bought your home three to five years ago, you've had good appreciation built in, which is a great tailwind as you look to buy right now. I think if there's any consternation in the housing market, it's about lack of inventory. It can be frustrating for a buyer to get up the nerve to actually go into the market, and then have to keep making multiple offers and losing. And that-- you know, that's where the stress comes from in the transaction.