Zillow Group, Inc. ZG recently announced that it has resumed home buying for Zillow Offers in another five of its existing markets.
Notably, homeowners from Los Angeles and Riverside in California as well as Minneapolis, Cincinnati and Orlando will now be able to sell their homes directly to Zillow Group via Zillow Offers.
Zillow Group is gradually restarting operations in existing markets after the temporary halt in home acquisitions in March due to the global COVID-19 outbreak. The company is now purchasing homes in 20 out of the 24 markets where it operates.
The decision to resume buying highlights the company’s optimism in the U.S. real estate space amid the pandemic. Moreover, the continuation of Zillow Offers is likely to boost the company’s revenues in the quarters ahead. In first-quarter 2020, Zillow Offers revenues came in at $769.1 million, which contributed 68.3% to Zillow Group’s total revenues.
The gradual resumption of operations is also expected to boost investors’ optimism in the stock.
Talking about year-to-date price performance, shares of the company have returned 35.6% compared with the industry’s rise of 16.3%.
Year to Date Performance
Enhanced Safety Measures to Attract Customers
Zillow Group has undertaken various initiatives to ensure health and safety of all its customers, employees and partners amid the ongoing pandemic.
Under the guidance of new health advisor Regina Benjamin, the company’s ‘Move Forward. Stay Safe’ initiative is aimed at protecting its stakeholders and making sure that potential customers are able to buy, sell or rent a home safely.
Through Zillow Offers, homeowners can sell their homes with minimal in-person contact.
Meanwhile, customers are resorting to virtual tours of houses through the Zillow 3D Home app amid social distancing trends. Notably, agents created 525% more 3D home tours in April compared with February tally. Buyers have been enabled to take virtual tours through local Zillow Group brokers or a Zillow Premier Agent.
Additionally, buyers can utilize Zilllow’s self-touring feature to check out most Zillow-owned homes by themselves. The feature allows them to use the Zillow app to identify themselves and tour the home without supervision between 6 a.m. and 8 p.m. daily.
These efforts are expected to help the company attract more customers and enable them to close transactions digitally. As part of Zillow Group’s ‘Clean, Protect, Distance’ protocol, enhanced cleaning and protective measures will ensure customer safety even during in-person tours.
Recovery in Real Estate Market Holds Promise
Despite the initial impact of the pandemic that brought the market to a standstill, the U.S. real estate market is recovering.
As of July 2, new for-sale listings increased 5.2%, while newly pending sales rose 18.8% from the same period in June, per a recent Zillow Group report. Moreover, in June, homes in the United States stayed on the market for only 22 days before being sold off, the fastest sell rate in the past two years.
Also, home prices in the United States have been rising. The median listing price surged to a record of $337K in June, up 3.8% year over year.
Real estate brokerage Redfin RDFN stated that as of the first week of June, demand for home buying is up 25% compared with pre-pandemic levels. The company is also witnessing a supply and demand recovery in Chicago, Detroit, New Orleans and Seattle. Notably, significantly lower mortgage rates (3.3%) and reduced coronavirus-induced restrictions are driving demand for homes in the United States.
Per the latest Housing Market Index (HMI), sentiment among U.S. homebuilders jumped a striking 21 points to 58 in June from May. This recent spike in builder confidence clearly highlights a rapid improvement in the housing market.
Thus, Zillow Group’s decision to resume home buying has well positioned the company to capitalize on the anticipated recovery of the real estate market after the pandemic. Moreover, it is likely to strengthen Zillow Group’s competitive position against Redfin that resumed services across a few of its markets.
Zacks Rank & Key Picks
Currently, Zillow Group carries a Zacks Rank #3 (Hold).
Fortinet, Inc. FTNT and Nice Ltd. NICE are some better-ranked stocks worth considering in the broader computer and technology sector, both flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Long-term earnings growth rate for Fortinet and Nice is pegged at 14% and 10%, respectively.
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