Consider building a long-term position in Zillow Group (ZG), which is currently trading down roughly 65% to 66% from its peak due to macroeconomic interest rate pressures rather than weak business fundamentals.

Exercise caution and wait for upcoming earnings results before making a heavy investment, as summer mortgage rates near 7% may have negatively impacted recent home sales.

Monitor macroeconomic indicators closely and look for 30-year mortgage rates to decline toward 4% before expecting a major market turnaround.

As the housing market eventually normalizes, successful execution by Zillow Group (ZG) could drive significant revenue acceleration and potential 3x to 5x stock appreciation over a longer investment horizon.

Maintain similar patience with deeply discounted real estate plays like REACs, ensuring you tie any new trades strictly to an eventual drop in interest rates and improved housing market liquidity.

Zillow Group (ZG)

• Current Status: Trading near a five-year low, down roughly 65% to 66% from its peak. It is heavily correlated to macro interest rate trends rather than its own business fundamentals.
• Business Performance: Firing on all cylinders with strong revenue growth despite a depressed real estate market. The company has grown revenue at a 21% CAGR historically and is guiding for mid-teen revenue growth.
• Revenue Segments:
  • Residential/Buy-and-Sell: Makes up about 66% of revenue, earning commissions (at least 15% to 30%) by connecting homebuyers to realtors. This division has declined due to the broader real estate market crisis.
  • Rentals: Currently accounts for 24% of revenue and has been saving the business, growing at a 37% CAGR for multifamily properties and 48% CAGR over the past three years. Zillow faces very little major competition in this digital space.
  • Mortgage & Advertising: Nascent segments, with mortgages making up 8% and advertising representing a small portion with significant long-term upside potential.
• Market Dominance: Operates as the "super app" of real estate in the US, effectively rendering traditional Multiple Listing Services (MLS) and outdated websites less relevant.
• Cost Management: Successfully reducing fixed costs, cutting advertising spend to roughly 7% of revenue, and lowering stock-based compensation.
• Share Buybacks: The company has an active share buyback program, purchasing twice as many shares in 2025 compared to 2024.
• Catalyst Potential: If the housing market normalizes and transaction volume returns (turnover is currently at a historic low of roughly 3%, down from a normal 4%), Zillow could see a major spike in revenue growth of up to 80% in the normalizing year, with potential for the stock to 3x to 5x if mortgage rates drop to around 4%.
• Short-Term Risks: Earnings are reporting in two days, bringing elevated uncertainty regarding how high summer mortgage rates (near 7%) impacted home sales. The stock is heavily dependent on macroeconomic factors (such as the Middle East conflict, oil prices, and Federal Reserve rate decisions) rather than company-specific execution.

Takeaways

• Exercise caution in the short term due to upcoming earnings announcements and a high-rate environment that continues to depress transaction velocity.
• View Zillow as a longer-term, tech-enabled bet on the eventual recovery of the US real estate market.
• Before making a heavy investment, monitor macroeconomic indicators: look for the 30-year mortgage rate to decline, resolution in the Middle East, oil prices moving toward $60, and a shift in Federal Reserve rate policies.

REACs (REACs)

• Current Status: Trading at a multi-year low alongside Zillow.
• Business Impact: Heavily sensitive to interest rates rather than specific corporate actions, such as their acquisition of Keller Williams.
• Valuation: Trades at zombie-grade valuations with an enterprise value-to-growth profit over revenue growth of 0.03.

Takeaways

• REACs operates as a real estate brokerage doing heavy lifting, meaning it carries deep exposure to the current high-rate real estate downturn alongside Zillow.
• Similar to Zillow, any potential upside is strictly tethered to a macro recovery and a drop in 30-year mortgage rates below the current 7% level.

Opendoor Technologies (OPEN)

• Current Status: Mentioned as a former darling of the channel, though the host no longer actively covers it.
• Business Profile: Believed to have good underlying growth numbers similar to other real estate tech platforms, but operates under the same overarching real estate bear market pressures.

Takeaways

• Opendoor shares the same macro risk profile as Zillow and REACs, as it is fundamentally tied to housing market liquidity and transaction frequency.