Key insights
- Zillow is launching an AI tool to help users navigate the housing market, aiming to increase user engagement and facilitate transactions. The CEO notes that mortgage rate lock-in is a significant factor contributing to the limited housing supply, as homeowners with low rates are reluctant to sell. This dynamic could continue to constrain housing inventory and temper any potential upside for homebuilder stocks.
Zillow Group (Z, ZG) CEO Jeremy Wacksman joins Yahoo Finance Executive Editor Brian Sozzi to discuss Zillow's implementation of AI and why fewer houses are entering the market.
We are launching today Zillo AI mode, uh, which is bringing an LLM inside of Zillow, right? So we've had AI capabilities on Zillow for a long time. Personalizing search. That's how we generate all that rich media you play with when you fly your drone around. But now you can have a conversation with Zillow and what we're finding even in the early days of using that is people are just asking more and more questions.
We're able to guide them further along in the journey, and we're able to really help them move along in the transaction from not just searching, but actually financing, offers, you know, finding their agents and closing. When it's time to transact, you spend all available time trying to make sure you make the right decision.
Uh, we were telling a story to our investors of someone who uh came back to the same condo 16 times and just kept trying to figure out more information about it and compare it to the next one that he found. That is how this category works. You're you're only buying a house once a decade or more.
It's your single biggest financial decision. So tools like Zillow, platforms like Zillow where you can get information, the reason we have 235 million unique users is because they want to know and make sure they're making the right decision. So when you bring an AI tool to the fold, it just unleashes them to get even more informed, even more empowered, and it makes them more educated.
What is the barrier for people holding on their homes for so long?
They folks that have owned their homes for 20, 30 years, they're they're not selling. Like what has to happen to get them to sell? I mean, they just I don't know.
Well, mortgage rate lock is a real thing, right? So there are many homeowners who are sitting on 2, 3% mortgages. Yeah, from COVID, and the idea that I'm going to go trade into a six or 6 and a half% mortgage right now, they're kind of delaying that. That's why you're seeing supply down, right?
Supply is down really for two reasons. One, we haven't built enough homes, right? Zillow economists estimate we are 5 million homes underbuilt since the global financial crisis. Just not enough new construction coming online to keep up with household formation.
And now, the question you asked, rate lock. If you're a seller and you might have moved, but you didn't have to move, you probably put off that move. And so the demand to sell, the desire to sell is at elevated levels because people are kind of sitting on the sideline.