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Zillow Shares Plunge on Fears of Lower Real Estate Commissions

Zillow (ZG) - ★★★ – Ranked 37th in Q1 2024 Mid/Small Cap Rankings

Zillow Group's stock (Z) was hammered on Friday, plunging as much as 15% at one point, after the National Association of Realtors (NAR) reached a $418 million settlement that could reshape the real estate commissions landscape.

The NAR agreed to settle claims that it conspired with real estate brokers to raise commission rates paid by homebuyers and sellers. If approved by federal courts, the settlement could open the door to lower commissions and disrupt pricing dynamics across the industry.

Investors clearly viewed this as a negative for Zillow and other real estate technology players. Shares of Anywhere Real Estate (HOUS), Compass (COMP), and Redfin (RDFN) also got clobbered, falling between 5-15% on fears the settlement will intensify pricing pressures.

In last month's 10-K filing, Zillow explicitly acknowledged that "If agent commissions are meaningfully impacted, it could reduce the marketing budgets of real estate partners or reduce the number of partners...which could adversely affect our financial condition."

The sharp sell-off in Zillow and peers underscores how sensitive the real estate tech sector is to potential commission rate changes. With the NAR settlement poised to introduce more commission flexibility and competition, investors are bracing for margin pressures to hit industry players.

Zillow is currently has a ★★★ star ranking and is ranked 37th in our Q1 Mid/Small Cap Rankings.

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