Zillow Group, Inc. Q1 FY2021 Earnings Call

Good afternoon. My name is Riley and I will be your conference operator today. At this time, I would like to welcome everyone to the Zillow Group First Quarter 2021 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Please note, this event is being recorded. I would now like to turn the conference over to Brad Berning, Vice President, Investor Relations. Please go ahead.

Thank you, Riley. Good afternoon, and welcome to Zillow Group's first quarter 2021 conference call. Joining me today to discuss our Q1 results are Zillow Group's Co-Founder and CEO, Rich Barton; and CFO, Allen Parker. During the call, we will make forward-looking statements about our future performance and operating plans based on our current expectations and assumptions. These statements are subject to risks and uncertainties, and we encourage you to consider the risk factors described in our SEC filings for additional information. We undertake no obligation to update these statements as a result of new information or future events, except as required by law. This call is being broadcast on the Internet and is accessible on our Investor Relations website. A recording of the call will be available later today. During the call, we will discuss GAAP and non-GAAP measures, including adjusted EBITDA, which we refer to as EBITDA. We encourage you to read our shareholder letter and our earnings release, which can be found on our Investor Relations website, as they contain important information about our GAAP and non-GAAP results, including reconciliations of historical non-GAAP financial measures. In addition, please note, we will refer to our Internet, Media & Technology segment as our IMT segment. We will now open the call with brief remarks followed by live Q&A. And with that, I'll turn over the call to Rich.

Thank you, Brad. Good afternoon, everyone. And thank you for joining our first quarter 2021 earnings call. We are in a much better place compared to one long year ago. And I'm so grateful and impressed that these miraculous COVID vaccines are now widely available across the country. I hope that you and yours are beginning to find some normalcy after such a trying year. In a typical year, spring begins the traditional home buying season. But we know that this past year was anything but typical. Home buying never really slowed down. A great reshuffling driven by changes in what we want and need out of our homes has fueled continued interest in moving. And we expect this moving demand to continue as we all adjust to a safer world ahead. Our research team recently published a survey-based mover report, which we have hyperlinked to from the shareholder letter. It's a great read when you have the time. The report indicates that the pandemic has indeed caused people to rethink where they live, and concludes that approximately 8 million existing homeowner households that have been on the sidelines may enter a real estate market already beset by unrelenting demand. Additionally, 8.9% of consumers plan to purchase a home in the next six months near a 20-year high per the conference board's April consumer confidence survey. The reaction we got from our own employee base when we told them last March that we intended to have a more flexible workplace policy for the long-term is an interesting case study in how remote work catalyzes the great reshuffling. We found that 30% more employees moved in the year following our announcement compared to the previous pre-pandemic year. This time last year, we had employees in 25 states. Now they are in all 50. This is obviously a small sample, but it shows how the great reshuffling might play out as people gain certainty about their companies' post-COVID workplace plans. Zillow was an early embracer of a more flexible long-term workplace model. So we are a few steps ahead in firming up our plans. But we expect that other companies will adopt more physical location flexibility in varying degrees, simply because it's hard to take back something that employees have been given and value. That cultural shift will free up more restless households to list to move, and Zillow will be here to serve as their trusted partner and resource. Beyond the continued reassessment of where we all are, the housing market is underpinned by demographic and economic tailwinds that will persist for the foreseeable future. Millennials are moving up. Baby Boomers are downsizing and in between people of all generations are rethinking their lives. Despite recent shocks, mortgage rates are expected to be quite constructive for the foreseeable future and are near all-time lows relative to historical levels. It appears that housing turnover should accelerate from the historically low rates in the past several years along with easier digital transactions. All of these trends point to more liquidity and household formation long-term, which creates a healthy backdrop for the housing market and the business in which we operate. Of course, the most powerful and important shift driving our business is the title shift moving consumers real estate, dreaming, searching and transacting from offline to online. Just as they have in many other parts of their lives, consumers have experienced the greater convenience of a digital technology-enabled home search and some of the magic of a digital transaction. They will only expect further advancements in the future. Moving on now, to some business results from another strong quarter here at Zillow cloud HQ. First and foremost, all of this energy around moving has created a Zillow wave of sorts. Our customers are surfing it every day. Just last week, Time named Zillow one of the 100 most influential companies for, in their words, 'Making an extraordinary impact on the world.' A little grand perhaps, but definitely a nod to the vast reserve of brand goodwill that we have been building up over the past 15 years. An uptick in pop culture recognition this past year has helped to accelerate our traffic. In Q1, 221 million average monthly unique users visited our sites and apps, which represents an increase of nearly 30 million average monthly unique users compared to this time last year. This is a level that we previously would not have thought possible and should provide the fuel for years of customer growth into the future. Our top of funnel engagement with our customers translated into excellent results across Zillow's suite of products and services. Our flagship buy-side business, Zillow Premier Agent, once again generated the strongest results we've ever seen, reporting 38% revenue growth year-over-year in Q1. Our nascent sell-side business Zillow Offers continued to accelerate out of the pause we instituted during the pandemic, generating over 700 million in revenue and surpassing our internal expectations on revenue, EBITDA, and unit-level economics. The success from our buy-side and sell-side offerings, when combined with solid execution from our adjacent services, translated into total revenue growth of 54% sequentially and total company EBITDA of $181 million for the quarter. With that number in the context of Zillow's history, it represents 90% of our full-year 2018 EBITDA, which was just prior to the commencement of our heavy investment in our Zillow 2.0 vision. We are now beginning to register the benefits of the investments we have made across our product innovations for buyers and renters, as well as our major ventures into Zillow Offers, Zillow Home Loans, and Zillow Closing Services. This increased profit generation after such a meaningful investment period gives us confidence that the bets we are making across the business are accretive and we are allocating our time, our people, and our capital appropriately for the long-term. Speaking of our people, Fortune named Zillow one of its 100 Best Companies to Work for based on our employees’ feedback about working at Zillow in 2020, including how trustworthy, caring, and fair they felt Zillow has been during the pandemic, which forced most into online sessions. As we reimagined the future of our workplace, we are grateful for our flexible and talented workforce. While our employees are doing well and our quarterly results are strong, we are oriented to the multi-decade journey in front of us, the journey to digitize and simplify a huge industry, delivering more and more movers gracefully to their next homes. The pursuit of these growth opportunities deserves continued appropriate reinvestment of profits. As part of that journey, we recently launched a new advertising campaign with the tagline 'Move is to grow.' We think it wonderfully captures the essence of why moving is both exciting and daunting and how we at Zillow are increasingly able to help our customers navigate this crossing. The campaign supports the expedition we are on as a company as well. Just as we've been reorienting our employees and mission around transactions, we have the exciting task of reeducating our customers on who the new Zillow is and what we can do for them. Every signal we see based on data and customer feedback indicates that customers expect and demand a more seamless experience. This is Zillow 2.0. A great example of our customers' enthusiasm for ease is the reaction to our recent announcement that many homeowners in Zillow Offers markets can now see that their Zestimate is a live initial offer from Zillow. The announcement alone drove record-breaking interest in the service with requests coming in at levels we've never seen before. We believe we are onto something with this Zestimate offer. The continuing challenge and opportunity going forward will be to translate customer interest into transactions. Now that we have many of the ingredients for our end-to-end home transaction through Zillow’s services and products, we are upgrading our customer funnel by converting more browsers into customers. We are motivated every day to ensure we deliver our customers excellent integrated experiences on par with simpler smaller e-commerce transactions in other parts of their lives. To reiterate, it is still early days in these efforts and there's so much work to be done as we begin to scale. Across Zillow, we estimate that our 2020 gross profit was larger than any other player in the residential real estate technology category. But our buy-side Premier Agent business and sell-side Zillow Offers businesses still represent less than 2% of the total annual residential real estate industry service fees. We are proud of our business, but we have an ocean of opportunity in front of us. Each customer who uses Zillow to move has a story. One we're sharing today is about first-time home sellers Jessica LaRue-Briscoe and her husband Sean. They turned to Zillow when they were anxious about a move from Colorado to Texas, where they wanted their two-year-old son to grow up near their families. Zillow connected Jessica to an agent partner Adam Unger, and he walked her through the selling process. It was all new to her and she was scared and dubious. 'I'm going to take a gamble on you,' she told him. Adam's experience and professionalism kept their worries at bay, and Jessica and Sean felt informed and prepared throughout their move. 'I really feel like we were able to be connected with the best real estate agent for us because we went through Zillow,' Jessica said. Their happy ending to their story is that their son is now spending time in Texas with Jessica's grandparents who are in their 90s. We are motivated every day by customer and partner success stories like Jessica, Sean, and Adam's, as our ad campaign says, 'Move is to grow.' And we're seeing that here at Zillow with our employees, our customers, and with our industry partners. As far as our investor partners, we appreciate the support as we go on this journey with you. With that, I'll turn it over to Allen.

Thank you, Rich. As Rich discussed, Zillow Group delivered another strong quarter, reporting Q1 consolidated revenue of $1.2 billion and EBITDA of $181 million, both exceeding the high end of our outlook range. Q1 IMT segment revenue of $446 million grew 35% year-over-year, as we continue to see accelerated growth in Premier Agent and strong growth in rentals. IMT segment EBITDA was $209 million in Q1 or 47% of IMT segment revenue. Accelerating revenue growth, combined with year-over-year declines in operating costs, translated into 143% year-over-year EBITDA growth in Q1. Premier Agent revenue grew 38% year-over-year in Q1. The accelerated growth was primarily driven by connections growing faster than traffic, as well as our focus on providing outstanding service and optimizing to connect high-intent customers with high-performing partner agents. Growth in Zillow Offers continued to reaccelerate in Q1. We reported home segment revenue of $704 million, which exceeded the high end of our outlook with 1,965 home sales. Resale velocity was above our expectations. In Q1, we sold 128% of the beginning inventory of 1,531 homes, contributing to an inventory decline at the end of Q1 to 1,422 homes. Purchases increased to 1,856 homes in the quarter from 1,789 homes purchased in Q4, but not quite at the pace we planned as we continued to work on refining our models to catch up with the rapid acceleration in home price appreciation. During Q1, we continued to focus on unit costs, automation, adding capacity, and sharpening pricing models to improve offer strength as we continue to scale. Our Q1 Zillow Offers unit economics of 549 basis points return before interest expense was above the plus or minus 200 basis point guardrails we've set for ourselves while working to scale the business. The outsized economic results were impacted by the ongoing strong housing market, which is temporal in nature. We made progress during the quarter on improving offer strength and sharpening pricing that tightened our unit economics by approximately 120 basis points from that of Q4. The durable operational improvements in overall cost per home contributed 280 basis points improvement from Q1 2020. Our mortgages segment revenue increased 169% year-over-year in Q1 to $68 million and mortgages segment EBITDA was $6 million compared to the midpoint of our outlook range for a loss of $1 million. The revenue and EBITDA outperformance was primarily driven by mortgage loan origination volume, which was up more than 8x year-over-year, as well as our mortgage marketplace, both as a result of strong refinance activity. Beginning this quarter and going forward, we will disclose our mortgage loan origination purchase and refinance volume. In Q1, refinance loan origination volume comprised 90% of total origination volume. We continued to invest in our mortgage platform to provide a compelling experience for our purchase customers, as well as integrating across our business. Turning to our outlook for the second quarter. At a consolidated level, we expect revenue to be $1.26 billion, up 64% year-over-year at the midpoint of our outlook. And EBITDA to be between $116 million and $140 million. In our IMT segment, we are forecasting 66% year-over-year revenue growth in Q2 and 44% revenue growth over Q2 2019 at the midpoint of our outlook range. Within the IMT segment, we expect Premier Agent revenue to be between $342 million to $350 million, up 80% year-over-year and up 49% over Q2 2019 at the midpoint of our outlook. This is being driven by strong top-of-funnel traffic and connections as we enter Q2. It is important to note that during Q2 last year, we provided Better Together billing relief to our Premier Agent and other marketplace partners. Excluding the impact of this billing relief, we expect Q2 year-over-year Premier Agent revenue growth to be 38% and IMT segment revenue growth to be 35% at the midpoint of the respective outlook ranges. We expect Q2 IMT EBITDA margin could be 41% at the midpoint of our outlook, down sequentially from 47% in Q1. As we position ourselves to drive sustainable, profitable long-term growth, we expect Q2 IMT EBITDA margin to reflect accelerated investments in marketing, staffing, and technology up from Q1 levels, and we expect to further accelerate investments into Q3. For full year 2021, we expect EBITDA dollar growth more in line with revenue growth rates rather than expansion from the 38% EBITDA margin we reported in 2020. In Q2, we expect our home segment revenue to increase sequentially to $735 million at the midpoint of our outlook. The higher than expected Q1 resale velocity I mentioned previously pulled forward a portion of expected Q2 home sales. Customer interest in selling their homes to Zillow and the operational improvements we have continued to make have shown strong improvement in the top of funnel as we enter Q2. This gives us confidence in our ability to continue to scale the business in the periods ahead. We expect mortgage segment revenue to be between $57 million to $62 million in Q2, which is down from Q1. Our Q2 guide reflects slower industry refinance activity and narrow gain on sale spreads. As we have discussed for the past couple of quarters, we do not expect the high gain on sale margins from originations to be sustainable. We plan to continue to capture solid refinance demand and invest in building the factory to scale our operations, as the purchase business is built over time. As a result, we expect mortgages segment EBITDA to be between a loss of $9 million and a loss of $5 million. We further strengthened our balance sheet during the quarter by initiating an at-the-market offering, selling $551 million of capital stock. We have been and will continue to be opportunistic and prudent in any potential future share sales and have approximately $450 million remaining on the authorization. We ended the quarter with $4.7 billion in cash and investments, which puts us in a strong position to fund our vision for Zillow and make strategic long-term investments both organically and inorganically. As a reminder, we do have a $500 million commitment to acquire ShowingTime as we cooperate with federal regulators to work diligently toward closing the acquisition. As we look forward to the balance of the year, our priorities remain focused on innovating and executing on behalf of our customers and partners. We look to grow our customer base and engagement through a compelling dream and shop experience. Invest in sustainable top-line growth opportunities across the company, reduce cost structure and improve productivity and transaction services, and drive profit growth through operational discipline. And with that operator, we will open the line for questions.

I wanted to ask clearly so much going on. I wanted to maybe zero in on Zillow Offers here first. I mean, significant demand in the quarter, sales pulled forward. Allen you talked about that, the Zestimate driving even more demand, maybe with supply seeming a little bit harder here and you're sharpening pricing to offset that. Rich, can you just talk about the broader market for offers in a stronger real estate market? Just how do you acquire the inventory relative to demand? How do you balance those two things together? Thank you.

Hey, Ron, thanks. I mean, we are rapidly learning how Zillow Offers operates in this really unprecedented home price appreciation environment. The appreciation over the last six months is the largest move up or down that we have observed in the data set over the last 35 years. It's a very fluid market. But as you noted in your question, and Allen talked about in his remarks, our top of funnel indicators are good. Like, it turns out, speed, certainty, and convenience are attractive to sellers no matter what kind of market they are in. So we are seeing record levels of folks raising their hands to get a Zillow offer. I think part of that is driven by this really nifty feature we launched last quarter that we internally called Zestimate offers, which is this live initial offer for lots of homes inside the buy box in Zillow Offers markets. We are also really happy with this kind of glow we are seeing across the business from this positive reinforcement we have from having all of these linked businesses and having this very large single funnel of customer demand coming in. The IMT and adjacent business numbers are really, really commendable. But on Zillow Offers in particular, we are leaning in—we're expanding into the 25 markets. We are heavily staffing, and I think we made an announcement about this. We are planning to hire a net 2,000 people in 2021, and a lot of that will be for Zillow Offers. We're making other investments in Zillow Offers as well. So we are comfortable with that increased investment because of what we are seeing in top of funnel, because of what we know about the consumer value proposition. Also, we’re leaning in because most consumers don't even know what Zillow Offers is yet. They don't even know, and we’ve got to take Zillow 2.0 out of the quarterly conference call realm and into the consumer awareness realm. So we have a lot of work to do there and basis points to penetrate in the business overall. Long answer, but we're feeling good and leaning in.

Hey, Ron and Rich, I'll just add. To give a little color to the guidance for Q2 with respect to home segment revenue. We've called out the resale velocity pulling some sales into Q1. And I just want to call out even with strong top of funnel activity, there is a lag as we go between offer, purchase, and an eventual sale, which when we see the revenue. A lot of this top of funnel activity will start to show up more in Q3, and that's part of the reason for the Q2 guide that lag is reflected in the Q2 guide.

There are a couple of questions. So maybe just one Zillow 2.0, how do we measure the progress that you're making on the initiative and how do you think about the long-term profitability potential in 2.0? And then, just maybe on hiring? What are the areas that are seeing the biggest increase in headcount?

Okay. Hey, Naved. The 2.0 bet is all about the fact that we believe customers want speed, simplicity, integration, and value—these are not risky bets to make on consumer behavior; they are timeless features of what customers demand. We also believe that our brand and our traffic give us a competitive advantage relative to point solution competitors because we have a large audience, we can spread any customer acquisition costs we may have across a much larger revenue, profit, and transaction base. That’s kind of the Business School answer to why we like the competitive advantage. So, we've made these big bets over the last two and a half years when we really leaned into 2.0 and were building out all the 2.0 components, like Zillow Offers, mortgages, Zillow closing services, even rentals. Anyway, the short answer to your question is, it's working. All the components appear to be performing very well beyond our expectations. So that's a terrific proof point that the integrated strategy and the transaction strategy are positively affecting our revenue and profit on a per-user basis, which is really nice to see and it's still quite low. So we have a ways to go. I said in my remarks, to kind of introduce a new kind of total addressable market and penetration concept. This is less than 2% gross profit penetration into the total addressable market of services in the industry. We keep struggling for ways to talk about the full opportunity. In quarters past, we talked about trying to estimate transaction share and what share of transactions we touched, but that is fraught, because we don't exactly know how many transactions we touched. I challenged the team to figure out if there's maybe a gross profit penetration metric we can come out with to communicate the opportunity for ourselves and for you all. So that could be interesting. Anyway, there’s still a ton of work to do on 2.0, not the least of which, as I said before, is the awareness of 2.0. That's where you're seeing marketing investment, increased marketing investment from us. Anyway, stay tuned, we're on the path, we like the path, and things look clear with plenty of green lights out the front windshield.

Thank you, Rich. And maybe on the headcount, give us some more clarity on the areas where these are…

Yes, I would classify we're continuing to make investments across a variety of our businesses where we feel there's a lot of opportunity to accelerate innovation for our customers. Tech and development roles, but also transactional-type resources are necessary as we scale the business. I think you're seeing a mix of those; there are additional innovative ideas around 3D tours and other things. Most of the initiatives we talk about involve looking at where we need to allocate resources and accelerate our investment. But it's spread across the company. I'll just take this moment to say we continue to prioritize our existing resources as well, to ensure we're making bets on the right things. But we like the results we're seeing, like the inputs that we're tracking, and we look forward to execution.

Thanks. Two questions. First, you're recognizing better growth in the second quarter guide on that kind of normalized basis, excluding the Better Together discounts? Can you just talk about the sustainability of the Premiere Agent business, particularly into the second half as comparisons get harder? What are some of the drivers behind the outlook for Q2 that can help in the second half? Secondly, you've put up the 47% segment margin in IMT guidance implying first margins about 44%. So if full-year margins are going to be kind of flashed with last year, it implies a big step up in the second half. Can you give us a better sense of what you're investing in? How it's going to flow across the segments? And then what specifically will weigh on IMT segment margins in the second half, given disciplined cost growth there for multiple years now? Thanks for your help there.

Thanks, Lloyd. That sounds like an Allen question.

Sure. Thanks, Lloyd. So, on growth, yes, in Q1, Premier Agent growth was 38% year-over-year. If you compare it to the underlying growth rates we talked about in Q4, it was 27%. We saw this accelerating underlying growth trend in the Premier Agent business. If you look at our Q2 outlook, the underlying growth rate of 38% at the midpoint, after you adjust for the Better Together discounts, is a continuation of the inputs that we're seeing. We have a large audience, strong top of the funnel. When you combine that with a focus on the inputs of customer satisfaction, conversion, and revenue per lead, we’re just seeing very encouraging trends on the inputs. All of this is predicated on helping the customer get through the transaction. In terms of the second half, we are not providing guidance, but I would call out that the Premier Agent Q2 two-year growth rate of 49% we pulled out in the shareholder letter, at the midpoint of our range, is probably a good way to think about growth as you look at your models on how to model forward through this weird year we had in 2020. Hopefully, that helps. Regarding the margins, our Q2 IMT margin is expected to be 41% at the midpoint of our outlook that is down sequentially from the 47% in Q1. As we position ourselves to drive sustainable long-term growth, we expect this margin rate to reflect accelerated investments in marketing, staffing, and technology to provide innovation on behalf of the customer. We do expect this to increase from Q1 levels and we expect further acceleration in Q3. When I think about the full year, given your question, I'd say we expect dollar growth but that growth more in line with revenue growth rates rather than expansion off the 38% margin rate we reported in 2020. So hopefully that helps.

Thank you. Congrats on the results and great to see the momentum continuing. So the first question, I apologize if I've missed this, but can you share an update on the transition to using in-house agents or employees on the high buyer transactions? Maybe what share of transactions in the quarter were working in-house? And how that transition is going versus your expectations? Second question on the mortgage business, the stat on the 90% share of refinance is very interesting. It seems to be a bit of an early confirmation signal that the overall Zillow business is moving from something that was once servicing and monetizing buyers to then sellers and now homeowners that might want to refinance. So I guess I'm curious on the mortgage space. Can you talk about the strategy and maybe that interplay between driving the actual attachment on the high buyer purchase product and driving mortgage value more generally, because I know there can, of course, be a lot of differences in just strategy to the approach of kind of purchase versus refinance share over time. So hoping you can maybe separate those pieces and talk a bit about strategy. Thanks so much.

All right. I'll start and Rich or Brad can jump in. On Zillow brokerage services, we're operating in just a few of the 25 markets. So that's still relatively nascent, but it's going well. We're excited about initial results, but there's nothing specific with respect to attach or any kind of data point to share yet. Over time, we believe that's a great way to have a better integrated customer experience. But we still work with partners across all our markets. We're learning the services that we can provide, but it's still relatively new. And on our mortgage, I guess I would describe it this way: As you think about our mortgage strategy coming together. When we purchased Mortgage Lenders of America back in 2018, they were really a direct consumer non-conforming origination shop. Our initial strategy was to move to a broader mix of conforming mortgages while updating and transforming the platform and bringing in new leadership. In 2020, we started to focus on building the factory, bringing in loan officers and loan processors, and building the systems. We did that off of strong refinance demand and we continue to do that now in Q1. I think over time, you'll see that mix normalize more to industry standards. We want to have a compelling and great customer experience, and we're continuing to work with customers and learn. We think that mortgages are a very important part of Zillow 2.0, and we're continuing to expand there.

So just one question on Zillow Offers and one on Premier Agent. So let's go back to Allen's comment, hope I'm not misquoting it, highlighted purchases that were not at the pace that you were expecting kind of over the course of the quarter, and doing work to catch up with the home price appreciation and really strong environment. Can you expand on that and what you're doing to catch up with that and fix the model? Or just the model we’re seeing, especially in light of some data that we've seen from your competitors continuing to accelerate some of their purchases there. Then, on PA, you highlighted improvements in PA connections and that's what I was hoping you could talk about a little bit. Listings are still challenged overall; can you talk about the impact that has on the PA business down significantly year-over-year? Does that have a meaningful impact? Thanks.

You want to start with the Zillow Offers stuff, Allen?

Yes. So yes, I mean, I think Rich hit it pretty well. What I would say is, if you look at our unit economics and as I mentioned, 549 basis points of return on home sold before interest expense, being above our plus or minus 200 basis point guardrails, the driver that's there has improved from Q4, and that's reflective of resale velocity. We’re selling homes at rates higher than we would have expected or underwritten to when we acquired them. This expansion that we're catching up with has a lot of nuance in the offers and how we present them. We're also iterating. We are continually figuring out how to improve our offer strength in the way we communicate that to our customers. The top of funnel interest is strong. We're seeing early trends in Q2 that give us confidence that this is something we are going to be able to do. The guidance I provided for Q2 is reflective of the lag as we purchased those homes, renovate them, and then we sell them, as well as the Q1 overperformance. But we're very confident we have a compelling offer that high-buying is something customers want even in this market. The early signs give us confidence that we can continue to grow and scale this business.

Let me pause too for a moment to clarify the issue. The unit economics, the margins we're earning on a unit basis right now are not what our goal is? I’ll reiterate that. We want this and know this can be a giant business. It's only going to be a giant business when the pricing is perceived to be fair to consumers. So it's not our goal to have 549 basis points or whatever it is we just printed on a unit basis. No, it's slightly better than last quarter, and in other words, it's lower. What we're aiming to do is to provide a fair offer and charge a fair fee to our customers. Thus, we believe we maximize the TAM, maximize the number of transactions we can touch and participate in, and we have the ability to sell a bunch of adjacent services around those transactions. It's worth pausing there for a second. Regarding listings, yes, listings are really, really thin; inventory is really low. I think I said this last quarter, it's kind of like the flight attendant on the airplane when she says, even though the airbag does not appear to inflate, oxygen will flow. That is what's happening clearly in the market. Volumes are up, price appreciation is way up, but homes are just moving really, really fast. We like to see a market where lots of activity is happening. We see offline to online shifts happening. We see demographic shifts happening. We see great reshuffling things happening—all to put wind in the sails of our business overall.

Congrats on the continued success. You guys have a couple of positive things spinning up across the product set, obviously, but it feels like rentals just seems to fly under the radar. You guys put up some good growth this quarter, the last couple of quarters of good growth. Just curious about the drivers there and how much lift have you seen from the shift in the monetizing of the rentals? And then, maybe also the broader opportunity ahead for Zillow Rental Manager?

46% year-over-year growth rate is fantastic. We're really pleased with our rentals business. It comes from and is driven by a lot of the decisions we've made to invest in a fairly streamlined set of product innovations. I think we're starting to see the benefits of some of those over the last few years that we've made. A lot of those are integrated services like one-click applications, payments, listings, and these services are all kind of coming together. In fact, as I talked about Zillow 2.0, getting closer to the transactions, I believe we’re seeing that in the rental space. It's also assisted by this continued strength in top of funnel and our large audience. Even some of the demographics we talked about on the housing market and the broader great reshuffling and these demographic tailwinds are also helping our rentals business. So we're excited with the progress. The growth has been strong. We’re excited about the products and services we can deliver both to our customers and to our property managers. I don't know, Rich, if you want to add anything.

No, that was completely great. Thanks, Allen.

I'll ask just one and maybe a follow-up on your comments about your cost advantages in the Offers business and the multiple opportunities you guys are developing to monetize customers that hopefully stick with you. Maybe I was just curious to hear your thoughts on your appetite for increasing the prices of the homes that you're going after anytime soon, as a way to maybe increase your total addressable market.

Hey, Tom, thanks for the question. We are constantly experimenting on a market-by-market basis with the buy box and what works and what doesn't. We have a significant amount of data streaming in, not as much as I would like. I’d like it to be even larger. If you step back and look at the overall number of transactions we've conducted, it's still relatively low. We want to get that up, keep the learning machine going, and get the buy box as broad as we possibly can in as many markets as we can.

This concludes our question-and-answer session. I'd like to turn the call back over to Rich Barton for any closing remarks.

Thank you very much, and thank you all for your time today. We're really grateful to have you along for the journey, and we look forward to speaking with you again next quarter, if not sooner. Talk to you soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.