Zillow Group (Z) Shares Plunge 13.92% on Legal Scrutiny and Market Pressures

Zillow Group Inc. (Z) shares fell to their lowest level since July 2025 on Sept. 25, with an intraday decline of 1.86%. The stock has now dropped 13.92% over six consecutive days, marking a significant correction amid mounting legal and market pressures.

A new class-action lawsuit filed in Washington state is intensifying scrutiny on Zillow’s business practices. The case alleges the company’s Flex agent program misleads buyers by steering them to affiliated agents, inflating commission rates and home prices. Zillow has denied the claims, but the litigation highlights regulatory risks tied to its core revenue model. This follows a June 2025 lawsuit from Compass Inc., which accused Zillow of stifling competition in home listings, underscoring broader legal challenges in the real estate tech sector.

Market dynamics are compounding the company’s struggles. Stagnant real estate transaction activity, driven by high mortgage rates and inventory shortages, has pressured Zillow’s monetization strategy. In response, CEO Jeremy Wacksman has shifted focus toward non-traditional revenue streams, including backyard improvements and rural property services. These initiatives aim to capitalize on growing consumer interest in renovation and suburban migration but remain unproven at scale.

Regulatory concerns over commission transparency further weigh on investor sentiment. The lawsuit’s emphasis on hidden fees could prompt industry reforms, potentially squeezing Zillow’s profit margins. The company’s reliance on agent partnerships, which constitute a significant portion of its revenue, makes it vulnerable to changes in commission structures. Meanwhile, Zillow’s recent launch of AI-powered virtual staging tools and enhanced listing features reflects efforts to retain user engagement in a low-transaction environment.

Strategic innovations and digital transformation may yet provide long-term growth avenues, but near-term uncertainties persist. The combination of legal risks, regulatory scrutiny, and macroeconomic headwinds suggests a cautious outlook for Zillow’s stock, with investors closely watching how the company navigates these challenges while maintaining platform dominance.