Zillow Group (Z) Dives 1.60% as Legal Risks and Competitive Pressures Intensify

Zillow Group C (Z) fell 1.60% on Friday, marking its fifth consecutive day of declines with a cumulative drop of 9.25%. The stock hit an intraday low of 2.06% below its previous close, reaching its lowest level since July 2025. This prolonged selloff reflects mounting concerns over operational setbacks, legal risks, and intensifying competition in the real estate sector.

Zillow’s strategic retreat from its high-risk Zillow Offers home-flipping division, following significant financial losses, has raised doubts about its profitability. The company’s core real estate marketplace and mortgage services have also seen revenue declines, exacerbated by a slowdown in housing demand and market saturation. Recent cost-cutting measures, while common in downturns, have drawn scrutiny for potentially stifling long-term growth initiatives.

Legal challenges further weigh on the stock. The Federal Trade Commission (FTC) sued Zillow in October 2024, alleging collusion with Redfin to share multifamily rental advertisements, which could lead to regulatory penalties or operational restrictions. A separate class-action lawsuit accuses Zillow of inflating real estate costs through biased agent referrals, potentially resulting in costly litigation and reputational harm. These disputes highlight regulatory uncertainty that could disrupt the company’s operations.

Competitive pressures from Compass are intensifying. Compass’s $1.6 billion acquisition of Anywhere Real Estate has bolstered its market share, enabling the rival to hoard exclusive inventory and delay public listings on Zillow. This strategy, supported by a federal court ruling against Zillow’s restrictive listing policies, threatens to fragment the real estate market into competing “walled gardens.” Compass now controls 24% of U.S. real estate sales volume, with localized dominance in key markets like San Francisco and New York.

While Zillow’s 220 million monthly unique visitors and data-driven tools remain competitive strengths, its ability to retain listings and navigate regulatory scrutiny is under strain. Analysts emphasize that Zillow’s recovery hinges on adapting to a fragmented market, balancing cost discipline with innovation, and addressing legal risks. The stock’s trajectory will depend on how effectively the company can counter Compass’s exclusive inventory model and demonstrate resilience amid broader industry shifts.