Zillow Slides to a Three-Year Low as US Housing Stalls — What Investors Should Do Now

Why Zillow’s stock is a warning sign for the real estate USA market

The sell-off in Zillow shares is hard to miss. Zillow stock is trading around a three-year low, and management has issued guidance that assumes a near-flat housing market in the second half of the year. For anyone following the real estate USA scene — buyers, investors, or expats — that combination is worth paying attention to.

The short version: prices remain high, mortgage rates are well above pre-pandemic levels, and supply is not expanding fast enough. That mix keeps housing activity low, pressures transaction-dependent businesses, and reshapes which stocks and sectors will benefit when the market turns. In our analysis below we break down the forces squeezing the market, what Zillow’s performance tells us, and three publicly traded companies that can profit if housing recovers.

What’s really squeezing the US housing market

If you strip the debate down to basics, the US housing market is a matter of supply and demand. Right now, both sides are working against buyers and many investors.

• Demand headwinds:

  • Mortgage rates have climbed far above pre-pandemic levels, cutting buying power for many households.
  • Housing affordability is at multi-decade lows. The Fixed Housing Affordability Index has fallen below 100, meaning a family earning a median household income would struggle to qualify for a mortgage on a median-priced home with a 20% down payment.
  • Job markets and incomes have not kept pace with the run-up in home prices, so the ratio of price to income is elevated.

• Supply constraints:

  • Housing starts have flatlined, meaning developers are not delivering enough new inventory to relieve pressure on prices.
  • Existing home sales are near multi-decade lows, so current homeowners are not listing en masse to increase supply.

Those two forces together create a market where prices stay high while transaction volumes slow. That combination is exactly what management at Zillow is betting on when it forecasts a flat H2.

Zillow: a growth story that’s being tested

Zillow thrives when buyer-seller churn is high because its business model monetizes traffic, listings, advertising, and software tools sold to real estate professionals. Yet the company’s recent guidance and market reaction show the downside of being tied closely to transaction volume.

Key facts from Zillow’s recent results:

• Site and mobile traffic was down 3% year over year in the latest quarter.
• Average monthly unique users remain massive at 220 million.
• Revenue grew 18% in the most recent quarter, and the company is now consistently profitable.
• Management expects a flat housing market in H2, reflecting a slower-than-expected start to the year.

What this means for investors

• The dip in traffic is a warning sign for short-term growth, but the company’s database of listings, users, and tools still has value. Having 220 million average monthly unique users is a strategic asset when activity returns.
• Revenue growth of 18% during a slowdown suggests Zillow has diversified beyond pure-for-sale transactions through software, marketing products, and Zillow Home Loans.
• Zillow is a higher-beta play on housing market recovery. If you believe the market will recover materially, Zillow could outperform; if the market remains sluggish, the stock will be vulnerable.

Risks specific to Zillow

• Its results depend on housing market activity and advertising spend from agents and brokerages.
• A prolonged period of weak transaction volumes or further declines in consumer confidence could compress margins or slow revenue growth.

Our read: Zillow is attractive as a recovery growth stock, but it is not a defensive pickup. Investors should match position size to conviction about a housing rebound and be prepared for volatility.

Home Depot: the income play tied to housing activity

If Zillow is a pure-growth play on transactions, Home Depot is an income-oriented way to play housing through consumer spending on repairs and renovations.

Key details from Home Depot’s recent performance:

• Average ticket rose 2.2% in the latest quarter.
• Overall transaction volume fell 1.3% during the same period.
• Operating margins have been trending down, and revenue growth is modest compared with its historical expansion.
• The company has 18 consecutive years of dividend raises and currently yields around 3%.

Why Home Depot matters to housing watchers

• Renovation and maintenance spending is less volatile than home sales, but it still tracks home-ownership activity and consumer confidence.
• When mortgage rates ease and transaction volumes pick up, Home Depot can see a stronger recovery because buyers and owners address upgrades or remodeling projects.
• The retailer is actively reshaping its business: opening new stores, renovating existing locations, and expanding contractor services to capture professional demand.

Risks for investors

• Home Depot’s earnings are sensitive to discretionary consumer spending. If homeowners postpone big-ticket projects, revenue growth and margins can suffer.
• A macro slowdown that depresses construction and remodeling activity would hurt same-store sales.

Our read: For income-seeking investors who want exposure to housing without relying on transaction velocity, Home Depot offers a blend of dividend income and exposure to recovery. It is a more defensive option than Zillow but will lag if a high-volume housing boom returns.

Sherwin-Williams: the balanced exposure with industrial legs

Sherwin-Williams is frequently lumped in with housing-related stocks because it sells retail paint to homeowners, but the company’s mix of commercial coatings and international sales makes it less cyclical than pure residential plays.

Key points from Sherwin-Williams’ profile:

• Performance coatings represented 29% of 2025 sales, a sizable portion that is more tied to industrial and commercial demand than to housing.
• The company has strong margins and all-time-high sales, even amid housing weakness.
• Sherwin-Williams has increased its dividend for 47 consecutive years, although its current yield is about 1%, which is lower than Home Depot.
• The company has significant international exposure and a diversified product base that reduces dependence on U.S. home improvement cycles.

Why Sherwin-Williams fits a balanced portfolio

• The mix of retail paint, industrial coatings, and international sales reduces single-market risk.
• Management’s history of buybacks and dividend growth signals commitment to shareholder returns.
• Because the company is less tied to U.S. housing transactions, it can be a hedge for investors who want some exposure to housing-related demand but also want stability.

Risks for investors

• The stock carries a premium valuation relative to some peers, and the dividend yield is modest.
• Any global industrial slowdown or input-cost inflation could weigh on margins and the topline.

Our read: Sherwin-Williams is a conservative way to own exposure to housing demand while capturing industrial and global growth, but investors should accept a lower income yield in exchange for reduced cyclicality.

What these corporate stories say about housing market fundamentals

Taken together, Zillow, Home Depot, and Sherwin-Williams provide a three-way view of how different business models respond to the same macro forces.

• Zillow is the pure transaction play: it benefits when buyers and sellers are active.
• Home Depot benefits from renovation and maintenance spend tied to homeowner confidence and disposable income.
• Sherwin-Williams has diversified demand that softens the blow from a weak U.S. housing cycle.

From a policy standpoint, the fundamentals that need to change to improve affordability and transaction volumes are familiar:

• Lower mortgage rates or higher household incomes would restore buying power.
• A faster ramp-up in new construction would increase supply, but housing starts have remained flat, so that relief has not arrived.
• Higher seller willingness to list homes would increase inventory, but existing home sales are near multi-decade lows.

These are structural and cyclical issues. Structural constraints like zoning, permitting times, and labor shortages slow supply growth.