Zillow Group shares are back under pressure as a legal fight over access to Chicago-area home listings adds another uncertainty to a company already navigating one of the weakest U.S. housing markets in years.
Zillow’s Class A shares closed Wednesday at $29.35, down 7.1% for the session, after falling through much of the previous week. The decline followed a federal court decision that denied Zillow’s request for a preliminary injunction in its dispute with Midwest Real Estate Data, the multiple listing service serving the Chicago area, and Compass. The ruling does not settle the underlying antitrust dispute, but it removes temporary protections that had preserved Zillow’s access to MRED’s listing feeds while the case proceeded.
The selloff comes despite a business that is still producing double-digit revenue growth. Zillow reported second-quarter revenue of $772 million, up 18% from a year earlier and above the high end of its outlook. Mortgages revenue climbed 75% to $84 million as purchase-loan origination volume nearly doubled to $2.2 billion, while rentals revenue increased 31% to $209 million. Zillow still posted a $4 million GAAP net loss, although adjusted EBITDA reached $176 million with a 23% adjusted EBITDA margin.
The Listings Fight Creates an Operational Risk, Not Yet an Earnings Collapse
The dispute centers on Zillow’s Listing Access Standards, which generally prevent homes from appearing on Zillow after they have previously been marketed through certain private listing networks. Compass has promoted a phased marketing strategy that can place homes in its private network before broader MLS distribution, while MRED concluded that Zillow’s decision to exclude some of those listings violated rules governing its data feeds.
The consequences became tangible in May when MRED suspended Zillow’s access to its IDX and VOW feeds. Court records show that more than 30,000 MRED listings disappeared from Zillow before the company restored roughly half through alternative sources such as direct brokerage feeds. A temporary restraining order later restored the MRED feeds, but the court’s latest decision dissolved that protection.
That does not mean Zillow has lost its antitrust case. U.S. District Judge John Tharp found that Zillow had not made the strong showing required to demonstrate that it was likely to succeed on its Sherman Act claims at the preliminary-injunction stage. The court also pointed to a lack of evidence that Zillow had suffered the kind of irreparable business damage necessary for emergency relief, noting that the company had not demonstrated a broader “downward spiral” from its inability to enforce the standards in Chicagoland. Zillow’s dispute with MRED is headed to arbitration, while the federal case has been stayed.
For investors, the immediate concern is less about a direct hit to quarterly revenue than about whether similar listing-access disputes could spread. Zillow’s consumer value depends heavily on presenting a broad and useful inventory of available homes. Losing meaningful listing coverage in additional markets could weaken that proposition, although the Chicago dispute by itself has not yet shown up as a material deterioration in Zillow’s reported financial results.
Growth Is Holding Up as the Housing Market Weakens
The larger challenge remains the housing environment. Existing-home sales fell to a seasonally adjusted annual rate of 3.98 million in August, according to the National Association of Realtors, while inventory climbed to 1.62 million homes. Pending sales were also 4.7% below their year-earlier level in August, underscoring how constrained transaction activity remains despite more homes reaching the market.
Borrowing costs are again working against a recovery. Freddie Mac said Thursday that the average 30-year fixed mortgage rate increased to 7.03%, from 6.95% a week earlier and 6.30% a year ago. That is particularly relevant for Zillow because the company is increasingly trying to capture more economics from each home transaction through Zillow Preferred, agent services and Zillow Home Loans rather than depending primarily on advertising revenue.
So far, that strategy has allowed Zillow to grow faster than the transaction market around it. Residential revenue increased 7% in the second quarter, but mortgages and rentals have become much larger contributors to incremental growth. Zillow said its Preferred model generated 23% more revenue per connection than its legacy advertising model in 2025 and expects that advantage to reach 35% by the end of 2026 as more connections move into the integrated system. The company expects more than 75% of connections to use Preferred by year-end.
There are still signs of strain beneath the revenue growth. Average monthly unique users and total visits both declined 2% in the second quarter, and management has already lowered its expectations for the broader purchase-mortgage market. Zillow now assumes industry purchase originations will decline by low- to mid-single digits for the rest of 2026 rather than remain roughly flat.
The Third Quarter Will Test Whether Zillow Can Keep Outgrowing Housing
Zillow has maintained a full-year revenue forecast of $2.92 billion to $2.96 billion, representing mid-teens growth, while expecting adjusted EBITDA of $730 million to $760 million. Rentals revenue is expected to grow about 30% for the year, and the company is targeting a roughly 26% adjusted EBITDA margin at the midpoint of its outlook.
For the third quarter, management expects revenue of $745 million to $760 million, or about 11% year-over-year growth at the midpoint. Mortgages revenue is expected to grow more than 50% and rentals growth is expected to remain in the high-20% range, but Residential revenue is projected to be roughly flat as Zillow shifts more transaction economics into its mortgage operation and housing activity remains subdued.
That makes Zillow’s next earnings report a more meaningful test than the legal headline alone. Investors will be watching whether mortgage originations and rentals can continue expanding while home sales remain near four million annually, traffic remains under pressure and financing costs sit around 7%. The Chicago listing dispute adds another risk to that equation, but the more consequential question is whether Zillow can continue extracting more revenue from each transaction fast enough to offset a housing market that still is not delivering a meaningful volume recovery.