Zillow, the digital real estate platform that revolutionized how Americans search for homes, is confronting one of the most severe housing market downturns in its two-decade history. Yet while property sales languish at historic lows, CEO Jeremy Wacksman is placing an audacious bet on artificial intelligence as the company's salvation.
The housing market's struggles are impossible to ignore. Wacksman doesn't mince words when describing the landscape: "We describe the home market as bouncing along the bottom." The statistics support his grim assessment. In 2024, only 4.1 million existing homes were sold nationwide—a figure that falls dramatically short of the 5.5 to 6 million transactions that define a healthy, balanced market. This 25-30% shortfall has created ripple effects throughout the industry, and Zillow hasn't been immune.
The company's market valuation tells its own story. After reaching stratospheric heights in 2021, Zillow's worth has contracted to just one-quarter of that peak. The disconnect between operational performance and market sentiment was on full display recently: despite posting increased quarterly earnings, the company's stock price tumbled nearly 5% the following day. Investors remain skeptical that Zillow can thrive while the underlying market struggles.
But Wacksman sees a path forward, and it runs directly through generative AI. "The LLM revolution has really opened all of our eyes to what's possible," he explains, referring to the large language models that power today's most advanced AI systems. Unlike some executives who view AI with caution or defensiveness, Wacksman embraces it wholeheartedly. "We think AI is actually an ingredient rather than a threat," he declared on a recent earnings call, positioning the technology as essential rather than optional.
This AI-centric philosophy builds on Zillow's existing technological foundation. Since its founding, the company has leveraged machine learning to power its signature "Zestimates"—those algorithmically generated home value estimates that became a cultural phenomenon. Zestimates didn't just provide useful data; they created a viral loop that made Zillow indispensable to millions of users. The feature's success spawned an entire ecosystem of content, from social media accounts like Zillow Gone Wild to television programming on HGTV, all built around the platform's unique data and listings.
The difference now is scale and sophistication. Zillow isn't just adding AI features; it's fundamentally rewiring its entire operation around artificial intelligence. The integration spans from customer-facing tools to backend systems that agents rely on daily.
Among the most impressive innovations is SkyTour, which uses an AI technique called Gaussian Splatting to transform raw drone footage into photorealistic 3D property models. The technology captures every architectural nuance and spatial relationship, allowing potential buyers to conduct virtual tours that feel remarkably tangible. It's a quantum leap beyond static photos or even traditional video walkthroughs.
Complementing SkyTour is Virtual Staging, an AI-powered feature within Zillow's Showcase offering that digitally furnishes empty properties. With a few clicks, a barren living room can be populated with stylish sofas, artwork, and accent pieces—all existing only as pixels. This capability solves a practical problem (staged homes sell faster) while raising philosophical questions about authenticity. Once you cross the line from photography to computer-generated imagery, how do you maintain trust? Wacksman acknowledges this tension, stressing the importance of transparency so users clearly understand when they're viewing AI-enhanced content versus reality.
The search experience itself is being reinvented through conversational AI. Rather than navigating complex filter menus, users can now type or speak natural language requests: "Show me three-bedroom houses within walking distance of Lincoln Elementary, with a backyard for my dog, priced under $450,000." The AI interprets these nuanced queries, understanding context and intent in ways that traditional search algorithms cannot. This removes friction and makes the platform more accessible to non-technical users.
Yet this AI-powered future presents a paradox. The same technological advances that strengthen Zillow could also empower rivals to encroach on its territory. If consumers begin their home search on ChatGPT, Gemini, or other general-purpose AI assistants, Zillow risks being disintermediated. The company must ensure it remains the destination, not just a data source for others' AI models. This means creating experiences that are uniquely valuable and cannot be easily replicated by aggregators.
Wacksman's strategy involves massive investment. Zillow has poured billions into technology development, viewing AI as the central nervous system of a modern real estate platform. The goal extends beyond flashy features to practical workflow automation for real estate agents. By handling routine tasks—scheduling, document processing, client communications—AI frees agents to focus on high-value activities that require human judgment and relationship-building.
The authenticity challenge cannot be overstated. In an industry built on trust and major financial decisions, any perception of deception could be catastrophic. When Virtual Staging places a digital chandelier in a dining room or Gaussian Splatting smooths over a property's imperfections, Zillow must ensure buyers understand exactly what they're seeing. The company is walking a tightrope between helpful enhancement and misleading manipulation.
As Zillow marks its 20th anniversary, it faces a defining moment. The real estate market shows little sign of returning to pre-pandemic activity levels anytime soon. Interest rates remain elevated, inventory is constrained, and affordability challenges persist. Against this backdrop, AI represents more than a competitive advantage—it's a potential lifeline.
Wacksman's vision is clear: transform Zillow from a digital listings board into an AI-powered real estate ecosystem that anticipates needs, streamlines transactions, and creates value for every participant. Whether this technological pivot can generate enough momentum to overcome macroeconomic gravity remains the central question.
For now, Zillow is committed to an AI-first future. The company is betting that smarter technology can create better outcomes even in a struggling market. If Wacksman's gamble pays off, Zillow could emerge from the current downturn not just surviving but fundamentally transformed. If not, it may find that even the most sophisticated AI cannot solve the basic challenge of too few homes changing hands.
The experiment is underway, and the entire real estate industry is watching.