CoStar Pulls Back on Homes.com After Dim Growth

CoStar made a billion-dollar-plus bet on Homes.com in its quest to become a major player in the residential market.

But the firm is now reversing course and slashing its investment in the home search platform. CoStar said in a yearly outlook announcement it will reduce its annual net investment by 35 percent in 2026 to $550 million, down from $850 million in 2025. The firm will continue to cut its investment by at least $100 million annually until 2030.

“Homes.com is an important part of our ecosystem; we now have a clear path to accelerate top-line growth and drive profitability,” CEO Andy Florance said in a statement.

The announcement marks a sharp reversal for CoStar.

In 2023, Homes.com rocketed to the second most-trafficked home search platform. The following year, it announced a splashy $1 billion marketing campaign, kicked off with a series of television spots during the Super Bowl.

CoStar has recently sought to position itself as an alternative to Zillow’s lead generation model as part of its “Your Listing, Your Lead” campaign.

CoStar has also deployed its litigation playbook that helped it ascend the commercial real estate industry to the residential space, suing Zillow for alleged copyright infringement last year.

But while the company has touted rapid growth to the tune of an average of 115 million unique monthly visitors in the third quarter, it still lags far behind Zillow, which reported an average of 250 million unique monthly visitors in the same period.

The return, or lack thereof, on all that investment has drawn the scrutiny of some of the company’s largest investors like Third Point.

In an April investor letter, Third Point CEO Daniel Loeb wrote that investment in Homes.com has “yet to generate meaningful revenue.”

“Expanding losses at Homes.com have obscured rapid growth in the core business and reduced consolidated EBITDA by approximately 80%,” he added.

Around the time of the letter, CoStar shook up its board of directors and established a capital allocation committee to review its investment in Homes.com and its timeline for profitability.

The change also comes at a turbulent time for the home search business. Compass, the nation’s largest brokerage, sued Zillow last year over its listing policy that threatens to ban listings that are not uploaded to its platform within 24 hours.

Compass has led the charge in brokerages pushing private listing networks, which would keep listings off of sites like Zillow and Homes.com. In court, Zillow executives testified that these networks posed an existential threat to its business model.