CoStar announced Wednesday it will cut spending on Homes.com by 35 percent this year, after investing heavily to create a fourth major competing real estate search portal.
CoStar, which has spent years investing heavily to build a fourth competing real estate search portal, announced Wednesday that it will cut spending on Homes.com over the next few years in an effort to bring it back into the black.
The company said in a filing with the U.S. Securities and Exchange Commission that it will reduce net spending on the portal by $300 million this year, more than 35% from the previous year, and then by more than $100 million annually through 2030. This is a significant decrease from the estimated $850 million the company says it will invest in the portal in 2025.
The portal’s parent company said in its filing that Homes.com aims to generate more revenue than expenses by the end of 2029 through a combination of cost reductions and continued growth in subscribers, advertising and partnerships.
“We are implementing proven strategies to continually expand Homes.com and improve its profitability,” CoStar wrote in the filing.
The cuts followed growing pressure from investors who questioned CoStar’s aggressive foray into residential after dominating the commercial real estate sector.
CoStar acquired Homes.com in 2021 and began looking to grow it into a force on par with Zillow, Realtor.com, and Redfin in the housing space. The company made headlines in 2024 when it announced a $1 billion marketing investment to increase awareness of Homes.com, including through celebrity-studded Super Bowl ads.
The company has historically been a major player in commercial real estate, but a smaller player in the residential sector. It also engaged in more subtle but controversial efforts to generate publicity and revenue, such as sending direct mail to home sellers asking them to pay for increased marketing of their properties through Homes.com.
Homes.com reports a significant increase in subscribers among real estate agents who pay the portal for a variety of services, including marketing “boosts” across the Homes.com network.
However, investment and subscriber growth were not enough to translate into stock market gains. CoStar’s stock price is down nearly 10% from a year ago and about 30% from five years ago.
Last April, the company reorganized its board of directors and created a committee focused on reviewing “our continued investment in Homes.com.” [to ensure] appropriate schedule to increase profitability,” a company statement said.
Around the same time, investment firm Third Point released a report that included KoStar’s analysis and questioned its large investment in Homes.com.
“After several years of uncertainty, we believe the time is right for our co-stars to begin a meaningful journey of self-help,” Third Point wrote in an April 30 letter.
Specifically, the company wrote, “Homes.com’s growing losses are obscuring the rapid growth of its core business.”
Analysts at investment firm William Blair expressed modest optimism about the spending cuts, saying the move should allow Homes.com to “marine” its model for some time.
Analysts at William Blair were quick to react to the news, writing, “We are encouraged by the guardrails surrounding Homes.com’s spending.”
William Blair initially thought CoStar should cut its investment by $200 million, analysts wrote.
“While we believe investors will appreciate the reduced spending and increased granularity of the path to profitability, some investors may be seeking a faster timeline to profitability than 2030,” they wrote.
Indeed, CoStar’s stock price remained down about 5% after Wednesday’s announcement.
Koster said the entire company is leaning toward artificial intelligence to improve efficiency and user experience “across all market platforms.”
“Homes.com is an important part of our ecosystem,” CoStar CEO Andy Florance said in a statement. “We now have a clear path to accelerating sales growth and improving profitability.”
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