Borrowers who use Zillow Home Loans pay more, study suggests 

Borrowers who get their mortgages through Zillow Home Loans (ZHL) may end up paying more over time than those who use other lenders, a new study suggests — but a separate analysis came to a different conclusion.

The 40-page report, titled "Empirical Analysis of Zillow Home Loans Pricing," was published Dec. 21 by Georgetown University Professor of Economics and Law Emeritus Steven C. Salop. It received funding from CoStar, the parent company of Zillow home search rival Homes.com.

The study, which a Zillow spokesperson said draws "inaccurate and misleading conclusions," pointed to two class-action lawsuits filed this fall — Taylor v. Zillow and Armstrong v. Zillow — which accuse Zillow of boosting ZHL through illegal kickbacks.

In the wake of those cases, which a judge merged earlier this month, Salop set out to determine whether loans secured through Zillow's mortgage business "are more expensive than the mortgages offered by other lenders" — and finds that they are.

However, the consultancy firm that employs Salop disagreed, arguing that the data assessed for the study should not be used alone without considering other pricing factors. Salop has since spoken out to defend the report, which he said "was not flawed."

What the study analyzed: Salop assessed loan origination data made publicly available via the Home Mortgage Disclosure Act. The law requires lenders to share a wide range of information on lending activity, including interest rates, fees, borrower demographics, loan amounts and property types.

The report analyzed data for 30-year fixed-rate mortgage originations from 2022 to 2024, comparing the 10,969 ZHL mortgages originated in that time to those from other lenders.

It found that ZHL mortgages "have become more expensive over the course of the 2022-2024 time period, relative to other lenders," and that the number and sizes of ZHL loans also increased.

What Zillow had to say: A Zillow spokesperson noted that the study "was commissioned and paid for by a competitor and relies on selectively chosen data to produce a distorted view of Zillow Home Loans."

The study doesn't assess "critical" price factors such as business models, service levels and customer choice, the spokesperson told Real Estate News. "Any credible analysis cannot just look at the base pricing as this study does; you have to control for factors such as loan products, geography, and credit score — to do anything short of this does not accurately depict the data."

Zillow Home Loans "is committed to both fair lending and pro-consumer practices," the spokesperson said, adding that they stand by their business model.

A closer look at the report: Over the study's three-year period, ZHL borrowers were found to "pay significantly higher mortgage costs than they would pay to other lenders" — costs that were equivalent to a mortgage APR about 10 basis points higher overall and 15 basis points higher in 2024 alone. For example, the study found that borrowers taking out a $337,000 30-year loan in 2024 would pay an extra $21 a month. 

Salop wrote that it "will be useful to analyze the 2025 data" once it's available "to see how the market has further developed."

Income, race differences: Lower-income borrowers tend to be impacted more by ZHL price differences, the report found, with borrowers who make $100,000 or less particularly affected.

Salop's analysis also suggested that there are racial differences between which borrowers typically pay more. While white and Asian ZHL borrowers faced similar costs from 2022 to 2024, the difference was nearly double for Black ZHL borrowers. Latino ZHL borrowers didn't face higher mortgage costs relative to other lenders until last year.

Researcher's analysis disputed: Charles River Associates (CRA), the firm that employs Salop as a senior consultant, challenged the report's findings, arguing in a statement shared with Real Estate News that HMDA data "should not be used to draw conclusions regarding fair lending disparities because it lacks various key pricing factors."

The consulting firm's own independent analysis "has consistently found no disparities in average mortgage loan pricing based on borrower race or ethnicity for the years studied by Mr. Salop," said CRA Practice Leader Marsha Courchane, who leads the firm's financial economics practice.

That analysis "is based on proprietary Zillow Home Loans data that includes a comprehensive set of non-discretionary loan-level pricing factors that are commonly used in mortgage loan pricing across the industry," Courchane added.

Salop stands by his findings: In a response later published on Online Marketplaces, Salop stood by the study, which he said "shows consistent Zillow loan overcharges" and "was not based on selectively chosen data."

"To be clear, my paper is public," Salop said. "It is available for independent peer review. If Zillow wants to show that its loans are not more expensive, it should prove it with data that can likewise be reviewed."

Competitor funding? The study noted that its funding was provided by CoStar, the parent company of Homes.com. In addition to battling in the portal wars, the companies have also faced off in court this year over alleged copyright violations.

But CoStar's funding "was not contingent on the results of the analysis," Salop wrote. "All analysis, opinions and any errors are my own and are not those of CoStar or any other person at any organization with which I am affiliated."

CoStar was compelled "to commission a rigorous academic study" in response to allegations of Zillow's "unethical" business tactics, a CoStar Group spokesperson said in a Jan. 5 statement.

"Salop's findings are damning: Zillow Home Loans gouge all borrowers, with an especially shocking and disparate impact on Black borrowers, working families earning less than $60,000, and veterans seeking VA loans," the spokesperson added. "CoStar Group exercised zero influence over the study's outcome and demands full peer review."

Editor's note: This story has been updated to include comments from Charles River Associates Practice Leader Marsha Courchane, a CoStar Group spokesperson and Georgetown University Professor of Economics and Law Emeritus Steven C. Salop.