CoStar poured billions into Homes.com. Five years later, its stock is down 27% while the broader market nearly doubled. And a public battle has broken out over whether that bet built long-term value or burned it.
The clash started with a sharply worded letter from activist investor Daniel Loeb of Third Point and was quickly followed by an official response from CoStar Group defending its strategy, financial outlook, and governance changes.
Together, the two statements offer a side-by-side look at how one of the biggest real estate portals and one of Wall Street’s most aggressive investors see the future of Homes.com.
And the numbers on both sides tell very different stories.
Third Point Says Homes.com Has Become a Value Drain
At the center of Third Point’s criticism is how much capital CoStar poured into residential real estate and how little revenue it has produced so far.
To frame the scale of the investment, Loeb pointed to both total spending and recent revenue:
- Roughly $5 billion invested across CoStar’s residential real estate segment over five years
- About $3 billion tied specifically to U.S. residential marketplace efforts
- Around $60 million in revenue in 2024
- Around $80 million expected in 2025
After walking through why the residential portal market was already dominated by entrenched competitors, Loeb connected the spending directly to what he sees as a major distraction from CoStar’s strengths.
In his letter to the CoStar board, Loeb wrote:
“Over the past five years, we estimate that CoStar has ‘invested’ roughly $5 billion in its RRE segment (including $3 billion in its U.S. RRE segment) via a combination of organic operating expenses and acquisitions. These direct financial costs have been compounded by broad management distraction which has prevented the core CRE franchise from reaching its full potential.”
He then underscored just how small the returns have been relative to that investment:
“Despite a cumulative investment of roughly $3 billion over five years, the U.S. residential marketplace businesses have generated negligible returns, with roughly $60 million of revenue in 2024 and $80 million in expected revenue in 2025.
“Looking ahead, ample feedback from market participants suggests the prospects for improvement remain elusive.”
Missed Targets and Earnings Fallout
Homes.com was originally positioned as a major growth engine for CoStar. Loeb reminded the board of the financial goals once tied to the residential push:
- More than $700 million in organic residential revenue by 2027
- More than 15% EBITDA margins
Those targets were later abandoned, and in 2025, Homes.com subscription pricing was cut by more than 30% to chase adoption.
After laying out the shifting projections, Loeb summed up the pattern in the letter:
“In 2022, CoStar guided the residential segment to >$700 million of organic revenue and >15% EBITDA margins by 2027 but subsequently abandoned those targets when it became clear they were completely unachievable.
“Management then introduced annual projections for its RRE business, only then to miss its own mid-year revised 2024 revenue guidance.”
Third Point also tied the residential losses to broader financial damage:
- RRE losses projected to depress 2025 adjusted EBITDA by more than 65%
- Consensus 2025 EBITDA estimates down more than 70% since 2021
- CoStar stock down 27% over five years, while major indexes rose roughly 94% to 98%
Loeb connected those earnings declines directly to shareholder impact:
“These precipitous EBITDA declines have had a predictably disastrous impact on CoStar’s long-term stock performance. The fact that this severe stock underperformance is entirely self-inflicted simply adds insult to injury.”
Why Leadership Is at the Center of the Criticism
One of the most pointed sections of the letter focused on compensation and oversight.
Despite shrinking EBITDA and lagging returns, CEO Andy Florance received roughly $37 million in total compensation in 2024, placing him in the top 10% of S&P 500 CEOs.
At the same time, CoStar’s stock performance ranked in the bottom 10% of the index.
Loeb framed that gap as a breakdown in board accountability:
“During 2024, CEO Andy Florance received roughly $37 million in total compensation, nearly the maximum payout, despite abysmal results. Incredibly, Mr. Florance’s compensation placed him within the top decile of S&P 500 CEOs, despite CoStar’s extraordinarily poor stock performance over the last five years.”
He also criticized the board’s plan to tie only 25% of long-term incentive compensation to shareholder returns, arguing that it continued to reward weak performance.
Read the full letter here.
CoStar’s Counterpunch on Governance and Strategy
CoStar’s response pushed back hard on the idea that the board has been complacent. The company pointed to several changes made over the past year:
- Three new independent directors were added, including two designated by Third Point and D.E. Shaw
- 50% of the board appointed within the last three years
- A new independent Board Chair
- Formation of a Capital Allocation Committee
- A redesigned executive compensation program for 2026
After outlining those steps, CoStar directly challenged Third Point’s narrative in its statement:
“Third Point appears intent on spinning a yarn of Board complacency and ‘quixotic’ investment. Their story is completely detached from reality.
“Following a review process that Third Point and D.E. Shaw suggested with participation from their Board nominees, the Board unanimously recommended a plan involving accelerated profitability for Homes.com, additional investments in our core platforms, incremental capital return, stockholder-aligned executive compensation, and greater investor transparency.”
The Financial Case CoStar Is Making for Homes.com
Where Third Point sees value destruction, CoStar says Homes.com is entering the payoff phase. The company highlighted subscriber momentum and a sharp pullback in spending. Before Third Point’s letter became public, CoStar said it would reduce its investment in Homes.com by more than a third beginning in 2026 and continue tapering spending over the rest of the decade.
CoStar pointed out the following:
- Homes.com subscribers up 337% since Q1 2024
- Net investment reduced by $300 million in 2026
- Net investment reduced by $100+ million annually after that
- Breakeven profitability targeted exiting 2029
CoStar also framed Homes.com as a core part of its broader ecosystem and addressable market, now estimated at more than $100 billion.
Explaining why it believes residential is essential to long-term growth, CoStar said:
“Providing comprehensive digital solutions to the world’s real estate markets would not be possible without residential data, information, and marketplaces. The reality is that the single-family residential market is the largest segment of the real estate industry. Homes.com complements and meaningfully expands our residential portfolio alongside Apartments.com, Domain, OnTheMarket, and Land.com, significantly increasing our global addressable market to more than $100 billion.”
The company also leaned on its acquisition history to defend the long game. Over the past 15 years, CoStar has:
- Acquired more than 40 businesses
- Invested approximately $7.3 billion
- Generated IRRs between 17% and 39% on major deals
That same playbook, CoStar says, is now being applied to Homes.com. Looking ahead, CoStar’s 2026 guidance projects:
- $3.8 billion in revenue, up 18% from 2025
- $770 million in adjusted EBITDA, up 83%
- EBITDA margin of 20%, up from 13% in 2025
Longer term, the company is targeting $2.3 billion in adjusted EBITDA and a 35% margin by 2030.
Read CoStar’s full response here.
What This Fight Signals for the Portal Economy
At its core, this is a referendum on how much spending is justified to compete in residential real estate tech.
Third Point is arguing that years of heavy investment produced minimal return and damaged earnings power. CoStar is arguing that the hardest, most expensive phase is ending just as the platform starts to scale.
For anyone watching, this back-and-forth offers a real look at the financial pressures shaping the next chapter of real estate technology.
And depending on which side prevails, it could reshape how future platforms are built, funded, and judged.
