Housing Rebound Pushes Online Real Estate Stocks Up

Includes: MOVE, Z
by: Sramana Mitra

The housing market continues to rebound. Recent market reports show that housing prices have gone up significantly, with some markets reporting price increases of 15% over the previous year's levels. The housing industry has benefited from lower mortgage rates and government policies such as the Home Affordable Refinance Program (HARP) and the Home Affordable Modification Program (HAMP). According to the U.S. Department of Housing and Urban Development, the number of single-family houses sold in July this year rose to 454,000 from 276,000 in 2010. The median price for properties has also gone up from $204,000 in 2010 to $271,600. The report showed that in 2010, the housing inventory stood at 9.1 months, but today that number has fallen to 4.1 months. Improvement in the sector has also driven stock prices of online real estate firms to 52-week highs, with more headroom due to macro trends.

Zillow's Financials

Zillow's (Nasdaq:Z) Q2 revenues grew 69% over the year to $46.9 million, ahead of the Street's estimates of $44 million. Loss per share widened to $0.30, compared with earnings of $0.04 per share reported a year ago. The market was looking for loss of $0.39 per share for the quarter.

By segment, marketplace revenues grew 86% over the year to $36.45 million and Display revenues grew 29% over the year to $10.47 million. In operating metrics, average unique monthly users grew 62% over the year to 54.3 million, with premier agent subscribers up 71% over the year to 38.8 million. Average monthly revenue per subscriber increased 1% to $266.

Zillow's Expansion Plans

During the quarter, Zillow (Z) launched Agentfolio Chicago, a real estate platform that collaborates multiple home searches at one central place. Agentfolio is the new avatar of Zillow's 2012 acquisition, Buyfolio. Chicago is just one of six major markets where Zillow launched Agentfolio, with plans to launch it in five more by the end of the year.

Other search enhancements launched by Zillow during the recent quarter include the ability to search for homes within certain school districts. Zillow users can now search by multiple boundaries and filter the selection by school ratings, which are provided by GreatSchools.

As part of its mobile expansion plans, Zillow updated its Mortgage Marketplace app for iPhone and iPad. The new app comes with features such as the ability to provide mortgage holders with details regarding the Home Affordable Refinance Program and FHA Streamline Refinance. In response to the new iOS7, it also upgraded the app to make home searches simpler. Users now have access to an enhanced photo-driven experience, where they can slide through thumbnail-sized photos of their searches while remaining on the map. Mobile is a big traffic generator for Zillow, which sees 60% of its traffic from mobile devices.

Finally, as part of its continued acquisition plans, Zillow recently acquired New York City real estate website, StreetEasy, for $50 million. StreetEasy attracts a traffic of nearly 1.2 million monthly unique visitors. Through the acquisition, Zillow will be able to expand their market position in New York, the country's largest real estate market.

Zillow's stock is trading at $87.96 with a market capitalization of $3.07 billion. It touched a 52-week high of $103 earlier this month.

Move's Financials

Competitor Move's (Nasdaq:MOVE) financial performance was also better than market projections. Q2 revenues grew 17% over the year to $57.5 million, ahead of the Street's target of $56.1 million. EPS of $0.11 was 175% higher than previous year's $0.04 and surpassed market's projections of $0.09 for the quarter.

During the quarter, the number of unique users grew 18% over the year and 10% over the quarter to 29 million. For the current quarter, Move projected revenues of $58 million with margins of 11-12%. It expects to end the year with revenues of $227 million-$228 million and adjusted EBITDA of 12-13%.

Move's Growth Plans

Move continued to focus on enhancing the customer experience and during the last quarter, released a new Advice and News blogs on realtor.com. The blog offers expert tips on real estate related decisions. Move is building its quality content on real estate matters through the blog.

Move is also constantly upgrading its mobile initiatives and recently launched the realtor.com rentals app for both iOS- and Android-based smartphones. The apps offer photo-rich content with a simple user interface to help consumers search nearby rental properties. It also entered into a strategic partnership with Xceligent Inc., a provider of commercial real estate information and marketing. Through the agreement, Move will be able to launch offerings geared to the commercial property listings.

The stock is trading at 52-week highs of $16.57 with a market capitalization of $667.84 million.

Trulia's Financials

The recently listed real estate company Trulia (NYSE:TRLA) is also seeing a strong stock performance. For its second quarter, Trulia saw revenues grow 77% over the year to $29.7 million. The market was looking for revenues of $27.6 million. EPS of $0.05 was also ahead of the market's projections of $0.04 for the quarter. Website traffic grew to 34.9 million monthly unique visitors, compared with 23.5 million reported a year ago. The subscriber base also grew 49% to over 32,120.

For the current quarter, Trulia projected revenues of $30.5 million-$31.5 million, ahead of the market's projections of $29 million.

Trulia's Expansion

Trulia released an interactive map visualization tool that displays comprehensive information on communities, schools, amenities, and similar qualitative features on the map. Trulia's visualization tool has integrated such information with home values and historical information on earthquake and flood data to help buyers and tenants assess their property choices. As part of its mobile offerings, Trulia released its first dedicated iPad rentals application that also features this visualization tool.

Finally, Trulia entered into a tie-up with real estate franchise company, RE/MAX. As part of the agreement, RE/MAX agents will receive premium agent profiles, training curriculum and marketing and advertising products through Trulia to help the company reach a wider mobile consumer base.

Trulia's stock is trading at $48.21 with a market capitalization of $1.57 billion. It touched a 52-week high of $52.71 earlier this month.