REALTY: Is This the Beginning of a NEW ERA?
hemant is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Trulia (NYSE: TRLA) was listed in the New York stock exchange with a big bang. Its IPO debut was a huge success – one of the best IPOs of this year. It is the first IPO offering in over a month and is making quite a fuss. It was priced at $17 a piece which was above the targeted range of $14-$16. It opened at $22.10 (up 30%) and ended at $24 (up 40%) on its first day itself. Such a great response was not expected as the company reported a loss of over $7 million in the first half of the year. Trulia raised $102 million by selling 6 million shares. This is really a good sign for the real estate market in the United States.
Other real estate website shares are also rising this year. Zillow (NASDAQ: Z) which started at $23 this year is now trading at $46.17 (up 101%) and Move (NASDAQ: MOVE) which has increased by around 32% over the last one year.
Zillow, Inc. is an online real estate founded in 2005 by Rich Barton. It is a media company that generates revenue by selling advertisements on its website. In 2011, they had a tie up with Yahoo! Real Estate making it the biggest online database for real estate. As per the scores from ComScore, they have surpassed Realtor in November in terms of the number of unique visitors. This stock has already increased by over 100% since its listing giving a sign of the possible boom in the real estates. Zulia can sense Trulia’s emergence in the market. This is the very reason they had filed a patent infringement lawsuit against Trulia. Zillow alleges that Trulia copied its "Zestimates" technology and is seeking a permanent injunction and a "reasonable royalty for the use" of the invention. However, this lawsuit did not have much impact on the share prices of Trulia.
Move is also a real estate web site which captures more than 15 million monthly visitors. They recently acquired TigerLead Solutions for $22 million. The main strategy behind acquiring TigerLead is to broaden Move’s lead generation tool and thus empowering it to deliver a complete suite of end-to-end solutions. This makes its product portfolio a very impressive look which already has Realtor.com, ListHub, and Top Producer CRM. One of its biggest websites is Realtor.com which has been leading this online frontier for quite some time. But with companies like Zillow and Trulia this might not remain the same. The earnings are not impressive and the stocks have remained more or less unaffected i.e the investors are neither bullish nor bearish for the scrip.
Trulia has been able to monetize its mobile application which is giving it an edge over its competitors. As per the interview with the CEO Pete Flint, they generally see the number of visitor’s spikes during the day time, which is primarily driven by its mobile application. When people want to check out any home, they use Trulia’s mobile application to search for a place and then look inside. The customers also use their mobile applications to connect to the real estate agents via phone calls or emails. Even the agent subscribers and advertisers find the mobile application more attractive and prefer spending more than 25 per cent on the same as compared to a desktop application. This is where Trulia is unique and looks promising in the near future.
The mortgage rates were at an all-time low a few weeks back and they are slowly rising. Also the household debt in US has increased to $13 trillion in the second quarter which is quite encouraging for the market. Higher borrowing leads to higher spending and a higher investment as well.
Americans are slowly regaining the money they lost during the recession. This is primarily due to an increase in the stock prices and rising home prices as well. But people who don’t have any stocks won’t feel it. This increase in wealth will boost the confidence amongst people to invest further and strengthen their economy. According to a Fed report stocks account for 22% of the people’s wealth while housing accounts for 27% approx.
Real estate market is looking promising, courtesy of online resources such as Zillow, Trulia and Realtor which are the top players in the game. Whenever a homeowner is looking to sell his property or a buyer is planning to buy a property, he/she heads out to the above mentioned websites on his laptop or mobile device for references. These websites provide property details, quotes, mortgage and financial analysis and a lot more that a prospective buyer or seller would need.
Zillow leads the online real estate market with the highest number of visitors, followed by Trulia and Realtor. Interest rates are also low now and it is the right time for the buyers to invest in real estate whether it’s residential or commercial. Homes cheaper or expensive, you will always find a buyer. Petra Ecclestone, daughter of Bernie Ecclestone bought the Spelling Manor for a whopping $150 million, which made it the most expensive home for sale in the US. While movie stars and billionaires try to find the most lush and glamorous homes to prove their style statement, common man takes help of Zillow or Trulia to find his dream home.
Trulia reported an increase of 79% in revenue, in the first half of the year making it $29 million. The problem has been that they have not been reporting any profit till now. However the overwhelming response to its IPO seems to change its fortune. The question is for how long will they be able to sustain at this level? Will they expand their horizon of online advertisement into real estate brokerage as well? Will they continue to enjoy the advantage in the mobile application? Even the stocks of Zillow and Move are on the high for the past few weeks. Is this just the momentary movement for all these stocks or a true sign of the beginning of a new era in real estate?
hemantnagla has no positions in the stocks mentioned above. The Motley Fool owns shares of Zillow. Motley Fool newsletter services recommend Zillow. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.