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U.S. Housing Market Getting Worse

Posted on Thursday, Sep 23rd 2010

Housing inventories in many U.S. cities continued to rise for the eighth consecutive month in August, reflecting the downtrend in the housing market. The number of available homes for sale in twenty-six major metropolitan areas at the end of August grew 0.4% over the month. The demand in the industry has fallen significantly on account of the expiration of the April deadline for the homeowner tax credit. Researchers estimate that at the current pace, the market is carrying a 12.5-month inventory compared with a six-month inventory that a healthy housing market is expected to carry. According to Zelman Data, national inventories are at their highest levels since November 2008.

For Q2, ZipRealty’s (NASDAQ:ZIPR) revenues grew 17% over the year to $37.6 million. The total value of real estate transactions closed during the period grew to $1.6 billion compared with $1.4 billion a year ago. The total number of transactions closed also grew, to 7,100, compared with 6,017 in the previous year. However, average net transaction revenue per close fell 2.7% over the year to $5,129. At the end of the quarter, the company had 3,251 ZipAgents, compared with 3,172 a year ago and 3,017 a quarter ago.

To help homeowners sell homes, ZipRealty recently launched a free online tool, Buyer Buzz. The tool lets homeowners post a trial listing of their house giving details of the property, expected sale price, and photos to get feedback from active buyers and ZipRealty agents in their area. Homeowners can use the inputs on property and suggestions for improvements or upgrades to maximize sale proceeds.

Recently, the company converted its California agents to an independent contractor model. The new model in California, which is the company’s biggest market, still gives agents access to ZipRealty’s technology, marketing support, and training and brokerage resources. Further, ZipRealty will continue to offer a customer satisfaction guarantee to reward agents for outstanding client service. However, agents, who till now were employees of the company, will lose that benefit.

Continuing with its handheld device expansion, the company recently launched an iPad application, similar to the earlier launched iPhone application. The application lets users see information on “for sale” and recently sold homes, listing prices and other vital property information in more than 4,000 cities and neighborhoods nationwide.

Despite these changes, ZipRealty expects sales to decline and has revised projections downwards to target net revenues for the year to grow in single digits with net loss for the year expected to be narrower than the 2009 net loss.

The stock is trading at $2.85 with a market capitalization of $58 million. It had reached a 52-week high of $5.47 in March of this year.

Meanwhile, Move’s (NASDAQ:MOVE) Q2 revenues fell to $49.7 million compared with $54.6 million a year ago. Earnings also fell to 11% compared with 14% a year ago. Despite the gloomy outlook for the housing market, Move continued to maintain its market leadership. In June, it attracted 11.8 million unique users who spent over 240 million minutes on their network. Visitors to the Move Network viewed more than 400 million pages, more than the next five competitors combined. Its Real Estate Search iPhone application has also been successful and recorded 1.5 million downloads in the past six months.

Move completed its beta version of Realtor.com and launched the site with new developments that include improvements in search and map display. IT also released the next generation of the Top Producer 8i CRM solution for Realtors which includes a new social media integration feature that lets users capture updates, status changes, and postings from Facebook and Twitter directly into the contact, calendar, and outreach programs. The solution is also available as an iPhone application.

Move recently announced the acquisition of Threewide Corp, the owner of ListHub, for $13 million. ListHub is the country’s largest online real estate listing syndicator and provides performance reporting solutions for brokers, real estate franchises, multiple listing services (MLSs), and real estate Web sites. Its products and services include syndication of 2.4 million property listings from more than 270 MLSs and 38,000 brokers to more than seventy real estate marketing Web sites, as well as streamlined data management and reporting analysis used to monitor online listing performance. Through the acquisition, Move is expecting to become a single source for national online listing syndication and reporting services. 

Move is projecting Q3 revenues of $48.5 million–$49.5 million with EBITDA margin of 10%–11%.  For the year, it expects revenues of $194 million–$197 million with EBITDA of 11%.

The stock is trading at $2.15 with a market capitalization of $336 million. It touched a 52-week high of $3.11 in September of last year.

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