Online Real Estate Sector Benefits from Housing Market Improvement

Market reports confirm that the housing market in the U.S. is beginning to show signs of improvement. According to the National Association of Realtors, in January sales of existing homes grew 0.4% over December to a seasonally adjusted annual rate of 4.92 million. The housing inventory also shrunk to its lowest since December 1999, with inventory falling 4.9% over December and 25.3% over the previous year to 1.74 million homes. At the current selling pace, the inventory is expected to be exhausted within four months. Low inventory levels and 40% growth in buyer interest is also helping drive prices upward. The median national price grew 12% over the year to $173,600 in January. The median listing time for sales also fell 28% to 71 days in January. Improving housing market conditions are helping the performance of the online real estate sector.

Zillow’s Financials

Zillow’s (Nasdaq:Z) Q4 revenues grew 73% over the year to $34.3 million, surging past the Street’s estimates of $31 million. Revenue growth was driven by 95% growth in marketplace revenues, which brought in $26.8 million for the quarter. Display revenues grew 22% over the year to $7.5 million. EPS of $0.02 was also significantly ahead of the market’s projected loss of $0.06 for the quarter.

Among operating metrics, Zillow’s average monthly unique users grew 47% over the year to 34.5 million. The company added more than 2,770 premier agent subscribers to end the quarter with more than 29,470 subscribers. Average monthly revenue per subscriber also grew 3% over the year to $267.

For the year, Zillow’s revenues grew 77% to $116.9 million. EPS of $0.18 was also ahead of the Street’s target of $0.10 for the year and recorded a significant increase over the breakeven year reported in 2011. By segment, for the year, marketplace revenues grew 105% to $86.7 million and display revenues grew 26% to $30.2 million.

Zillow’s Acquisitions

During the last quarter, Zillow has been rapidly acquiring companies. In December, they announced a $16 million acquisition of San Francisco–based real estate site, HotPads. HotPads was launched in 2005 and offers consumers the ability to search for rentals, real estate listings, and even vacation rentals. They had received $2.3 million in venture funding from Meakem Becker Venture Capital. As of October 2012, HotPads had a unique visitor base of more than 2.8 million. The acquisition will help Zillow improve their offering in the rental space as more than 70% of HotPads’s visitors were focused on rental listings. Zillow had recently launched Zillow Rentals to cater to the rental market.

Earlier last quarter, they also acquired mortgage software provider, Mortech, for an estimated $17 million. Mortech’s solutions help connect lenders with borrowers by matching the needs of the borrowers with the relevant mortgage products. The software’s lead management platform helps lenders cater to borrowers from both offline and online channels. Zillow will be able to expand their presence into the mortgage marketplace through this addition.

To grow their mobile and online product portfolio, Zillow also acquired Buyfolio, a collaborative shopping platform that lets home buyers search, track, organize, and discuss for-sale listings with their network of a real estate agent and a group. Buyfolio’s tools simplify the process of online shopping for a home by enabling a more organized approach and by providing  a simple, real-time snapshot of home search while letting them add their own notes and comments about the listing. Zillow will be able to add Buyfolio’s tools to their own mobile offerings and thus help their Premier Agents serve better client relationships.

Zillow’s stock is trading at $41.13 with a market capitalization of $1.37 billion. It touched a 52-week high of $47.85 in earlier this month.

Move’s Financials

Move’s (Nasdaq:MOVE) Q4 revenues grew 12% over the year to $52.7 million, ahead of the Street’s target of $51.7 million. EPS, however, fell 56% over the year to $0.09 and was also short of the market’s projections of $0.12 for the quarter. They ended the year with revenues growing 4% over the year to $199.2 million. Net income grew from $0.08 a year ago to $0.12 per share.

Move gave an outlook of current quarter’s revenues of $53.5 million-$54 million and adjusted EBITDA of 11%-12%. Move projected the current year revenues to grow to $222 million-$226 million with an adjusted EBITDA margin of 15%. For the current quarter, analysts expect Move to deliver revenues of $52.8 million, with EPS of $0.12. They expect Move to end the current year with revenues of $216.8 million and EPS of $0.52.

Move’s Customer-Focused Initiatives

During the year, Move has been trying to drive up consumer engagement. Realtor.com remained the leading site for real estate professionals, registering a viewership of nearly one billion pages and one billion minutes. Mobile usage continued to help in improving customer engagement. During the last quarter, Move completed the first phase of the Realtor.com site redesign that will help make search more intuitive and improve functionality.

Recently, Move also announced the acquisition of eFrogPond’s electronic housing trends newsletter. Following the acquisition, Move’s real estate brokers and agents will be able to distribute the newsletter to their clients, which had more than one million page views per month and 50,000 real estate agent and broker subscribers at the time of the acquisition.

The stock is trading at $9.77 with a market capitalization of $379.4 million. It touched a 52-week high of $10.14 in March 2012.

Trulia’s Financials

Last September, after a long wait, the the stock of real estate firm, Trulia, listed on the NYSE under the ticker TRLA. The company listed their stock at $17 a share. The market reacted positively to the listing, and the stock soon surged 46% on the first day of trading.

The company recently announced their fourth quarter financials. For the current quarter, revenues grew 75% over the year to $20.6 million, managing to surpass Street’s target of $19.1 million. By segment, marketplace revenues grew 90% to $13.9 million and media revenues grew 51% to $6.7 million. Loss of $0.03 a share was, however, worse than the Street’s projected loss of $0.02 for the quarter.

Among operating metrics, total traffic during the quarter grew 50% over the year to 23.6 million monthly unique visitors. Mobile usage continued to improve as Trulia reported an increase of 119% over the year to 5.8 million mobile monthly unique visitors.

Trulia ended the year with revenues growing 77% over the year to $68.1 million. Marketplace revenues grew 104% to $45.5 million and media revenues grew 39% to $22.6 million. Net loss for of $0.87 was narrower than the loss of $0.92 per share recorded a year ago.

For the current quarter, Trulia expects to earn revenues of $20.8 million-$21.2 million with an adjusted EBITDA of $800,000 to $1.2 million. The market was projecting revenues of $19.3 million, with adjusted EBITDA of $800,000 for the quarter.

Trulia’s Mobile Growth

Trulia’s success in expanding revenues is attributed to the success of their mobile tools. Trulia’s reports suggest that agents normally see a better performance of mobile ads for their business. Hence, Trulia is also charging advertisers a higher price for mobile ads. Despite the higher prices, Trulia’s mobile advertising adoption is increasing. Trulia did not divulge statistics, but they claim that the average revenue per advertiser for the site grew in the fourth quarter, driven by the increased ad sales on mobile and an increase in advertising prices.

Trulia’s Expanding Offerings

Recently, Trulia announced a partnership with PRIMEDIA, the parent company of Apartment Guide. As part of the agreement, Apartment Guide’s collection of information and listings will be accessible exclusively to Trulia users. The information will add to Trulia’s inventory photos and floor plans of more than 20,000 multi-family apartment communities and 5 million units.

Trulia also expanded their presence in the mortgage segment by releasing the Trulia Mortgage Center, a tool that helps prospective home buyers and homeowners find the best financing deals. The tool offers personalized mortgage quotes that are updated in real time and are available not only on their web portal, but also on their mobile apps for iOS devices.

In keeping with the times, Trulia also released their Windows 8 app that is customized for the new OS and features a gallery of photos for houses available on sale or for rent and identifies new listings in the market.

Trulia’s stock is trading at $25.56, with a market capitalization of $698.5 million. It touched a high of $38.22 earlier this month.