Will the Real Estate Rally Continue This Week?
The slow but steady recovery in the U.S. housing market has been a boon for real-estate information marketplaces like Trulia (NYSE:TRLA) and Zillow (NASDAQ:Z). Both companies are shaking up the way that interested buyers search for property and connect with sellers, and the broad revitalization of the market has helped convince once-skeptical investors that their business models can actually work.
Trulia’s core services provide pricing and listing data, and information on the communities that homes are listen in. Much like a social network, the larger and more engaged its community is, the better. Trulia reported its fourth-quarter and full-year results last week, and showed that monthly unique visitors to its website grew 50 percent, year over year, to 23.6 million.
What’s more, total subscribers grew 45 percent, year over year, to 24,443 at the end of the quarter. Average revenue per subscriber grew 46 percent to $172 for the same period. All this translated into quarterly revenue of $20.6 million, a 75 percent year-over-year increase. Full-year revenue increased 77 percent to $68.1 million.
The downside is that Trulia is still operating at a loss, but negative earnings shrank from $0.30 in the year-ago period to $0.06 in the most-recent quarter. What the results say loud and clear is that the company is heading in the right direction. Shares climbed more than 41 percent over last week’s five-day period, even as its major competitor, Zillow, posted strong earnings of its own…
Zillow is slightly more established than Trulia, and boasts a market cap that’s about 50 percent higher. Zillow’s fourth-quarter and full-year 2012 results showed a 73 percent year-over-year increase in quarterly revenue to $34.3 million, while full-year revenue increased 77 percent to $116.9 million, the same annual growth rate as Trulia.
Average monthly unique visitors to Zillow’s website increased 47 percent year over year to 34.5 million in the fourth quarter. The company reported 29,473 premier agent subscribers at the end of the quarter, an 87 percent year-over-year increase. Average revenue per subscriber increased 3 percent to $267.
Basic diluted earnings fell by 1 cent to $0.02 per share, largely due to an increase in depreciation and amortization expenses and share-based compensation related to three acquisitions in the fourth quarter.
Again, the results were strong, and provided strong evidence that the real-estate information market place has developed a feasible business model. Shares rallied more than 23 percent over last week’s five-day trading period. Looking ahead, several major housing market reports could affect the long-term performance of Zillow and Trulia…
On Tuesday, the National Association of Home Builders will issue its housing market index report for February. The consensus expectation is for the index to increase one point to 48, indicating that home builders still view conditions as more bad than good. A reading above 50 would indicate the opposite.
On Wednesday, the U.S. Department of Housing and Urban Development will report housing starts data for January. The consensus estimate is for a seasonally adjusted annualized rate of 914,000 units. This is a decrease from December’s annualized pace of 954,000 units, but it’s important to remember that housing starts rebounded more than expected in December. Expectations were for an annualized paced of 910,000 units.
On Thursday, the National Association of Realtors will report existing home sales data. Home sales surged 4.8 percent in November, but dropped 1.0 percent in December to 4.94 million. However, they were still up 12.8 percent year-over-year. Estimates for January are calling for another slight decrease to 4.9 million.
Taken together, these indicators will paint a fairly robust picture of the current state of the housing market. If they come in strong, real estate information marketplaces like Zillow and Trulia could continue to attract investor attention, especially following their strong earnings.