Why Are Real-Estate Listing Sites Hot Right Now?

by 24 Sep 2012

(time.com/business/) -- Last week’s IPO of Trulia, an Internet real-estate listings site, was a smashing success for investors, as the stock traded up 41% to close at $24 per share, according to Marketwatch.

The price gives the company a price-earnings ratio of … wait, you can’t get a price-earnings ratio on a negative number, can you?

In truth, San Francisco-based Trulia has so far been profitless. And while its revenues of $29 million for the six months ending June 30 have nearly doubled from a year ago, the firm’s loss of $7.6 million for the first half of the year is nearly triple its loss of $2.6 million for the same period last year.

The pattern is similar to that of another listings aggregator: Zillow, which IPO’d in July of last year, with a home-run 79% increase in stock price on its first day. When Zillow debuted on the Nasdaq Stock Exchange, it, too, was running at a loss, of $6.8 million dollars during the prior year. (The company has since turned a tiny profit.)

So why do investors love these stocks? In a world where Facebook stock has been pummeled (down some 39% from its IPO price in May, according to the San Francisco Chronicle) it’s probably not a love of all things social media. The housing market is not currently go-go either. Real estate fundamentals are warming — but only oh-so-slightly. The Federal Housing Price Index shows home prices up 3.0% in the second quarter from a year before, good news but hardly enough to offset the slump since 2006.

Read more: http://business.time.com/2012/09/24/why-are-real-estate-listing-sites-hotter-than-listings/#ixzz27PCw2DUz


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