Zip Realty Gets Pummeled
Zip Realty, an online real estate brokerage, got the heart ripped out of its stock on Friday, losing over 35% of its value in one day.
Zip Realty is structurally a real estate brokerage but they aim to become a more efficient one by cheaply generated leads for their agents online. 80% of their business is in helping consumers buy homes and 20% in helping consumers sell them. Zip Realty agents were involved in around 1.0 transactions per month for the recent quarter, roughly double that of the industry average.
They use the statistic that of 2.5 million real estate agent licensees rather than the 1 million registered Realtors with the NAR. If you use the later and assume that there are two agents per transaction, then the productivity figures of their agents look a little above average but not that much.
But that’s not the point. In September the firm noticed a dramatic rise in the number of homes for sale in their geographies but not a commensurate rise in the number of transactions. Sellers put their homes on the market and buyers stood on the sidelines, indicating that sellers are putting too big a premium on their house.
Zip Realty noticed the same trend in October and have lowered their guidance for the fourth quarter because they admitted that they don’t know if this is an endemic trend (no one possibly can).
Two months don’t make a trend but it does indicate that the housing market is finally cooling (Bubble popping?). The transaction volumes have been rising slightly, but that metric is a big lagged and so it is too soon to know until the NAR figures come out.
Zip Realty operates in the more ‘agressive’ housing markets, and so a correction was inevitable.
With the one day movement in Zip Realty’s stock price the inclination might be to forecast blood on the streets, but honestly, I think it is just simply a national correction. I don’t think housing prices will go down but at the same time I don’t think they will rise by more than 5-7% in the next few years.
The Internet still has so much to improve about this dusty old industry that I doubt you will see any significant slowdown in real estate advertising dollars online.
