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TheStreet Open House

This Company Sees More Growth In Housing

James Dennin, Kapitall: RE/MAX and Zillow (Z) are both trying take advantage of growing profits from an improving housing market. As of Monday afternoon Zillow had announced an acquisition of a small, web-based competitor in New York.

In even bigger news, RE/MAX Holdings, one of the largest real estate brokerages in the country, announced that it will be going public after 40 years as a private company. While few details are available so far regarding the potential IPO – the deal is expected to help the firm raise about $100 million – and comes at what some are calling the end of a robust housing recovery. RE/MAX follows the lead of a chief rival, Reaology Holdings (RLGY), which went public in 2012.

Real estate companies have been hit hard this summer over treasury loan rates and uncertainty about the future of the Fed. Some are saying a decline in the number of bidding wars has slowed the pace of growth among home prices. However, land purchases and development are both up. RE/MAX's current shareholders are making an audacious bet that the overall housing market will continue to grow.

Another company that is expecting further growth in this area is the Howard Hughes Corporation (HHC). Its chief executives both took their positions in a unique compensation scheme, actually taking a combined loss of $19 million when they signed on. While the climb in share price has already rewarded them handsomely – almost doubling in value to $101.50 per share - they can't cash out until 2016. The average target price is $130 per share, indicating that the company's investors believe that the company still has room to grow.

Zillow's own accountants are expecting home prices to slow their climb next year, to 4.4% from 6.7% this year. Whether nascent offerings will be able to profit much as the recovery slows is hard to say. The decisions made by these companies suggest that that sector still has room to grow, especially as inventory remains low throughout the summer season. 

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