Is eBay Buying In at the Top of Housing Bubble?
technewsworld.com
AFX News
12/17/04 9:59 AM PT
Rent.com's revenue has been driven by a record year in home sales. In the U.S., the turnover of existing homes is running at a record rate of 9 percent. But eBay could be buying near the top of a housing bubble
Amid a level of real-estate activity in which homeowners seemingly have been flipping properties almost as quickly as they would stocks, eBay's (Nasdaq: EBAY) getting in on the action.
EBay said today that it bought Santa Monica, California-based Rent.com for US$415 million in cash and stock.
Rent.com, which said it's profitable, charges homeowners and managers success fees but waives listing fees.
The buyout price represents about 10 times Rent.com's expected sales of $40 million this year.
Fee-Driven
Shares of eBay fell 59 cents to $115.11 in morning trading.
By buying Rent.com, eBay stands to capitalize on the steady stream of fees, which are being driven by record housing activity.
But even though eBay is a cash-spewing machine with $3 billion in cash in the bank, one might say that eBay could be buying near the top of a housing bubble.
The revenue that Rent.com is bringing in has been driven by a record year in home sales. In the U.S., the turnover of existing homes is running at a record rate of 9 percent, according to Goldman Sachs.
This year, about 8 million new and used homes will sell with a total transaction value of $1.9 to $2 trillion in the U.S. market.
Slowdown
If real-estate activity remains robust, that's good news for businesses like Rent.com, which help homeowners rent homes or assist people in moving and settling down in a new place. Rent.com even offers a listing of local wireless phone services and dating services.
But there are also signs that housing activity could slow in 2005.
For one, economists say there's too much inventory.
The rate of housing-stock growth is exceeding the number of households by a wider margin than any in the past 40 years, according to Goldman Sachs. Interest rates also are on the rise.
Earlier this week, Federal Reserve policymakers voted unanimously to hike benchmark rates, marking the fifth such increase seen during 2004. |
