The Inman News Real Estate Stocks Index suffered a decline of nearly 7 percent of its value in August as nine of the 10 publicly owned real estate brokerage, mortgage and technology stocks that make up the hypothetical index lost ground.
The only winner in the index in August was Homestore, the online real estate company that operates the National Association of Realtors’ Realtor.com Web site. Homestore’s shares gained $1.19, or more than 45 percent, after adding 51 cents per share for a 25 percent gain in July.
Homestore’s good news was a second-quarter profit of $3.3 million or 2 cents per share on revenue of $63.3 million. Earnings would have been higher had the company not been obligated to pay $4.2 million in litigation expenses to defend two former officers against allegations that they violated federal securities law. The negative effect of those expenses was partially offset by a $1.4 million cut in prior restructuring costs. Deutsche Bank upgraded its recommendation to investors on Homestore from hold to buy.
Other Inman Index companies with online real estate interests didn’t hold a candle to Homestore as Wall Street’s August darling.
Shares of HouseValues lost a quarter of their value, despite record second-quarter results of $20.6 million in sales and $3.7 million or 14 cents a share in earnings.
Shares of Interactive Corp., which operates the LendingTree.com and RealEstate.com Web sites, dropped more than 8 percent, despite a favorable Business Week Online story, “The Good News about IAC,” about the company’s split into two separate entities. The story concluded: “…even if IAC and Expedia don’t quite re-live their shares’ salad days of 2003 after the spin-off, there’s a lot of meat there.”
ZipRealty’s shares suffered after the company reported a second-quarter loss of $900,000 or five cents per share on revenues of $25.8 million. Zip achieved positive operating results, but took a $4.1 million hit in connection with a pending settlement of a threatened class-action lawsuit over its sales associates’ expense allowances.
Washington Mutual achieved the dubious “best” results among the three mortgage companies in the Inman Index with a share-price decline of 2.26 percent in August. Analysts, regulators and shareholders weighed in with mostly favorable responses to WaMu’s pending acquisition of credit-card issuer Providian. That deal is expected to close later this year.
IndyMac was down 8.6 percent and Countrywide dropped 6.25 percent in August as Banc of America Securities downgraded its ratings on the two mortgage companies from buy to neutral and neutral to sell, respectively. Analysts opined in a research note that market sentiment in the mortgage sector would become “increasingly ruled by fear,” according to a news report.
Fannie Mae fell further out of favor in August as investors reacted to the disclosure that the company will need at least another year to straighten out its prior-year financial statements. Fannie’s mortgage portfolio shrunk in July for the ninth consecutive month; a top portfolio manager resigned to start a real estate investment trust; and a few pundits speculated that the New York Stock Exchange could de-list the company – a step other observers said was highly unlikely.
The hypothetical Inman Index fared worse than broader market indices during August. When Wall Street closed its doors at month-end, the Dow Jones Industrials, Standard & Poor’s 500 and Nasdaq Composite Index had lost 1.5 percent, 1.21 percent and 1.78 percent, respectively.
Marcie Geffner is a real estate reporter in Los Angeles.
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