September was a month of extremes for the Inman News Real Estate Stocks Index. Investors smiled broadly on two online companies, Homestore and HouseValues, while they frowned severely on three mortgage stocks, Fannie Mae, Freddie Mac and Washington Mutual.
Homestore and HouseValues racked up per-share price gains of more than 15 percent and 11 percent, respectively. Financial giant Fannie Mae gave up nearly 12 percent of its valuation; Freddie Mac and Washington Mutual were also in the minus column with losses of more than 5 percentage points each.
At month-end, Homestore traded at a per-share price of $4.35, just shy of its recent 52-week high of $4.64. The company announced a profitable second quarter at the end of August, and followed that with a settlement agreement this month with former CEO Stuart Wolff. The settlement agreement caps Homestore’s obligation to reimburse Wolff for his attorney’s fees and other legal defense costs at no more than $11 million and bars Homestore from seeking repayment of such sums.
HouseValues’ share price rebounded to $14.30 at the end of September after its shares had declined in August despite an announcement of record second-quarter results.
Fannie Mae shares lost more than $6 apiece in September to close at $44.82. Shares of the beleaguered company have lost more than 39 percent of their value since they hit a 52-week high of $73.81 near the end of 2004.
A Dow Jones report of more newly discovered glitches in Fannie Mae’s accounting triggered a sell off that chopped 10 percent off Fannie’s shares in one day in September even though neither the company nor its federal regulators confirmed that more problems had been identified.
Federal Reserve Chairman Alan Greenspan repeated his warning that Fannie Mae’s and Freddie Mac’s portfolios of mortgage debt were too large, and reports of drastic cuts in Fannie’s formidable lobbying program also surfaced.
A Banc of America securities analyst reiterated a “sell” rating on Fannie Mae mid-month with a target price of $53. A Prudential Financial analyst maintained a “neutral” rating on Fannie Mae’s shares at month-end with a target price of $63.
Freddie Mac reported a sharp decline in income, which amounted to $1.6 billion in the first six months of 2005 compared with $4.1 billion in the first half of 2004. The company attributed the decline not to any fundamental change in its business, but rather to changes in its accounting practices.
Freddie Mac CFO Martin F. Baumann told analysts in a conference call that the company’s balance sheet is in great shape, according to news reports. The company also declared a 35-cents-per-share third-quarter dividend on its common voting stock.
The Banc of America securities analyst maintained a “neutral” rating on Freddie Mac at mid-month with a target price of $66. The Prudential Financial analyst maintained an “overweight” rating near month-end with a target price of $75, according to NewRatings.com.
All told, the hypothetical Inman News index of 10 publicly owned real estate brokerage, mortgage and technology stocks was down slightly more than 3 percent for the month, a result that trailed the major equities market indices. The NASDAQ Composite index essentially broke even; the Dow Jones Industrials and Standard and Poor’s 500 declined less than 1 percent in September.
Marcie Geffner is a real estate reporter in Los Angeles.
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