Investment markets were relatively quiet overall in February, but Wall Street hammered two real estate-meets-technology players, HouseValues and ZipRealty, during the month and on the first day of March. Other February losers included IndyMac and Fannie Mae; winners included Homestore and Countrywide.
HouseValues recorded a 29 percent jump in its per-share price from $13.02 to $16.79 in January, but gave back more than half of that gain with an 18.7 percent drop in February to close at $13.50.
The company announced an expansion of its new HomePages service into 33 additional markets. The service combines aerial maps, neighborhood information and home listings into one Web site.
Investors may have been dismayed at the likelihood of new competition from Homestore, which is backed by the National Association of Realtors, and the new Zillow.com, which estimates current market values of homes based on prior sales prices, appreciation rates and other data. Zillow has been launched as an advertising-driven service, yet it could add a leads-for-sale service in the future as Homestore now plans to do.
HouseValues’ stock price deteriorated further when the company released its fourth-quarter 2005 earnings announcement after the markets closed Feb. 28. The company reported net income of $4 million, or 15 cents per share, which included a $1.2 million benefit from the favorable settlement of a state tax audit, compared with fourth-quarter 2004 net income of $1.85 million, or 8 cents per share. But the company also reduced its 2006 earnings expectations, and that news apparently put downward pressure on the stock, which traded as low as $9.65 Wednesday morning.
Meanwhile, ZipRealty’s shares gained 17 percent from $8.34 to $9.81 in January, but gave back 6.6 percent in February to close at $9.04 and gave back the rest January’s gain and then some when the company released its fourth-quarter 2005 financial results after the market closed Tuesday. Shares traded as low as $8.16 Wednesday morning.
The company reported fourth-quarter 2005 net income of $17.9 million, or 73 cents per share, including a $16.8 million one-time non-cash income tax benefit, compared with fourth-quarter 2004 net income of $900,000, or 1 cent per share. The company also announced a new price-tracker services that allows home buyers to research price-reductions on for-sale homes in a number of markets.
The hypothetical Inman Index of 10 publicly traded real estate and mortgage corporations in February lost nearly 2 percent of its value, a worse performance than the Dow Jones Industrials and the Standard and Poor’s 500, which gained 1.2 percent and 0.8 percent, respectively, and the Nasdaq Composite, which lost approximately one-half of 1 percent.
Fannie Mae was the subject of a flurry of news reports about a 2,652-page internal report that blamed the corporation’s former financial executives and a culture of arrogance at the top for the creative accounting that triggered an $11 billion earnings restatement for prior years. (More information: Bloomberg and Business Week.)
An analyst at Prudential Financial initiated coverage of Fannie Mae with a “neutral weight” rating and target price of $65 per share, and an analyst at Banc of America Securities reiterated a “sell” rating on the company and increased the target price from $42.50 to $48, according to NewRatings.com.
Homestore, the top performer in the Inman Index last year, opened 2006 with a one-month gain of 16 percent and added another 4 percent plus in February to reach $6.22 per share, although that price slipped to $6.11 Wednesday morning. The company said it will change its name to Move, Inc., and announced plans to introduce a per-lead service for realty agents who utilize the Top Producer lead management system, which Homestore owns.
Marcie Geffner is a real estate reporter in Los Angeles.
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