Publicly traded real estate brokerage, mortgage and technology companies weren’t awash in red ink on Wall Street in August, despite the nationwide slowdown in home sales. Rather, the list of 10 companies that comprise the hypothetical Inman Index contained both winners and losers when the month ended.
The stock market sector, which competes with real estate for investment dollars, has taken rather a dim view of the outlook for real estate brokerage and lending companies now that the pace of home sales has slowed from the record volume of recent years. One report, “Housing Bubble Horror: Market Has Makings of a Gory Story,” in The New York Sun compared the housing sector to “investment crazes” that occurred as long ago as the 1630s and early 1700s.
New issue Realogy, last month’s spin-off of Cendant Corp.’s real estate brokerage division, captured the dubious “honor” of the top spot in the loser’s column in August. The company’s shares debuted north of $25 on the first of the month, but closed the month at $21.40, a loss of more than 14 percent. At month-end, Realogy opened a type of Dutch auction self-tender offer as part of its previously announced plan to buy 48 million shares of its own stock. The price range for the offer is $20-$23 per share.
IndyMac, Washington Mutual and Countrywide Financial were also in negative territory on Wall Street in August.
An analyst at Banc of America Securities maintained a “sell” rating on Countrywide and cut his target price for the financial company’s shares to $30 from $35, according to NewRatings.com.
At the top of the win column was Interactive Corp., which owns and operates the LendingTree and RealEstate.com Web sites, among other Internet properties. An August jump of nearly 15 percent tipped the company’s stock back into positive territory for the year.
Interactive reported a decline in second-quarter net income to $53 million, or 17 cents per share, in 2006 from $618 million, or $1.77 per share, in 2005. The year-ago results included a $402 million special after-tax gain from the sale of certain investments, the company stated.
Adjusted earnings, which don’t include certain charges and other items, increased from $96.6 million, or 28 cents per share, in the 2005 second quarter to $108 million, or 32 cents per share, in the 2006 second quarter. Revenue exceeded $1.6 billion in the recent period.
A story in The Wall Street Journal opined that some investors believe Interactive is “finally getting it right as it refocuses on Internet searches and other businesses that depend on Web-ad sales.” The story also suggested that Interactive’s acquisition growth strategy “makes it tricky for investors and analysts to measure the true performance of the company.”
Other Inman Index winners in August included Fannie Mae and Freddie Mac, both of which were up nearly 11 percent. Freddie Mac has posted an impressive 32 percent gain this year. Fannie Mae is in negative territory, down 5.2 percent, for the year.
Fannie Mae emerged from behind one cloud in August, when the U.S. government announced it won’t file criminal charges against the company in connection a massive earnings restatement.
Freddie Mac also announced the end of an investigation, this one was conducted by the U.S. Labor Department. Separately, the company agreed to settle a class-action lawsuit connected to its 401(k) employee retirement plan.
HouseValues, the most battered stock in the Inman Index this year, posted a noteworthy gain of nearly 12 percent in August, though the shares have still lost more than half their value since Jan. 1.
The Inman Index overall posted a small gain of 1.45 percent, again a poorer performance than that of the broader market indices, but nonetheless in positive territory. The Dow Jones Industrials and Standard & Poor’s 500 gained 1.75 percent and 2.19 percent, respectively, in August while the Nasdaq Composite was up 5 percent.
Marcie Geffner is a real estate reporter in Los Angeles.
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