Investors took a new look at housing-related stocks in January and seemingly liked some of what they saw, especially after the Federal Reserve cut interest rates twice near the end of the month. Half of the 10 real estate companies that comprise the hypothetical Inman Index posted healthy stock-price increases in January while the other half suffered further drops in their already-battered valuations.
Solidly in the plus column were mortgage lender IndyMac, title insurers First American Financial and Fidelity National Financial, and home builders D.R. Horton and Toll Bros. In the negative column were mortgage broker Countrywide Financial, secondary market giant Freddie Mac, Realtor.com operator Move Inc., lead generator HouseValues and realty brokerage ZipRealty.
The biggest winner of the month was IndyMac. Investors pushed up the company’s shares to an $8.17 closing price Jan. 31 from a $6.08 opening price Jan. 2, a one-month gain of more than 34 percent. Shares hit a low of $4.01 Jan. 22, a week after the company announced a staff cut of 2,403 jobs, or 24 percent, of the workforce. Look for fourth-quarter earnings Feb. 12.
Fidelity and FirstAm also notched impressive gains in January. Fidelity was up almost 34 percent to $19.42 from $14.53, while FirstAm rose more than 28 percent to $43.58 from $33.92.
Fidelity reported a fourth-quarter 2007 net loss of almost $45 million, or 21 cents per share, compared with net income of more than $71 million, or 34 cents per share, in the prior-year fourth quarter. The recent loss included a boost of almost $136 million in the company’s claims-payment reserves.
FirstAm announced a plan to spin off its title and specialty insurance businesses into a separate public company. The existing company will own the mortgage and property information, risk-assessment, and financial data and analytics businesses. FirstAm also said it will buy back an additional $300 million of its own stock on top of a prior repurchase authorization of $500 million, of which $60 million has yet to be executed.
Fourth-quarter 2007 earnings are due out Feb. 28, though the company has already anticipated revenues of approximately $1.9 billion and an after-tax loss of less than $50 million due to catastrophic losses from wildfires in California, write-downs of certain investments and assets, litigation reserves and severance payments.
The biggest newsmaker of the month was once again Countrywide, which is slated to be taken over by Bank of America in a $4.1 billion stock transaction. BofA CEO Ken Lewis assured investors that the acquisition is “a go,” despite the target’s disappointing fourth-quarter financial results and the opposition of at least one hedge fund manager, who has protested that the deal undervalues Countrywide.
Countrywide reported a loss of $422 million, or 79 cents per share, for the fourth quarter of 2007 compared with earnings of $622 million, or $1.01 per share, in the prior-year fourth quarter. Revenue declined 58 percent to $1.2 billion in the recent period from $2.8 billion in the 2006 fourth quarter. The company’s stock price opened Jan. 2 at $8.92 and closed Jan. 31 at $6.96, a 22 percent drop.
In other news, ActiveRain, which hosts real estate blogs, announced a $2.75 million investment from HouseValues. The blog company will use the capital infusion for product development. HouseValues also disclosed a staff reduction of 45 employees. The company’s stock sank more than 7 percent to $2.90 Jan. 2 from $3.13 Jan. 31.
The Inman Index companies as a group gained more than 12 percent in January, a significant reversal after months of negative results. The real estate companies bested the NASDAQ Composite Index, Standard & Poor’s 500 Index and Dow Jones Industrials Average, which fell 9.9 percent, 6.1 percent and 4.6 percent, respectively.
Marcie Geffner is a real estate reporter in Los Angeles.
Copyright 2008 Marcie Geffner. All rights reserved. No part of this article may be used or reproduced in any manner whatsoever without the author’s written permission.
