Editor’s Note: Inman Index closed the books two days early in July to accommodate our reporter’s travel to San Francisco for our Real Estate Connect conference. The full-month report will resume in August.
If ever there was a black month for real estate industry stocks, July was it.
As of July 27, all 10 of the issues that comprise the hypothetical Inman Index, along with many other housing-sector companies, had lower valuations than they had had at the beginning of the month.
The worst performances among the 10 Inman Index stocks were turned in by Move Inc., which declined 24 percent from $4.50 to $3.41, and IndyMac Bancorp, which dropped 21 percent from $29.33 to $23.09 in the shortened July period.
IndyMac announced it would lay off more than 400 employees and take a $6.5 million pretax charge in the third quarter as a result of the staff reduction. Cost savings in the second half of the year are expected to more than offset the charge, the company said. Analysts at Lehman Bros. downgraded the company’s shares from “overweight” to “equal-weight.” Second-quarter results are expected to be announced July 31.
Small-cap Move, meanwhile, traded at 52-week lows near the end of July. The company plans to announce second-quarter results Aug. 2.
Not far behind in July’s race to the bottom were Countrywide Financial, which fell from $36.49 to $29.85, a loss of 18 percent, and D.R. Horton, which fell from $19.93 to $16.61, a 17 percent loss.
Like IndyMac, Countrywide has been subjected to ill-winds that have buffeted the mortgage sector. Further, Countrywide reported a disappointing second quarter: Net income was $485 million, or $0.81 per share, a 33 percent decline compared with $722 million, or $1.15 per share, posted in the comparable prior-year quarter. Current results were impaired by $417 million in charges and write-offs and a $293 million loan-loss provision. Revenue dipped 15 percent from $3 billion in the year-ago quarter to $2.55 billion in the current-year second quarter.
A reporter at TheStreet.com dubbed Countrywide CEO Angelo Mozilo’s sales of company stock one of the “five dumbest things on Wall Street this week.”
“All told, Mozilo has sold 3.8 million shares this year for a profit of more than $90 million. Meanwhile Countrywide has seen some $8 billion wiped off its market value. … All this selling is doing a job on shareholders, all right,” the reporter wrote.
Countrywide also was the target of two new lawsuits: In one, four black homeowners in Massachusetts accused the company of racially discriminatory lending practices with regards to discretionary points, fees and interest-rate mark-ups. In the other, the NAACP accused the company and 13 other lenders of steering black borrowers into more expensive loans.
Investors may be puzzled by analysts’ ratings: Friedman Billings downgraded Countrywide from “market perform” to “underperform” July 25, the same day that Keefe Bruyette upgraded the shares from “underperform” to “market perform.”
D.R. Horton’s woes were reflected in headlines that trumpeted the weak housing market’s negative impact on builders: “Housing Funk Hits Homebuilders Hard” (AP), “Homebuilders Collapse” (Forbes), “Homebuilders Lose It” (Forbes again), “Charges Drain Homebuilder Earnings” (Marketwatch) and “Homebuilders in a Hole” (Business Week).
Perhaps more significantly, DHI reported a loss of almost $824 million, or $2.62 per share, in the most recent quarter. A variety of pretax charges for reduced values of land, goodwill and other intangibles amounted to more than $1.2 billion.
The year-to-date results for the Inman Index companies were just as ugly as the July results were. As of July 27, IndyMac had lost half its value, while Move was down 40 percent. Also in negative territory were D.R. Horton, down 37 percent; Countrywide and Toll Bros., both down 30 percent; HouseValues, down 24 percent; Freddie Mac, down 15 percent; and Fidelity National Financial, down 10 percent.
First American Financial hung on to its distinction of being the only Inman Index issue in positive territory this year. The company’s shares were up from $40.74 to $46.31, a 14 percent gain, as of July 27.
The second-best, though still negative, performance was turned in by ZipRealty, which posted a 3 percent drop in July and an 8 percent drop year-to-date as of July 27. Second-quarter results are set to be announced Aug. 7.
**Footnote: After this report was filed, IndyMac suffered a one-day, 6 percent decline in its valuation, and Countrywide lost another 1.9 percent.
Marcie Geffner is a real estate reporter in Los Angeles.
Copyright 2007 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.