Surging inflation and interest rates are taking a bite out of homebuyer budgets and have weighed significantly on the housing market. In addition to contending with high prices this year, buyers have lost considerable purchasing power, with mortgage rates increasing twice what they were in January 2022.
U.S. existing home sales fell for the fifth consecutive month in June to the lowest level in two years, as increasing interest rates and record-high selling prices made buying a home too expensive. According to a monthly report from the National Association of Realtors, June's home sales fell 5.4% from May.
According to the Mortgage Bankers Association, mortgage demand dropped to a 22-year low earlier this month. NAR Chief Economist Lawrence Yun said, "Falling housing affordability continues to take a toll on potential home buyers. Both mortgage rates and home prices have risen too sharply in a short span of time." Due to the weak demand, analysts expect a further decline in home sales in the upcoming months.
Given this backdrop, we think it could be wise to avoid real-estate stocks Fathom Holdings Inc. (FTHM), Alset EHome International Inc. (AEI), Centerspace (CSR), and Belpointe PREP, LLC (OZ).
Fathom Holdings Inc. (FTHM)
FTHM is a cloud-based provider of real estate brokerage services through its three segments: Real Estate Brokerage, Mortgage, and Technology. Its website provides buyers, sellers, landlords, and tenants access to all available properties for sale or lease on the multiple listing service.
On March 14, 2022, FTHM’s Board of Directors authorized a repurchase of up to $10 million of its outstanding shares of common shares. However, this indicates substantial cash expense in the near term, which might limit its organic growth prospects.
FTHM’s total operating expenses increased 80.3% year-over-year to $95.72 million for the fiscal first quarter ended March 31, 2022. The company’s net loss widened 76.4% year-over-year to $5.99 million. Also, its loss per share widened 48% year-over-year to $0.37.
Street expects FTHM's earnings per share to remain negative in fiscal 2022. Shares of FTHM have declined 75.1% over the past nine months and 76.3% over the past year to close the last trading session at $6.29.
FTHM's POWR Ratings reflect its poor prospects. The company has an overall rating of D, equating to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
FTHM has an F grade for Quality and a D for Stability and Sentiment. It is ranked #39 of 43 stocks in the D-rated Real Estate Services industry. Click here to see additional ratings (Growth, Value, and Momentum) for FTHM.
Alset EHome International Inc. (AEI)
AEI is engaged in real estate development, financial services, digital transformation technologies, biohealth activities, and consumer products. It operates through four segments: Real Estate, Digital Transformation Technology, Biohealth, and Other Business Activities.
For the quarter ended March 31, 2022, AEI’s total revenue decreased 65.2% year-over-year to $1.95 million. Its net loss attributable to common stockholders widened 3.7% from the year-ago value to $6.47 million. The company’s net loss per share narrowed 90.4% year-over-year to $0.07.
The stock has slumped 87.3% over the past year to close the last trading session at $0.28.
AEI’s POWR Ratings are consistent with this bleak outlook. It has an overall F rating, equating to a Strong Sell in our proprietary rating system. The stock has an F grade for Growth, Stability, and Quality. Within the same industry, it is ranked #43.
Click here to see AEI’s ratings for Value, Momentum, and Sentiment.
Centerspace (CSR)
CSR is a real estate company focused on the ownership, management, acquisition, redevelopment, and development of apartment communities. It has approximately 79 apartment communities consisting of 14,441 apartment homes.
CSR’s total expenses for the fiscal first quarter ended March 31, 2022, increased 42.7% year-over-year to $64.23 million. The company’s operating loss came in at $3.91 million, compared to an operating income of $1.64 million in the year-ago period. Its net loss to common stockholders widened 57.5% from the year-ago value to $10.20 million. Also, its loss per share came in at $0.68, up 38.8% from the year-ago period.
The stock has lost 23% year-to-date to close the last trading session at $85.44.
CSR’s weak fundamentals are reflected in its POWR Ratings. It has an overall rating of D, equating to a Sell in our proprietary rating system.
It also has a D grade for Growth, Value, and Quality. Again, in the same industry, it is ranked #38. Click here to see the other ratings of CSR for Momentum, Stability, and Sentiment.
Belpointe PREP, LLC (OZ)
OZ focuses on identifying, acquiring, developing, redeveloping, and managing commercial real estate properties in the United States. It also intends to invest and manage real estate-related assets, including commercial real estate loans and mortgages, debt and equity securities issued by other real estate-related companies, and private equity acquisitions and investments.
OZ’s total expenses for the fiscal first quarter ended March 31, 2022, increased 937.4% year-over-year to $2.83 million. Net loss attributable to OZ widened by 1,475% year-over-year to $2.02 million. Also, its loss per share narrowed 99.9% year-over-year to $0.60.
Over the past nine months, the stock has lost marginally to close the last trading session at $99.49.
OZ’s POWR Ratings are consistent with this bleak outlook. It has an overall rating of D, which translates to a Sell in our proprietary rating system.
It has an F grade for Quality and a D for Value. It is ranked #37 in the Real Estate Services industry. Click here to see the additional ratings of OZ for Growth, Momentum, Stability, and Sentiment.
FTHM shares were unchanged in after-hours trading Friday. Year-to-date, FTHM has declined -68.08%, versus a -12.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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