Shimizu (OTCMKTS:SHMUY – Get Rating) and Orion Oyj (OTCMKTS:ORINY – Get Rating) are both construction companies, but which is the better investment? We will contrast the two businesses based on the strength of their dividends, profitability, risk, earnings, analyst recommendations, institutional ownership and valuation.
Analyst Ratings
This is a breakdown of current ratings and recommmendations for Shimizu and Orion Oyj, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Shimizu | 0 | 2 | 0 | 0 | 2.00 |
| Orion Oyj | 0 | 0 | 0 | 0 | N/A |
Volatility & Risk
Shimizu has a beta of 0.58, suggesting that its stock price is 42% less volatile than the S&P 500. Comparatively, Orion Oyj has a beta of 0.69, suggesting that its stock price is 31% less volatile than the S&P 500.
Earnings & Valuation
This table compares Shimizu and Orion Oyj’s top-line revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Shimizu | $13.21 billion | N/A | $425.06 million | $2.24 | 9.49 |
| Orion Oyj | $1.23 billion | 4.58 | $229.29 million | $0.81 | 24.69 |
Shimizu has higher revenue and earnings than Orion Oyj. Shimizu is trading at a lower price-to-earnings ratio than Orion Oyj, indicating that it is currently the more affordable of the two stocks.
Profitability
This table compares Shimizu and Orion Oyj’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Shimizu | 3.18% | 3.98% | 1.66% |
| Orion Oyj | 18.71% | 27.42% | 17.56% |
Dividends
Shimizu pays an annual dividend of $0.30 per share and has a dividend yield of 1.4%. Orion Oyj pays an annual dividend of $0.49 per share and has a dividend yield of 2.5%. Shimizu pays out 13.4% of its earnings in the form of a dividend. Orion Oyj pays out 60.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.
Summary
Orion Oyj beats Shimizu on 6 of the 10 factors compared between the two stocks.
About Shimizu (Get Rating)
Shimizu Corporation engages in the building contracting, civil engineering, machinery, and other construction works in Japan. It is also involved in the research, planning, study, evaluation, diagnosis, soil analysis, surveying, design, supervision, management, and consultancy related to regional, urban, ocean, space, resources, and energy developments, as well as construction works and environment improvement; and purchase, sale, letting, brokerage, management, appraisal, and consultancy of real estate. The company constructs, lets, sells, and caretaking of residential houses and other buildings; plans, constructs, possesses, maintains, and operates public office buildings, roads, harbors, airports, and parks, as well as educational and cultural, medical and welfare, and water supply and sewerage facilities; generates and supplies electricity and heat; undertakes purification works; collects, disposes, and reutilizes waste; and designs, installs, leases, sells, and maintains information communication and building management system. It also engages in the cultivation, production, management, sale, and consultancy of agricultural produce and seafood, and forestry work; maintenance and upkeep, security, and cleaning of buildings, equipment, and machinery; and design, manufacture, sale, lease, and brokerage of construction machinery and materials, concrete and wooden products, furniture, and interior fitting. The company offers industrial property, copyrights, and computer software; pharmaceutical, medical care material, and medical machinery and equipment; and advertisement, publication, printing, images and other information media, business event, inland transportation, warehouse, distribution center, insurance and travel agency, manpower supply, loan, guarantee, and factoring services. It also engages in the management and consultancy of sporting, hotel, restaurant, nursing, and resort facilities. The company was founded in 1804 and is headquartered in Tokyo, Japan.
About Orion Oyj (Get Rating)
Orion Oyj develops, manufactures, and markets human and veterinary pharmaceuticals and active pharmaceutical ingredients (APIs) in Finland, Scandinavia, other European countries, North America, and internationally. It provides prescription drugs and self-care products, including Nubeqa for the treatment of prostate cancer; dexdor and Precedex for intensive care sedative; Stalevo and Comtess/Comtan for Parkinson’s disease; Simdax for acute decompensated heart failure; and Fareston for breast cancer, as well as Salmeterol/fluticasone Easyhaler, Budesonide/formoterol Easyhaler, Formoterol Easyhaler, Budesonide Easyhaler, Beclomet Easyhaler, and Buventol Easyhaler drugs for the treatment of asthma and chronic obstructive pulmonary disease. The company also offers veterinary drugs comprising Bonqat, Clevor, Domosedan, Domitor, Antisedan, Dexdomitor, Domosedan Gel, Sileo, and Tessie; and APIs for generic and proprietary drugs, as well as provides contract manufacturing services. In addition, it markets and sells veterinary drugs manufactured by other international companies. The company serves various healthcare service providers and professionals, such as specialist and general practitioners, veterinarians, pharmacies, hospitals, healthcare centers, clinics, and laboratories, as well as consumers with pets. Orion Oyj has partnership with Propeller Health to connect the Easyhaler(R) product portfolio for the treatment of asthma and COPD; and a research collaboration and license agreement with Alligator Bioscience AB (publ) to discover and develop new bispecific antibody cancer therapeutics. Orion Oyj was founded in 1917 and is headquartered in Espoo, Finland.
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Renting an apartment in New York City this summer? Say hello to sky-high prices and a fight to the finish.
Amid the heat and the occasional rain, there’s a mad scramble to rent affordable apartments in Gotham, which has been undersupplied for many years. Real estate agents describe the mayhem when it comes to prices.
“It’s nuts,” Jessica Peters, a real estate agent with Douglas Elliman, told MarketWatch. “We can’t even keep up anymore. We’re, like, let’s just put up this crazy number, and we’re getting it.”
Offices in the city are trying to woo more employees back: The city is not near full capacity yet — foot traffic to office buildings in NYC is still down 40.6% compared to pre-pandemic levels. But some workers are coming back, restaurants, movie theaters and Broadway are back, and college students are preparing to start school.
Consequently, the median monthly rent is up $725 in June on the year and $59 on the previous month, according to Zillow. The median monthly rent in NYC is $3,300, 53% higher than the national median of $2,155.
“‘A lot of renters will be in for a rude awakening.’”
Peters said that the reality was far worse on the ground. “I just rented something … in Williamsburg. It’s a great two-bedroom ground floor unit, with a big backyard,” she said. “We were asking $6,500. We got $7,000.”
Peters, who specializes in the Brooklyn area, said that while rental prices may be fluctuating a little, the reality is clear for someone looking to be in the city.
“If you’re coming back after not renting in either Brooklyn or Manhattan in the last ten years, a lot of renters will be in for a rude awakening,” Peters added.
(Reminder: Realtors and real estate agent make money on a commission basis, meaning the hotter the market, the higher their earnings.)
That said, the rental market in New York is reflecting a broader intensification of the inventory pressures, which is leading to bidding wars among renters across the country.
But in New York, one of the most expensive cities in the U.S., even some tenants in rent-stabilized apartments cannot catch a break. The city’s Rent Guidelines Board has signed off on hikes as high as 3.25% for new one-year leases, and 5% for two-year leases.
One of Gartenberg’s open housing listings in the Two Bridges area of Lower Manhattan.
Screenshot from Streeteasy.com
Mihal Gartenberg, a real estate agent with Coldwell Banker Warburg, said the market’s wrath was normal; it was just operating on a demand-and-supply basis.
There are people who are simply willing to pay more, he said. “It’s getting to the point where we’re not the ones deciding what these are going for,” Gartenberg added. “This is a true market enterprise.”
Technology was aiding some renters in their search for a home.
A two-bedroom luxury apartment she put on the market for rent two months ago in the Lincoln Square area attracted people streaming in during a two-hour open house in ten-minute increments, on top of prospective renters who joined on FaceTime
AAPL,
“We priced it in my opinion… quite high,” Gartenberg said, at $7,800, “but we ended up taking even more. The person who ended up taking the apartment offered $400 more… we had an offer of $8,200, and they also offered to pay the broker fee, which is an additional month.”
“‘I feel very uncomfortable with this idea that the first person to see a listing is the first one to get it.’”
Over this past weekend, she had open houses for two apartments in the Two Bridges area in lower Manhattan.
“I’m only going to be showing it at the open house. I like to have a level playing field,” Gartenberg said ahead of the event. “I feel very uncomfortable with this idea that the first person to see a listing is the first one to get it.”
Buying a home was worth considering, the real estate agents said, given how intense the rental market has become.
Peters said many renters are attempting to become homeowners because rents have risen so dramatically. “People are starting to reevaluate whether or not they should just purchase at this point,” she said.
“Why would I want to spend $10,000 a month on a rental if I qualify for a purchase? It might not be exactly what they wanted, it might be slightly smaller, but it’s still going to be better than spending $120,000 a year in rent,” she added.
“Do not go see things at your price point,” Gartenberg said. “Because where the market is today, is going above your price point.”
(PHOTO: Getty Images)
But be prepared for bidding wars when buying for a home, Gartenberg warned. She put a newly renovated apartment in Hudson Heights on the market, which is selling “well above ask,” she said, so much that “it made me scared.” The sale on the apartment is not closed yet so she said she was not able to discuss how far above asking the bidder went.
Gartenberg priced her Two Bridges apartments at $3,550 for a two-bedroom unit on the top floor, and at $3,050 for a one-bedroom unit.
On Saturday, her open houses were full. Everything went above the ask. “We had so much interest, we were able to divert offers to a not-yet-listed apartment and rent that, too,” Gartenberg said in a follow-up email.
Half of the offers that came in were from people who had seen the apartment via FaceTime, or from a video she had sent them.
Gartenberg offered rental tips for the summer.
Get your paperwork in order, such as your proof of income, photo ID, 1040 tax form, bank statements, and other financial documents. Also, get your job to write a letter to say you’re in good standing, Gartenberg said.
Given the number of rentals going for above asking, be prepared to look below your price point, she added. If you know which building you want to live in, get in touch with the landlord’s agent, she said, and find out what’s coming to market.
Hunting for a rental in New York and want to share your thoughts? Write to: aarthi@marketwatch.com
Independent property, construction, and infrastructure consultancy Pick Everard has opened a bigger office in Nottingham as it grows its presence in the region.
The Leicester-based firm has taken new office space in the EastWest building, in Tollhouse Hill, in Nottingham city centre.
Nationally the business has more than 600 staff supporting both private and public sector clients. It has had a presence in Nottingham for more than 14 years, and the new office has 28 workspaces and two meeting rooms set up for hybrid meetings.
There are also informal meeting spaces, with a café on the ground floor for employees and clients.
It will be headed up by project director Nick Fox, who said: “This is a really exciting step for us in Nottingham, and we’re naturally eager to make the most of the new opportunities this expansion in space and resources will bring us.
“It also allows us to grow even further, with a number of vacancies currently live for electrical engineers and apprentices across multiple disciplines.
“We’re proud to be a consultancy that has nationwide capability and delivers local service.
“This new office continues driving this approach forward, only now with more firepower behind us.
“Our agile and collaborative style of working will be able to flourish with the extra space meaning an even better output of the services we offer is possible.”
Pick Everard partner David Nisbet said: “Over the past two years particularly, the growth in both the design and management services of the business meant a bigger office was the only logical next step.
“On top of the greater resources we can now put into such areas, the move also allows us the opportunity to include additional new capabilities to the Nottingham office, bringing us more in line with Pick Everard’s multi-disciplinary construction solutions.
“Ultimately, we believe this growth signals the beginning of more expansion heading into the future.”
Pick Everard recently completed work on a new clinical skills specialist training facility for students at Nottingham Trent University, with a floor dedicated to simulated healthcare environments such as hospital wards or mock flats for home emergencies.
The firm has also been leading the development of new roads and public space on the southern side of the city around the new Broadmarsh car park. Since work began in 2020 much of the existing area, including an eight-lane highway, has been repurposed into pedestrian-friendly space.
Its new Nottingham office will be available to its workers from Derby, Leicester and Sheffield when visiting the city.
Some buyers tend to choose better properties because of their emotional connect with them and the liveability factor. They are just as important as investors
Some buyers tend to choose better properties because of their emotional connect with them and the liveability factor. They are just as important as investors
It is often thought that people who buy homes for their personal use are not too interested in the property’s potential to appreciate in value. These buyers, usually referred to as ‘end-users’, simply want a safe and comfortable place to live; only investors are interested in price appreciation.
This is unacceptable. If people merely wanted homes to live in, renting homes would be enough for them. They would not put all or most of their savings into making a hefty down-payment on a house, and then commit to paying EMIs for anything between 10-20 years.
Who is more serious about property purchases? When Indians buy homes, they make investments like investors do — even if they do not intend to make money out of the property. An owned home is not just a ‘status symbol’ — it is also a precious asset that can be borrowed against or even sold for a profit in the future. It is the ultimate investment even for so-called ‘end-users’ because it does not sit in a demat account or bank locker, but is actively used even as it becomes more valuable. This is why, just like gold, real estate is bought at auspicious times during the year. Of course, ensuring the family’s wellbeing is a significant consideration when purchasing a home on auspicious days. This is why so many Indians try to buy high-value assets, including real estate, during these festive times.
In this respect, both ‘end-users’ and investors have the same objectives. ‘End-users’ also desire the value of a property to go up once they have purchased it. But there are also critical differences between the end-user and investor approach to property purchase. Like in the case of gold, investors want to buy good properties at the lowest possible price so that the price appreciation is better and faster. They purchase properties from a pure profit motive, which surely does have advantages in the case of gold and stocks.
Where dreams come true
Many investors own multiple properties and keep them until their prices have appreciated enough. But end-users tend to choose better properties precisely because of their emotional connection with them. For them, a home is not just a tradeable commodity to rent out and then sell. It becomes an extension of the family, reflecting its values, desires and life concerns.
Investors often do not study the immediate neighbourhood to determine if it is suitable for children to grow up and elders to spend their golden years in peace and comfort. They will mainly study price trends and look at the neighbourhood as a future ‘target clientele’. What is the average purchasing power of the area today, and what is it likely to be five years from now? They will think of the current and upcoming infrastructure primarily as an ‘ultimate selling proposition’.
End-users will consider the neighbourhood and infrastructure from a much more serious and personal perspective. Is it immediately usable and advantageous? How much can a public transport node help save money on daily commuting? How is the air quality now, and can it deteriorate in the future? Will their children and elders be able to make good friends here and participate in exciting activities?
Investors are usually more interested in the area’s development potential. How soon will it reach saturation so that prices will begin to rise? End-users look at the same pace of development and wonder if there are enough green spaces to support the family’s health in the future as well. And, whether there is a possibility for the open spaces to be built up later.
Wanting this assurance, they will often buy a home in an integrated township where the entire development plan is legally committed and designated open spaces cannot be consumed by more development. They buy township properties because, as a family, they want the assurance of round-the-clock water and electricity supply and a school and hospital nearby. They picked highly liveable properties which have vastly superior resale values.
Liveability vs. profitability
Investors will often not see properties through the lens of such liveability but instead focus on potential profitability based on organic price growth in the area. Investors often sell homes they may have visited only a couple of times since they bought them. When end-users finally sell their homes, they put properties on the market that have passed the liveability test.
The fact that they have lived there for a long time is proof for the buyer that the property and location tick all the right boxes. Unlike investors, they will not sell their homes at break-even or even loss-making prices if the business requires cash flows.
Far too often, the difference between ‘end-users’ and investors is seen as the difference between amateurs and professionals. Nothing could be further from the truth. Families buy their homes with far more care and planning than investors do. They are the most serious buyers who examine every detail of a home before they make their final choice.
The writer is Chairman, Pharande Spaces.
A property investment company has bought another share in a £30 million Nottingham trade park.
Northwood Urban Logistics bought the first phase of the Teal Park trade units last November. Based off the Colwick Loop Road, in Netherfield, that phase is now fully occupied by tenants including Toolstation, Screwfix, Howdens, Trent Valley Windows, Trent Vehicle Charging, Karcher UK and Paintwell.
The same company has now bought the second phase of six trade units from developers Warwickshire-based AC Lloyd Commercial and Nottingham-based Henry Davidson Developments.
A third and final phase, made up of six larger employment units which range from 9,600 sq ft up to 31,500 sq ft, is set for completion later this year.
Mark Edwards, managing director at AC Lloyd Commercial, said demand was strong because there remained a lack of high-quality trade units in Nottingham.
He said: “Teal Park has been a real success story for AC Lloyd Commercial and this latest announcement underlines our commitment to delivering a premium mixed-use site for businesses and the local community.
“Work is now underway on the third and final phase of creating Teal Park which we hope to complete this autumn.”
Iain Taylor, director at Northwood Urban Logistics, said: “Enquiries remain strong at Teal Park since the market for trade units of this size remains on the up particularly when you add in Nottingham’s excellent transport links with the rest of the UK.”
Atlas Technical Consultants (NASDAQ:ATCX – Get Rating) and GreenBox POS (NASDAQ:GBOX – Get Rating) are both small-cap construction companies, but which is the better business? We will compare the two businesses based on the strength of their analyst recommendations, valuation, profitability, risk, dividends, earnings and institutional ownership.
Volatility & Risk
Atlas Technical Consultants has a beta of 0.16, indicating that its stock price is 84% less volatile than the S&P 500. Comparatively, GreenBox POS has a beta of 4.52, indicating that its stock price is 352% more volatile than the S&P 500.
Profitability
This table compares Atlas Technical Consultants and GreenBox POS’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Atlas Technical Consultants | -3.25% | -7.70% | 2.52% |
| GreenBox POS | -130.21% | -21.34% | -9.87% |
Earnings and Valuation
This table compares Atlas Technical Consultants and GreenBox POS’s revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Atlas Technical Consultants | $538.80 million | 0.45 | -$16.49 million | ($0.55) | -11.69 |
| GreenBox POS | $26.31 million | 1.73 | -$26.45 million | ($0.81) | -1.36 |
Atlas Technical Consultants has higher revenue and earnings than GreenBox POS. Atlas Technical Consultants is trading at a lower price-to-earnings ratio than GreenBox POS, indicating that it is currently the more affordable of the two stocks.
Institutional and Insider Ownership
21.5% of Atlas Technical Consultants shares are held by institutional investors. Comparatively, 13.5% of GreenBox POS shares are held by institutional investors. 18.3% of Atlas Technical Consultants shares are held by company insiders. Comparatively, 55.0% of GreenBox POS shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.
Analyst Recommendations
This is a summary of current ratings and target prices for Atlas Technical Consultants and GreenBox POS, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Atlas Technical Consultants | 0 | 0 | 3 | 0 | 3.00 |
| GreenBox POS | 0 | 0 | 1 | 0 | 3.00 |
Atlas Technical Consultants currently has a consensus target price of $15.67, suggesting a potential upside of 143.65%. Given Atlas Technical Consultants’ higher possible upside, equities analysts plainly believe Atlas Technical Consultants is more favorable than GreenBox POS.
Summary
Atlas Technical Consultants beats GreenBox POS on 9 of the 13 factors compared between the two stocks.
About Atlas Technical Consultants (Get Rating)
Atlas Technical Consultants, Inc. provides professional testing, inspection, engineering, environmental, and program management and consulting services in the United States. The company provides a range of technical services that helps its clients test, inspect, plan, design, certify, and manage various projects across various end markets. It offers testing, inspection, and certification services, such as construction materials testing; non-destructive testing and evaluations, materials testing and inspection, laboratory, and geophysics; construction quality assurance; owner verification and inspection; forensic and structural investigations; and materials laboratory services. The company also provides environmental services, including environmental permitting, compliance assistance, and auditing and compliance management system implementation; air quality; water, hazardous material permitting, and registration; underground storage tank management; leak detection and repair program management; water resource management; industrial hygiene and building science; and disaster response and recovery. In addition, it offers engineering and design services comprising civil site, transportation, and geotechnical engineering; hydrogeology; water/wastewater; solid waste/landfill; land acquisition; subsurface utility engineering; surveying and mapping; and geographic information system asset inventory and assessments. Further, the company offers program management/construction management/quality management services consisting of programmatic planning and phasing; contract document preparation; bid evaluation and award analysis; alternative/value engineering; project estimating and scheduling; project cost/schedule control; contract administration; project management; community relations/affairs; asset management; construction management; quality management and assurance; and construction engineering and inspection. The company is headquartered in Austin, Texas.
About GreenBox POS (Get Rating)
GreenBox POS, a technology company, engages in the development, marketing, and sale of blockchain-based payment solutions. Its blockchain-based systems facilitate, record, and store a volume of tokenized assets, representing cash or data, on a blockchain-based ledger. The company’s products include QuickCard Payment System, a physical and virtual cash management system, including software that facilitates deposits, cash, and e-wallet management; point of sale solutions comprising software and hardware; and Loopz software solution, a mobile delivery service operations management solution with automated dispatch functionality. It serves customers in various industries, including foreign exchange, retail, and e-commerce sectors. The company was formerly known as ASAP Expo, Inc. GreenBox POS was incorporated in 2007 and is based in San Diego, California.
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My summer portfolio strategy is to play the old disco hit “Baby Come Back” while slow dancing with my December brokerage statements. If it works, I have a business idea involving Hall, Oates, and a two-and-20 fee structure.
At least there’s real estate. Home equity is said to be hitting record highs. Then again, taking comfort there would be like slipping on a financial toupee—everyone knows that underlying conditions have deteriorated.
The latest reading on nationwide pricing comes from back in March. Since then, 30-year mortgage rates have shot up to nearly 6%, and applications from buyers have slowed. This past week, a pair of online brokers with a good read on house searches,
Redfin
(ticker: RDFN) and
Compass
(COMP), announced layoffs.
Meanwhile, Redfin shares are down some 90% from their peak. Builders have gotten clobbered, too. Friends don’t let friends own leveraged exchange-traded funds with names like
Direxion Daily Homebuilders & Supplies Bull 3X Shares
(NAIL), especially when interest rates are rising, but if you’re curious, that one just lost 45% over five trading days.
Should investors buy shares of home builders here? Brokers? What’s next for house prices? And when will the stock market come back? Let me answer those in order of declining near-term confidence, starting at iffy.
Yes, buy builders. Prefer
Lennar
(LEN) and
Toll Brothers
(TOL), says Jade Rahmani, who covers the group for KBW. He points out that builder shares trade at 60% of projected book value, which is where they tend to bottom during recessions, ignoring the 2008 financial crisis. Lennar will benefit from the pending sale of a real estate technology unit, and Toll focuses on affluent buyers, around 30% of whom pay cash, and so aren’t put off by high mortgage rates.
Price/earnings ratios across the group are astonishingly low, but ignore them. They stem from two conditions that won’t repeat soon: land values jumping 30% or more from the time companies bought acres to when they sold houses, and a sharply higher pace of transactions during the pandemic. A builder that trades at four times earnings might really go for eight times assuming normalized conditions—still cheap, but a big difference.
House prices jumped more than 20% in March from a year earlier, but Rahmani expects that rate to plunge to 2% by the end of the year. His baseline view is that next year brings flat prices. His recession scenario, based on a study of past sales volumes, has prices falling 5% next year—perhaps more if mortgage rates rise to 7%. That might not sound like much, but for recent buyers with typical mortgages, a 5% price drop can reduce equity by 25%.
Most homeowners don’t have mortgage rates anywhere near recent ones; some two-thirds are locked in below 4%. These buyers are unlikely to move and take new loans if they don’t have to, which is one reason that supply could stay low for years. Another is that mortgages are much higher quality than they were during the last housing bubble, so there’s unlikely to be a wave of defaults and panic selling.
But something has to give on affordability. Typical payments on new mortgages have topped 23% of disposable income, close to their 26% high during the last bubble. But incomes are growing by 6% a year, so a long pause for house prices could help restore affordability. Anyhow, the pandemic has left people spending more time in their homes, so they should be willing to pay somewhat more on housing as a percentage of their income, reckons Rahmani.
Don’t rush to buy shares of the brokers, says William Blair analyst Stephen Sheldon. He has Market Perform ratings on three of them: Redfin,
RE/MAX Holdings
(RMAX), and
eXp World Holdings
(EXPI). In a blog post this past week, Redfin CEO Glenn Kelman wrote that May demand was 17% below expectations, and that the company will lay off 8% of employees. Redfin hires agents directly, whereas many brokers use independent contractors.
Kelman wrote that the sales slump could last years rather than months. More agents could leave on their own. National Association of Realtors membership, a proxy for the number of people selling houses, hit 1.6 million last year, up from about a million in 2012.
Sheldon at William Blair says he’s struck by how far broker valuations have come down, but sentiment is sour, and he’s waiting for signs of stabilization. Redfin goes for less than a tenth of its peak stock market value early last year, even though revenue has roughly doubled. That puts shares at around one-third of revenue. Free cash flow was expected to turn consistently positive starting in 2024. Now, we’ll see.
As for the stock market, I have good news and bad news, neither of which is reliable. The S&P 500 this past week dipped below 15 times projected earnings for next year, which suggests pricing has returned to historical averages. But there’s nothing to say that the market won’t overshoot its average valuation on its way to becoming cheap. And
Goldman Sachs
says forecasts for 10% earnings growth this year and next look too high.
Expect slower growth, says Goldman, and if there’s a recession, earnings could fall next year to below last year’s level. The bank’s estimates under that scenario leave the S&P 500 today trading at more than 18 times next year’s earnings. Goldman predicts that the index will rise 17% from Thursday’s level by year’s end without a recession, or fall 14% with one. Please accept my congratulations or condolences.
Not to worry, says Credit Suisse. Statistically, individual forecasts for company earnings are tightly clustered. That’s the opposite of what tends to happen before earnings tank.
I’ve heard people refer to the stock market as a “total cluster” before, but I had no idea they were talking about estimate dispersion.
Write to Jack Hough at jack.hough@barrons.com. Follow him on Twitter and subscribe to his Barron’s Streetwise podcast.
My summer portfolio strategy is to play the old disco hit “Baby Come Back” while slow dancing with my December brokerage statements. If it works, I have a business idea involving Hall, Oates, and a two-and-20 fee structure.
At least there’s real estate. Home equity is said to be hitting record highs. Then again, taking comfort there would be like slipping on a financial toupee—everyone knows that underlying conditions have deteriorated.
The latest reading on nationwide pricing comes from back in March. Since then, 30-year mortgage rates have shot up to nearly 6%, and applications from buyers have slowed. This past week, a pair of online brokers with a good read on house searches,
Redfin
(ticker: RDFN) and
Compass
(COMP), announced layoffs.
Meanwhile, Redfin shares are down some 90% from their peak. Builders have gotten clobbered, too. Friends don’t let friends own leveraged exchange-traded funds with names like
Direxion Daily Homebuilders & Supplies Bull 3X Shares
(NAIL), especially when interest rates are rising, but if you’re curious, that one just lost 45% over five trading days.
Should investors buy shares of home builders here? Brokers? What’s next for house prices? And when will the stock market come back? Let me answer those in order of declining near-term confidence, starting at iffy.
Yes, buy builders. Prefer
Lennar
(LEN) and
Toll Brothers
(TOL), says Jade Rahmani, who covers the group for KBW. He points out that builder shares trade at 60% of projected book value, which is where they tend to bottom during recessions, ignoring the 2008 financial crisis. Lennar will benefit from the pending sale of a real estate technology unit, and Toll focuses on affluent buyers, around 30% of whom pay cash, and so aren’t put off by high mortgage rates.
Price/earnings ratios across the group are astonishingly low, but ignore them. They stem from two conditions that won’t repeat soon: land values jumping 30% or more from the time companies bought acres to when they sold houses, and a sharply higher pace of transactions during the pandemic. A builder that trades at four times earnings might really go for eight times assuming normalized conditions—still cheap, but a big difference.
House prices jumped more than 20% in March from a year earlier, but Rahmani expects that rate to plunge to 2% by the end of the year. His baseline view is that next year brings flat prices. His recession scenario, based on a study of past sales volumes, has prices falling 5% next year—perhaps more if mortgage rates rise to 7%. That might not sound like much, but for recent buyers with typical mortgages, a 5% price drop can reduce equity by 25%.
Most homeowners don’t have mortgage rates anywhere near recent ones; some two-thirds are locked in below 4%. These buyers are unlikely to move and take new loans if they don’t have to, which is one reason that supply could stay low for years. Another is that mortgages are much higher quality than they were during the last housing bubble, so there’s unlikely to be a wave of defaults and panic selling.
But something has to give on affordability. Typical payments on new mortgages have topped 23% of disposable income, close to their 26% high during the last bubble. But incomes are growing by 6% a year, so a long pause for house prices could help restore affordability. Anyhow, the pandemic has left people spending more time in their homes, so they should be willing to pay somewhat more on housing as a percentage of their income, reckons Rahmani.
Don’t rush to buy shares of the brokers, says William Blair analyst Stephen Sheldon. He has Market Perform ratings on three of them: Redfin,
RE/MAX Holdings
(RMAX), and
eXp World Holdings
(EXPI). In a blog post this past week, Redfin CEO Glenn Kelman wrote that May demand was 17% below expectations, and that the company will lay off 8% of employees. Redfin hires agents directly, whereas many brokers use independent contractors.
Kelman wrote that the sales slump could last years rather than months. More agents could leave on their own. National Association of Realtors membership, a proxy for the number of people selling houses, hit 1.6 million last year, up from about a million in 2012.
Sheldon at William Blair says he’s struck by how far broker valuations have come down, but sentiment is sour, and he’s waiting for signs of stabilization. Redfin goes for less than a tenth of its peak stock market value early last year, even though revenue has roughly doubled. That puts shares at around one-third of revenue. Free cash flow was expected to turn consistently positive starting in 2024. Now, we’ll see.
As for the stock market, I have good news and bad news, neither of which is reliable. The S&P 500 this past week dipped below 15 times projected earnings for next year, which suggests pricing has returned to historical averages. But there’s nothing to say that the market won’t overshoot its average valuation on its way to becoming cheap. And
Goldman Sachs
says forecasts for 10% earnings growth this year and next look too high.
Expect slower growth, says Goldman, and if there’s a recession, earnings could fall next year to below last year’s level. The bank’s estimates under that scenario leave the S&P 500 today trading at more than 18 times next year’s earnings. Goldman predicts that the index will rise 17% from Thursday’s level by year’s end without a recession, or fall 14% with one. Please accept my congratulations or condolences.
Not to worry, says Credit Suisse. Statistically, individual forecasts for company earnings are tightly clustered. That’s the opposite of what tends to happen before earnings tank.
I’ve heard people refer to the stock market as a “total cluster” before, but I had no idea they were talking about estimate dispersion.
Write to Jack Hough at jack.hough@barrons.com. Follow him on Twitter and subscribe to his Barron’s Streetwise podcast.
if sandy shores are in your future on a tight budget, here are some spots you might want to think about.
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With summer in full swing, and many of us hitting the beach, we’re highlighting some beach towns where you can buy a house for less than $300,000. That said, it’s important to note the risk of hurricanes and flooding — and the associated insurance costs — when buying beach real estate. (You can see the lowest mortgage rates you may qualify for here.) But if sandy shores are in your future on a tight budget, here are some spots you might want to think about.
If you want a quaint town on the beach: St. Augustine, Florida
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Founded in 1565 by Spanish colonists, St. Augustine is known for its architecture, including buildings spanning from the 18th century to the present. Attractions include the Fountain of Youth Archaeological Park, which is located on the reputed site where the Spanish explorer Ponce de León landed in 1513, as well as the Accord Civil Rights Museum, which commemorates 1964 protests in St. Augustine that were led by Martin Luther King Jr.
Great for both kids and adults, the city boasts white sand beaches and a fishing pier along with a rich history. Named the number one food town in the South by Southern Living magazine in 2019, exemplary restaurants include The Floridian, which serves southern comfort food, and the Ice Plant, which serves farm-to-table fare along with specialty cocktails. Although the typical value of a home in St. Augustine is currently about $450,000, there are still plenty of nice properties to buy for less than $300,000, including this recently renovated two-bedroom home in the historic downtown; this newly constructed three-bedroom in a planned community near the outlet malls; and this three bedroom home just a ten minute drive away from the beach.
Median home value: $454,109
Population: 15,065
Cost of Living: 1.9% higher than the U.S. average
Sources: Zillow; Sperling’s Best Places
If you want that Texas vibe: Port Isabel, Texas
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Just north of the border between the United States and Mexico, Port Isabel is located at the end of the causeway that leads to South Padre Island, the only tropical island in the state of Texas. The town has plenty of access to white sand beaches on the Gulf, as well as the lagoons, wildlife refuges and canals that make up the geography of the area. For less than $300,000, you can buy a home on one of the town’s many deep-water canals, including this one-bedroom with a spacious covered patio, and this recently updated one-bedroom. Along with a plethora of golf courses, beaches, boating activities and waterfront restaurants, the town also offers a historic lighthouse, as well as a flea market and a history museum. Enjoy local seafood at Los Tortugo’s Seafood Market and Joe’s Oyster Bar but beware that the area is prone to hurricanes.
Median home value: $238,724
Population: 5,094
Cost of Living: 24.5% lower than the national average
If you want to fish and golf: Sneads Ferry, North Carolina
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Once a fishing village, Sneads Ferry area has grown in recent years due to the expansion of the nearby Marine Forces Special Operations Command. Located at the mouth of North Carolina’s New River, just before it runs into the Atlantic Ocean, Sneads Ferry is a ten minute drive from Topsail Island, a barrier island with 26 miles of beaches. Along with taking your boat out, spend your days visiting nearby attractions including the Turtle Factory, which offers painting classes as well as turtle-themed gifts, as well as the North Shore Golf Course, which is located on the Intracoastal Waterway. Notable restaurants include the Riverview Cafe, a seafood restaurant with water views, and Salty Sistas, which serves traditional North Carolina seafood. But like many beach towns, Sneads Ferry’s is in a high risk hurricane zone. For less than $300,000, you can buy a well maintained three-bedroom home like this.
Median home value: $326,898
Population: 2,326
Cost of Living: 11.3% lower than the U.S. average
If you want to be Hamptons-adjacent: Mastic Beach, New York
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Located on the south shore of Long Island, roughly a two hour drive from Manhattan, and 30 minute drive to Southampton, Mastic Beach boasts the Wertheim National Wildlife Refuge, a 2,500-acre complex full of wildlife habitats, as well as the William Floyd Estate, which was inhabited over 250 years ago by the first delegate from New York to sign the Declaration of Independence. One of the gateways to Fire Island, a collection of barrier islands that separate Long Island from the Atlantic Ocean, Mastic Beach has its own beaches on the bay, as well as a yacht club that was founded in 1930. The town offers many casual dining spots, including Nino’s Pizzeria & Cucina and Empanada Ville. The town is prone to flooding, which keeps housing prices low. For less than $300,000, you can buy a two-bedroom home on a creek with access to the bay.
Median home value: $366,794
Population: 15,610
Cost of Living: 5.9% higher than the U.S. average