The Federal Reserve launched another 0.75 percentage points rate hike last week and has indicated further hikes ahead until the relentless inflation shows signs of slowing down. Amid the Fed’s hawkish stance, rising mortgage rates and inflation are causing the housing demand to plunge, forcing home prices to cool down. Moreover, home price gains slowed at the fastest pace on record in June.

According to the Mortgage Bankers Association, mortgage demand fell more than 6% in July, hitting the lowest level since 2000. Moreover, a survey revealed that homebuilders witnessed a record 9.3% cancellations in May.

Investors’ worries about a housing market crash are evident from SPDR S&P Homebuilders ETF’s (XHB) 27.2% year-to-date decline versus the SPDR S&P 500 Trust ETF’s (SPY) 14.1% slump. Therefore, Redfin Corporation (RDFN), WeWork Inc. (WE), and Centerspace (CSR) could be best avoided now, given their bleak fundamentals.

Redfin Corporation (RDFN)

RDFN operates as a residential real estate brokerage company in the United States and Canada. The company operates an online real estate marketplace and provides real estate services, including assisting individuals in purchasing or selling a home.

RDFN’s total revenue came in at $597.35 million for the first quarter ended March 31, 2022, up 122.6% year-over-year. However, its net loss increased 153.8% year-over-year to $90.81 million, while its loss per share increased 132.4% year-over-year to $0.86. Moreover, its cash, cash equivalents, and restricted cash came in at $648.73 million, down 51.7% year-over-year.

RDFN’s EPS is expected to decline 82.1% year-over-year to negative $2.04 in 2022. Also, its EPS is expected to remain negative in 2023. Over the past year, the stock has lost 85.1% to close the last trading session at $8.70.

RDFN’s POWR Ratings reflect its poor prospects. It has an overall grade of F, which indicates a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

Also, the stock has an F grade for Stability and Sentiment and a D for Growth and Quality. Click here to access the additional POWR Ratings for RDFN (Value and Momentum). RDFN is ranked #42 out of 43 stocks in the F-rated Real Estate Services industry.

WeWork Inc. (WE)

WE provide flexible workspace solutions to individuals and organizations worldwide. The company offers workstations, private offices, customized floor solutions, and various amenities and services. Its real estate portfolio includes around 756 locations.

On July 19, 2022, WE launched WeWork Workplace, a new space management solution built in partnership with Yardi, the leading provider of real estate software. However, given WE’s financials, the optimal productivity of this partnership might take some time.

WE’s revenue came in at $765 million for the first quarter ended March 31, 2022, up 27.9% year-over-year. However, its cash, cash equivalents, and restricted cash came in at $530 million, down 30.1% year-over-year. Its net cash provided by financing activities came in at $22 million, down 96.3% year-over-year.

Analysts expect WE’s EPS to remain negative in 2022 and 2023. The stock has declined 53.9% over the past year to close the last trading session at $4.78.

WE has an overall F grade, equating to a Strong Sell in our POWR Ratings system. Also, it has an F grade for Value, Stability, and Quality and a D for Growth.

Click here to access WE ratings for Momentum and Sentiment. It is ranked last in the Real Estate Services industry.

Centerspace (CSR)

CSR is an owner and operator of apartment communities committed to providing great homes by focusing on integrity and serving others. The company owns around 62 apartment communities comprising 11,579 apartment homes in Colorado, Minnesota, Montana, Nebraska, North Dakota, and South Dakota.

For the second quarter ended June 30, 2022, CSR’s revenue came in at $63.12 million, up 35.3% year-over-year. However, its operating income came in at $3.83 million, down 87% year-over-year. Its net loss came in at $4.60 million, compared to a net income of $19.93 million in the prior-year period, while its loss per share came in at $0.30, compared to an EPS of $1.48 in the previous period.

CSR’s EPS is expected to fall 431.9% year-over-year to negative $2.50 in 2022. Its EPS is expected to remain negative in 2023. The stock missed EPS estimates in three of the trailing four quarters. CSR has lost 22.7% year-to-date to close the last trading session at $85.68.

CSR’s POWR Ratings are consistent with this bleak outlook. The stock has an overall D rating, equating to a Sell in our proprietary rating system. In addition, the stock has a D grade for Growth, Value, and Quality.

We also have graded CSR for Momentum, Stability, and Sentiment. Click here to access all of CSR’s ratings. It is ranked #34 in the same industry.

RDFN shares were trading at $9.00 per share on Wednesday morning, up $0.30 (+3.45%). Year-to-date, RDFN has declined -76.56%, versus a -12.58% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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