2 US real estate stocks to watch as June's pending home sales drop

July 27, 2022 08:43 AM PDT | By Mridul Gogoi
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  • LGI Homes, Inc. (NASDAQ: LGIH) reported a net income of US78.7 million in Q1 FY22.
  • DLR reported first-quarter revenue of US$1.1 billion for fiscal 2022.
  • DLR’s Q1 FY22 net income was US$76.9 million. 

Pending home sales in the US saw a drop of 8.6 per cent month-over-month (MoM) to 91.0 in June 2022, reported the National Association of Realtors (NAR) on Wednesday, July 27. Amid this development, real estate stocks such as LGI Homes, Inc. (NASDAQ: LGIH) and Digital Realty Trust, Inc. (NYSE: DLR) could see an impact.

The trade association's Pending Home Sales Index (PHSI), which is said to be a contract signings-based indicator of house sales, also noted that transactions sank by 20 per cent year-over-year (YoY) in June while contracts for all four regions declined on an MoM and YoY basis.

Now, let us look at the two real estate stocks and their performances.

LGI Homes, Inc. (NASDAQ: LGIH)

LGI Homes reported a 21 per cent dip in its net income for the first quarter of fiscal 2022 to US78.7 million, or US$3.30 Basic EPS and $3.25 Diluted EPS. 

The Texas-based company, which is involved in new construction homes and housing developments, said its home sales revenues plunged 22.7 per cent YoY to US$546.1 million in Q1 FY22. Its net income was US$99.5 million in Q1 FY22, versus US$123.27 million in the year-ago quarter.

LGI Homes has said that the home closings have also gone down by 37.6 per cent YoY to 1,599 homes in Q1 FY22. 

LGIH stock has fallen over 29 per cent this year and dipped close to 35 per cent YoY.  

LGIH, DLR; 2 US real estate stocks amid pending home sales index data

Digital Realty Trust, Inc. (NYSE: DLR)

The real estate investment company reported first-quarter revenue of US$1.1 billion for fiscal 2022, which is a one per cent increase from the previous quarter but a three per cent slump from the year-ago quarter.  

The San Francisco, California-headquartered player's Q1 FY22 net income was US$76.9 million. 

DLR stock has tumbled over 37 per cent this year and fallen over 17 per cent YoY. 

Bottom line

The contracts to purchase previously owned homes in the US have depleted more than expected in June, as per the Pending Home Sales Index reported on Wednesday. 

Rising inflation, soaring rates and swelling inventory seem to have interrupted the housing market this year, making affordability harder for first-time buyers and entry-level clients. Amid these issues, real estate stocks can feel some impact.


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