Market puts the squeeze on HouseValues

The deteriorating national housing market continues to batter Kirkland-based HouseValues, which Tuesday reported sharply lower revenues, said it would lay off 100 workers and closed its Yakima call center.

"We were in the early stages of building a very talented team in [Yakima], but given the dramatic change in our environment it simply no longer makes sense to invest in an additional facility at this time," HouseValues Chief Executive Ian Morris said in a conference call with analysts.

The job cuts and Yakima closure follow January's layoff of 60 people in HouseValues' Kirkland office, as the company shut down its business of generating leads for mortgage providers.

As of the end of 2006, the company had 542 employees.

The eight-year-old company said second-quarter revenues were just shy of $16 million, down 10 percent from the first quarter and 28.5 percent from the same period last year.

But the quarterly loss, of $167,000 or 1 cent a share, bettered the Reuters consensus by 2 cents.

With home sales in many parts of the U.S. slowing to a crawl and house prices flattening or falling, real-estate agents have reduced their spending on marketing, a direct hit to HouseValues' business model.

The company makes money by signing up real-estate agents, who give free property valuations to homebuyers and sellers requesting them from HouseValues' Web site. The agents hope those contacts will turn into clients.

Closing the Yakima call center will cost the company $400,000 in severance and $400,000 to $500,000 in lease costs, along with unspecified other unspecified shutdown expenses. But the company said it expects to save $9 million on an annualized basis.

Yakima officials worked hard to attract the company, providing state and local job training and tax incentives totaling up to $500,000.

HouseValues used $100,000 from Yakima's Department of Community and Economic Development to open the facility and train its first group of workers. Since the company didn't stay at least five years, it must return the money, said Michael Morales, the department's deputy director.

As of the quarter's end June 30, HouseValues had nearly $74 million in cash, cash equivalents and short-term investments to help see it through the downturn. It drew down about $1.3 million last quarter.

Its stock, which began trading in December 2004 at $15, has been dropping since early 2006; they finished regular Nasdaq trading Tuesday at $4.15, down 16 cents.

The second-quarter results were issued after the market close.

While many Yakima officials were disappointed in HouseValues' departure, they did not view the closure as a catastrophe for the area.

With the nonagricultural job growth the Yakima Valley is seeing in other industries, such as health services, the closure will not have a big impact, Morales said.

"All in all, the economy just keeps adjusting and healing itself in other areas," he said.

Mai Hoang of the Yakima Herald-Republic contributed

to this story.

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com