Major publicly traded real estate brands appeared ready to follow the stock market on a continued slide toward correction territory before the market rebounded on Monday.
Wall Street nose-dived toward a continued month-long slide during early trading hours, with shares for the country’s largest real estate brands following suit.
Shares for some of the biggest publicly traded real estate companies were all deep in the red during early trading hours to start the week, some dropping as much as 11 percent before turning around.
The early drop appeared to accelerate what has been a bad month not just for the broader market in general but particularly for publicly traded real estate companies, and analysts point to rising interest rates as one of several reasons for one of the worst months in recent memory.
As of last week, a number of major indices had suffered their worst monthly performance since the Great Recession, according to analysts at Charles Schwab.
While the major indices were all down by midday Monday, stocks for some of the major real estate brands led the way to continue an abysmal start to 2022.
“I think that the market is in a far more broad based sell off,” said Matthew Gardner, chief economist for Windermere Real Estate. “The likely reason why real estate companies are down is that the yield on 10-year treasuries — which direct mortgage rates — has been trending higher. This, naturally, impacts the ownership market.”
Low-point on Jan. 24, 2022
- Compass (COMP): –10.1 percent
- Realogy (RLGY): –3.8 percent
- Offerpad (OPAD): –12.1 percent
- Redfin (RDFN): –11.8 percent
- Zillow (ZG): –6.1 percent
- RE/MAX (RMAX): –3.2 percent
- Opendoor (OPEN): –14 percent
- eXp (EXPI): –11.3 percent
Over the past week, Offerpad shares shed over 20 percent of their value, and the company’s market cap dropped below the $1 billion mark. At one point, its value stood at $765 million Monday, compared to $2.7 billion when it went public last fall, a 72 percent drop.
Analysts attribute the declines to the Federal Reserve’s plans to pull back support that brought in strong market conditions at the onset of the coronavirus pandemic in early 2020.
Withdrawing support is the Fed’s attempt at tamping down inflation that has been on the rise globally over the past year, led by the U.S.
It has led to the reality of housing prices continuing to skyrocket while shares of major brokerages plummet. Investors moving away from real estate stocks could indicate they expect a slowdown in the housing market this year.
There are indications that buyers have been undeterred by interest rates that are already rising, with applications for purchase loans climbing early this year. Still, that number was down 13 percent from the prior year, according to the latest Mortgage Bankers Association’s Weekly Applications Survey.
Fannie Mae also predicted that rising rates would begin to price many buyers out of the market this year.