Shares in publicly traded real estate companies were continuing, like most other stock indices last week, to experience major valuation drops.
Real Estate Stocks Deep in the Red During Week Starting January 24, 2022
Quite simply, January has not been a great month for Wall Street. 2021’s banner earnings year for stockholders is now past tense. The analysts with Charles Schwab said that many of the major indices have suffered their worst monthly performances since the Great Recession.
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As of Monday, January 24, real estate stocks led the way down:
- Compass – –56% drop year-to-date
- Realogy – -9.34% drop year-to-date
- Offerpad – -53.41% drop year-to-date
- Redfin – -34.23% drop year-to-date
- eXp World Holdings – -24.6% drop year-to-date
- Zillow – -23.49% drop year-to-date
- RE/MAX – -7.93% drop year-to-date
- Opendoor – -43.46% drop year-to-date
In the last week alone, Offerpad lost -20% of its value and its market cap fell below the $1B. This company now stands with a valuation of $765M as opposed to the $2.7B, a drop of -72%, it had last fall when it began trading on public markets.
Why This Slide?
Market analysts point to the Federal Reserve’s plan to shift its stance from economic growth policies to inflation fighting policies. This shift has underlined the dual realities of climbing housing prices in the midst of plummeting shock valuations.
One question some analysts are now asking is, “Are real estate investors moving away from real estate stocks because they expect a slowdown in the housing market this year?”
Answers come in several forms. Some analysts see applications rising for purchase loans in January despite the number of hose purchase loans being down -13% y/y in the latest Mortgage Bankers Association’s Weekly Applications Survey. Other analysts look at Fannie Mae’s predictions that rising rates would start to price out many buyers out of the market this year.
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And other analysts look to Freddie Mac’s 2022 predictions that purchase mortgage loan volume will grow from $1.9T in 2021 to $2.1T in 2022 and $2.3T in 2023. Freddie also predicted that home sales would hit 6.9M in 2022 from 6.1M in 2021 and 7.0M in 2023.
As they say in Vegas, it’s all a crap shoot.
Thanks to Inman.
