Shares of Opendoor Technologies (OPEN 0.10%) plunged 7.4% on Thursday, as of 1:11 p.m. ET.
The drop was all the more noticeable since the broader market indexes were up strongly today, with the Nasdaq Composite up 2.3% at that time.
While the broader markets were rallying on continued hopes for a de-escalation of the Trump administration's tariff war, the housing sector got some bad news today regarding March housing activity.
NASDAQ: OPEN
Key Data Points
A plunge in home sales not seen since 2022
Today, the National Association of Realtors disclosed housing sales data from March. Existing home sales fell 5.9% month over month, which was the largest decline in monthly sales since November 2022. That was also worse than the 3.1% decline expected by The Wall Street Journal.
But it wasn't just that the market is "frozen" with homeowners locked into lower mortgage rates unwilling to sell. The amount of housing inventory on the market is also rising, indicating sellers are putting houses up on the market, but with not as many takers as expected.
It's highly likely the Trump administration's tariff policies caused a high amount of uncertainty last month leading up to April 2. Thus, many would-be buyers likely put off buying a new home, which is a big-ticket purchase. In addition, mortgage rates, which saw some relief in February, stabilized between 6.5% and 7% in March. It's possible buyers were waiting for those rates to come down further, but were disappointed as rates remained steady.
A slowdown in housing activity would be a negative for Opendoor, which is both an online brokerage platform connecting buyers and sellers, as well as a "house flipper" in that it also buys homes and resells them. If there is a big slowdown in activity, not only will Opendoor see a decline in brokerage fees, but it could also see an increase in inventories on its books. Of note, even as revenue declined last year, Opendoor's inventory rose from 5,326 homes at the end of 2023 to 6,417 homes at the end of 2024.
Opendoor had also already guided for a weak first quarter at the end of February, with revenue projected to be below the first quarter of 2024, which itself was already a slow quarter. So, a lower-than-expected March also throws that guidance into question.
Opendoor: A penny stock worth betting on?
Opendoor is in a tough spot right now, with a backlog of unsold homes, and the company still losing money, although net losses aren't huge. And given the fallout from the April 2 "Liberation Day," it's also likely that April will be a negative month for existing home sales.
However, investors can probably take comfort that the administration appears to be backing away from its maximum-tariff policies in recent days. If a few trade deals get inked and some of the uncertainty overhanging the economy goes away, it's possible home sales could start up again, and housing stocks could bounce back.
With a share price below $1, Opendoor is a penny stock right now. That means it potentially has a lot of upside should the current headwinds clear, but it's also at high risk of distress should the housing freeze linger through the year.
