Amid the ongoing AI boom, digital real estate companies such as Opendoor (OPEN) and Better Home (BETR) have solidified their status as significant players in the market. Stephanie Guild, chief investment officer at Robinhood Markets, emphasized their relevance on Yahoo Finance’s Opening Bid, suggesting that investors should pay close attention to these companies, as they are unlikely to disappear anytime soon.
Despite experiencing a more than 10% decline in stock price during Tuesday’s trading session, Opendoor’s shares have seen an impressive rise of 367% year to date and over 268% in the last year. In contrast, Better Home’s stock surged by 30% on the same day, boasting an astonishing increase of over 630% year to date and more than 237% over the past 12 months.
The broader market continues to show signs of choppiness this year, with volatility remaining below long-term averages. Despite the S&P 500 and Nasdaq indexes reaching new highs, digital real estate companies have displayed uneven performance, largely influenced by high mortgage costs and ongoing investor speculation.
Guild noted the challenges within the real estate and housing markets, pointing out the sustained high levels of mortgage rates, which have hovered around multiyear highs. Currently, a 30-year fixed-rate mortgage is priced at approximately 6.36%, while a 20-year mortgage is around 5.81%, and a 10-year sits at 5.79%. Although these rates have contributed to a challenging market environment, there are indications that mortgage rates may be gradually easing, which could spur renewed activity in the housing sector.
She highlighted a phenomenon where many homeowners, benefiting from historically low mortgage rates, find themselves “frozen” in their current situations, thus limiting mobility and available supply. However, Guild suggested that this trend could begin to change, especially if the Federal Reserve follows through with anticipated rate cuts later this year. Such a shift could position companies like Opendoor and Better Home favorably for a potential uptick in market transactions.
“If interest rates are truly starting to fall, if mortgage rates can truly start to fall, then these are companies that should benefit from increased activity,” Guild stated. She urged investors to thoroughly understand the dynamics within these companies and how they plan to leverage any drop in rates.
Despite the optimistic outlook, Guild cautioned investors to proceed with care, noting that substantial stock price increases do not guarantee underlying financial stability.
On Wall Street, there remains an air of optimism regarding the prospects of digital real estate companies. Eric Jackson, founder of EMJ Capital, has publicly endorsed both Opendoor and Better Home, likening Better Home to the “Shopify of mortgages.” His vocal support has likely played a role in driving their recent stock rallies.
Ultimately, Guild advised that investors must balance the potential upsides of lower interest rates against the elevated valuations that have contributed to recent price increases. While these firms continue to grapple with losses, they maintain a vital presence in the landscape, indicating their significance despite current financial challenges.
