The last three years have been troubling for the real estate market. First there were troubles with supply, sending available houses screaming into the stratosphere price-wise. Then interest rates started climbing, and that put a killing blow on demand. Now, a new analyst report out is sending several real estate stocks crashing through the floor.
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The report came from Gordon Haskett Research Advisors, via analyst Robert Mollins, who declared several major real estate stocks in trouble in this field. Mollins took Redfin (NASDAQ:RDFN) and Opendoor (NASDAQ:OPEN) down from Hold to “underperform,” citing the massive run-up both saw in 2023. Compass (NYSE:COMP), meanwhile, got similar treatment, thanks in large part to its hefty run-up over the last few months, up 75% from the start of the year.
For Redfin and Opendoor, it was mostly a matter of risk versus reward. With both stocks spiking throughout much of this year, and real estate showing distinct signs of cooling off, it’s likely that Redfin and Opendoor will start seeing their own listings—and their own profit—start to decline as well. Even Redfin’s own deputy chief economist Taylor Marr pointed out recently that Federal Reserve interest rates need to come back down to around 5% to start generating movement in the real estate market again.
Redfin, a Moderate Hold by analyst consensus, was the second-hardest hit real estate stock by today’s developments. It was down over 9% at one point in Wednesday afternoon’s trading. And it’s also got the biggest downside risk, at 42.27% based on its average price target of $42.27. The lightest hit, Opendoor, was down just over 4% in Wednesday afternoon’s trading. Yet this Hold only has 11.9% downside risk based on its average price target of $3.70 per share.
