Shares of major real estate technology companies rallied sharply on Tuesday, with Zillow Group climbing 11%, while Opendoor and Better Home & Finance surged 17% and 33%, respectively. The move was part of a broader uptick in housing-related names, including UWM Holdings and PennyMac Financial Services.
The rebound came as U.S. Treasury yields pulled back from recent highs. The 10-year yield slipped to 5.06%, and the 5-year fell to 4.86%, both well off their peaks for the month. This retreat in yields provided some relief to mortgage rates, which have been hovering near multi-year highs. The average 30-year fixed mortgage rate dipped slightly to 7.3%, still elevated but down from recent levels.
Investors interpreted the yield decline as a signal that the Federal Reserve may hold interest rates steady at its upcoming meeting. Market odds for a pause in November rose to 72%, even after the latest inflation data came in hotter than expected. The Consumer Price Index rose 3.7% year-over-year in September, while core inflation increased 2.6%. The Producer Price Index also accelerated to 1.3% from 0.5% in August, beating forecasts.
Despite the positive reaction, these stocks remain deeply depressed. Zillow is down 62% from its 52-week high, while Opendoor and Better Home have fallen 72% and 85%, respectively, over the past year. The sustained rise in mortgage rates has been the primary drag on the sector, as higher borrowing costs have cooled homebuying demand and pressured transaction volumes.
Zillow, the largest real estate portal, has seen its website traffic decline 11% in September to 317 million visits, according to SimilarWeb. The company's most recent quarterly results showed revenue growth of 18% to $772 million, but it posted a net loss of $4 million. Analysts expect the upcoming quarter to show revenue growth slowing to 11%, reaching $754 million, indicating a deceleration in its core business.
Opendoor has been particularly hard hit by the housing downturn. In a recent statement, CEO Carrie Wheeler acknowledged that the worsening market had pushed the company's timeline for adjusted EBITDA profitability back by six to eight weeks. She noted that the twelve-month window for achieving that milestone now begins this quarter rather than last, reflecting the ongoing challenges in the resale market.
Better Home & Finance has also struggled as higher interest rates have reduced mortgage originations. While the company saw strong growth in the second quarter, revenue is expected to rise just 12% to $50 million in the current period. The broader environment remains challenging, with mortgage rates still near three-year highs and affordability constraints weighing on potential buyers.
The recent bounce in these stocks may be short-lived, as the underlying fundamentals remain weak. If bond yields resume their upward trend, mortgage rates could climb again, putting further pressure on the sector. Investors are watching closely for any signs of stabilization in the housing market, but the current data suggests that the headwinds are far from over.
This article is for informational purposes only and does not constitute financial advice.
