Why Opendoor Stock Plunged 32% in December
Real estate technology company Opendoor Technologies (NASDAQ: OPEN) stock dropped 32% in December, according to data from S&P Global Market Intelligence. Mortgage rates went back up after receding earlier in the year, and the market became more pessimistic about the real estate industry again.
Opendoor operates a digital real estate platform and iBuying business. Its core business is buying homes and reselling them, a capital-intensive business that's extremely sensitive to interest rate movements. High interest rates lead to pressured home sales, since few people want to venture into new homes when mortgage rates are high. In some cases, it could double the price of the home. Fewer people buying new homes also means fewer people selling, limiting inventory available for Opendoor to purchase.
There was a glimmer of hope when the Federal Reserve cut interest rates back in September and mortgage rates looked to be beginning to fall. Opendoor stock jumped 34% in November, when things looked to be moving in the right direction. But the trend reversed course in November and December, and the median home price continues to climb. At its latest meeting, the Federal Reserve said it will cut rates slower than it had originally planned, and that will continue to weigh on Opendoor's performance.
Source Fool.com
