The Covid-19 pandemic shaped homebuying habits in 2020. Now that 2021 is winding to a close and with it, some effects of the pandemic, real estate trends are starting to shift again. Unfortunately for Zillow (NASDAQ:ZG), they haven’t shifted in favor of its iBuying business, a trend which hasn’t been kind to ZG stock. The company first announced that it would stop buying homes for the remainder of the year… and then it walked away from iBuying. This news puts rival Opendoor Technologies (NASDAQ:OPEN) under pressure, but so far, OPEN stock is reacting well.
What’s Happening with OPEN Stock
While Zillow has already declined by 20% since markets opened today, OPEN stock is up by 3%.
However, this follows a near-9% plunge for Opendoor on Tuesday, following Zillow’s initial announcement. It seems that investors just are not sure how the news will impact OPEN in the long term, giving shares the challenge today of regaining lost ground.
Why It Matters
How exactly did Zillow fall so far? A recent analysis conducted by Business Insider found that while the company had listed 1,000 homes in its five largest markets, it was only advertising 36% for more than it had paid for them. In other words, the company stood to take a loss on 64% of these recently acquired properties. This trend has led to Zillow announcing the layoffs of 25% of its corporate staff.
With that in mind, it’s easy to see why ZG stock wasn’t named to InvestorPlace contributor Chris Markoch’s list of real estate stocks to help keep investors ahead of inflation. It is easy, though, to see why OPEN was, when we consider fellow contributor Dana Blankenhorn’s argument that as long as real estate prices continue to rise, so will OPEN stock, a clear beneficiary of the current inflation-fueled economic trends.
Can Opendoor succeed where Zillow failed? InvestorPlace analyst Luke Lango thinks so. In a recent argument, he called it the “Amazon of houses,” citing the company’s potential to streamline homebuying in a way that eliminates middlemen and makes the process less physical, essentially moving one of the last fundamentals of commerce into the digital age. Lango can personally vouch for Opendoor, having recently sold a home on its platform.
What It Means
According to Lango, iBuying is the future of real estate and Opendoor is the company best positioned to dominate the growing market. He sees it as having superior tech, staff and pricing algorithms to its competitors.
For a company like Opendoor, whose success depends on positive homebuying trends, the industry landscape looks good. Goldman Sachs recently forecast that real estate prices would rise by as much as 16% by the end of 2022. If that’s true, the year ahead looks quite promising for OPEN stock. Nothing is for sure, but this stock is absolutely worth watching closely.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
