Real estate tech company Opendoor (NASDAQ:OPEN) just announced layoffs amid an overall weak demand structure for the housing market. According to Reuters, the Opendoor layoffs will impact about 560 jobs or 22% of the company’s workforce. As of this writing, OPEN stock is down more than 6%.
Back in November of last year, Opendoor also announced job cuts for 550 roles or approximately 18% of its workforce at the time. “We’re taking these actions now to better align our operational costs with the anticipated near-term market opportunity,” the company remarked in an email.
Ominously, Opendoor says that new listings have “have fallen by around 30% from their peak in 2022 due in part to higher mortgage interest rates.” This appears to be a direct consequence of the Federal Reserve’s ongoing battle against skyrocketing inflation. While OPEN stock is currently up 44% year-to-date (YTD), it’s also down more than 80% for the past 12 months.
Adding more context to the woes, Reuters notes that “Opendoor reported a loss of $1.4 billion in 2022, more than double its $662 million loss in 2021, despite nearly doubling sales to $15.6 billion.” The company also reported nearly 13,000 unsold homes out of approximately 35,000 homes that it purchased in 2022. In 2021, the company acquired just under 37,000 homes.
Opendoor Layoffs Occur Amid Tough Economic Backdrop
On paper, the resilient print of the U.S. labor market suggests that the Opendoor layoffs should eventually turn a negative into a positive. Unfortunately, the vexing combination of soaring inflation and high interest rates has squeezed out would-be buyers. As Barron’s reports:
“March data released this week paints a picture of a still-tepid spring as buyers and sellers remain on the sidelines. The Mortgage Bankers Association’s seasonally-adjusted index measuring home purchase applications last week fell 10% from the week prior, the trade group said. On an unadjusted basis, the index was 36% lower than the same week in 2022.”
Barron’s also points out a key frustration for OPEN stock investors: The materialization of a double headwind. First, rising rates impinge on financing opportunities for prospective buyers. Second, prospective sellers are currently locked into historically low rates, which disincentivizes them from offloading real estate to buy a new home at a much higher rate.
On top of that, the spring season — which usually brings about increased interest for real estate — is seeing “notably less activity” this year. Indeed, real estate experts have noted that the throng of homebuyers that usually appear this time of year are failing to show up.
According to Redfin (NASDAQ:RDFN), new listings in March reached 460,000, a 23.3% year-over-year (YOY) decline. Outside of the pandemic, this figure is the lowest on record since 2012.
Why It Matters
Another factor impeding OPEN stock centers around sentiment within the “real” economy. According to Finder’s latest Consumer Confidence Index, 82% of households say they’re “stressed about their current financial situation.” Further, 35% say their household finances are worse off than a year ago.
To be fair, these stats are an improvement against 2022. Nevertheless, with so many people hurting, acquiring a potentially overpriced house may impose more stress. Therefore, the macro environment doesn’t appear to favor real estate, only adding questions to the Opendoor layoffs.
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On the date of publication, Josh Enomoto did not hold (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.
