Opendoor stock crashed to its lowest level since August 11 as concerns about its growth in a high mortgage environment continued. It slipped to $2.65, down by 75% from its highest point last year.
Soaring mortgage rates are hitting its business
The housing market in the US is facing substantial challenges this year as mortgage rates continue rising. Data shows that the average 30-year mortgage has jumped to 7%, pushing the revival of the housing market highly elusive.
A recent Reuters poll showed that these rates will remain higher than expected because of the ongoing US-Iran war. This rally is happening because of the ongoing developments in the bond market, where Treasury yields have jumped to the highest level in over two decades. The closely watched ten-year yield crossed the important milestone of 5% this week.
Higher mortgage rates normally have an impact on the housing market. A recent report measured by the S&P Cotality Case-Shiller 20-City Index estimated that house prices would jump 1.5% this year, barely outpaceing last year’s 14-year low of 1.4%.
Existing home sales are also expected to average an annualized 4 million unit rate this quarter and 4.1 million in Q1’27, much lower than the 15-year peak of 6.6 million in 2021.
These events are having an impact on Opendoor as the CEO recently noted. In a statement when the company delivered its results, she said that the worsening housing market had pushed it behind in its profitability metrics. She said:
“The worsening housing market at the end of August pushed us roughly six to eight weeks behind on our Adjusted EBITDA guidepost, meaning the twelve-month window in which we expect to be adjusted EBITDA profitable now starts this quarter rather than last quarter.”
The most recent results showed that its revenue dropped to $883 million in the second quarter from $1.56 billion in the same period last year. Its gross profit tumbled by over $42 million to $86 million.
This retreat happened as the company sold fewer houses than it bought. It bought 4,378 houses and sold 2,339 of them, which boosted its homes in inventory to 5,459. As a result, its adjusted net loss, worsened to $30 million.
On the positive side, the eight analysts tracking Opendoor expect its third-quarter revenue will jump by 19.6% to $1.09 billion, while the full-year figure will be $3.9 billion, a 10% annual decrease.
Opendoor stock price technical analysis
OPEN stock chart | Source: TradingView
The weekly chart shows that the OPEN stock has been in a strong sell-off in the past few months. It has now slipped to the lowest level since April last year.
The stock has recently dropped below the important support level of $4.14, its lowest level in February, April, and May this year. Dropping below that level confirmed the bearish outlook.
The Relative Strength Index (RSI) has been in a strong downward trend and is hovering at the oversold level of 30. That is a sign that the downward trend is accelerating.
Therefore, the most likely scenario is where the shares continue falling as sellers target the key support level of $2. In the future, however, the stock may rebound as investors buy the dip. Besides, it is one of the top short candidates with a short interest of 22%.
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