iBuyer Stocks Surge on Reported $200B Mortgage Stimulus Plan
Opendoor and Offerpad shares jumped on a proposal to lower mortgage rates through government purchases of mortgage-backed securities, signaling potential relief for the housing sector.
Shares of real estate technology companies, particularly iBuyers like Opendoor Technologies (NASDAQ: OPEN) and Offerpad Solutions (NYSE: OPAD), surged after a report detailed a potential $200 billion government-backed stimulus plan aimed at the housing market.
Offerpad stock was the most dramatic mover, reportedly exploding over 50% in overnight trading, while Opendoor also saw a significant spike. The buying frenzy followed a report from Benzinga outlining a proposal for the U.S. government to purchase mortgage-backed securities (MBS). The plan, attributed to discussions involving former President Donald Trump, would theoretically increase demand for these bonds, which would in turn lower their yields and help reduce consumer mortgage rates.
In Thursday's trading session, the momentum continued, though it moderated from the overnight highs. Opendoor Technologies stock climbed 5.07% to close at $6.43, and Offerpad Solutions gained 4.83% to finish the day at $1.52. This rally provides a stark contrast to the sector's recent performance, which has been hampered by a challenging real estate environment.
The iBuying business model, which involves purchasing homes directly from sellers for cash and reselling them, is highly sensitive to mortgage rates and housing transaction volume. The series of aggressive interest rate hikes by the Federal Reserve over the past two years has significantly cooled the U.S. housing market, squeezing the profit margins for iBuyers and slowing their growth. Both Opendoor and Offerpad have seen their revenues and stock valuations decline sharply from their pandemic-era peaks.
A government-supported program to purchase MBS would represent a significant tailwind for the industry. By potentially lowering mortgage rates, it could improve housing affordability, stimulate buyer demand, and increase the volume of transactions—the lifeblood of the iBuying business. This would allow companies like Opendoor and Offerpad to accelerate their inventory turnover and improve profitability.
Opendoor, the largest player in the space with a market capitalization of over $5.8 billion, has been working to navigate the downturn by optimizing its pricing algorithms and operational costs. Offerpad, with a much smaller market cap of roughly $53 million, would also stand to benefit from any market-wide improvement in transaction flow.
Investors will be closely watching for any further developments or official confirmation of the proposed stimulus. While the initial stock reaction highlights the market's appetite for any relief in the housing sector, the proposal remains speculative and its path to implementation is uncertain. Nonetheless, the report has injected a significant dose of optimism into a sector that has been under considerable pressure.