iBuying Stocks Soar on White House Mortgage Intervention Plan
Opendoor and Offerpad shares surged after reports the White House will direct Fannie Mae and Freddie Mac to buy mortgage bonds to lower interest rates.
Shares of iBuying and mortgage technology companies surged dramatically in the latest trading session, ignited by reports of a significant White House plan to directly intervene in the housing market.
Opendoor Technologies (NASDAQ: OPEN) saw its stock climb 21.1% to close at $7.78, while its smaller competitor Offerpad Solutions (NYSE: OPAD) skyrocketed an astonishing 45.7% to end the day at $2.21. The rally was triggered by news that the administration plans to direct government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac to purchase an additional $200 billion in mortgage bonds.
The move is a direct effort to increase liquidity in the mortgage market and is expected to drive down borrowing costs. According to an analysis by Morningstar, such a large-scale purchase could lower the average 30-year fixed mortgage rate by a quarter to half a percentage point.
This potential rate reduction provides a powerful catalyst for the housing market and particularly for companies with business models like Opendoor and Offerpad. These firms, known as iBuyers, operate digital platforms to buy homes directly from sellers for cash before making light repairs and reselling them. Their profitability and transaction volume are highly sensitive to interest rates, which dictate the affordability of homes for potential buyers and the overall velocity of the housing market.
The iBuying sector has been under immense pressure over the past two years as central bank rate hikes pushed mortgage rates to multi-decade highs, freezing housing activity and depressing property values. Both Opendoor and Offerpad have posted significant losses, with trailing twelve-month earnings per share of -$0.44 and -$1.93, respectively. Thursday's rally marks a sharp reversal from their 52-week lows of $0.51 for Opendoor and $0.91 for Offerpad, reflecting renewed investor optimism that a government-spurred decline in rates could revive their business.
The intervention is being viewed as a major stimulus for the entire housing ecosystem, with homebuilders and mortgage lenders also seeing their stocks rise. However, the surge in iBuyer stocks is particularly pronounced due to their high-beta nature and direct exposure to transaction volumes.
Despite the market's enthusiastic reaction, Wall Street analysts remain cautious. The consensus analyst rating for Opendoor is 'Hold', with an average price target of $2.99, significantly below its current trading price. This suggests that while the news is a clear positive, analysts may be waiting to see the policy's execution and its tangible impact on transaction volumes in the companies' upcoming quarterly reports before fully buying into a sustained recovery. Investors will now be closely watching for official confirmation of the directive and any subsequent data on mortgage rate movements and home sales.