Real estate stocks recovered in April, capturing gains seen in the broader market. Real estate company market performance is still worse than it was pre-pandemic. But things are surprisingly okay. News from major portals on continued demand is more promising than many expected. But listings are declining. Shelter-in-place and challenges coordinating new listings are likely weighing on the market.
Despite continued uncertainty from COVID-19, the markets improved in April. A lot of this was recovery from a bad March.
April S&P 500 Performance: The S&P recovered from it’s March decline, ending the month up 17.9%. In March, the S&P declined 16.4% due to concerns over the economy and COVID-19.
Why it matters: Despite record unemployment and no clear end to COVID-19, improvements in the market spread to real estate stocks.
April 30-year Mortgage Survey Results: 30-year interest rates fell even further to historic lows of 3.23%. Why it matters: Interest rates remain at historic lows. It’s more attractive for buyers to get a mortgage because low interest rates mean lower interest fees. But we’re seeing most of this impact in refinancing activity to convert current interest rates to lower interest rates. Better.com reported a 200% increase in refinancing. While rates are low, many banks are creating higher hurdles for borrowers in order to mitigate risk.
February Case Shiller Index Results: In February, home prices increased almost .4% month-over-month and almost 4% year-over-year. This continues the increases we’ve seen year-to-date. But it does not yet include data from the beginning of the COVID-19 pandemic in the United States. Data next month will likely be more telling. Why it matters: It probably doesn’t. The pandemic and economic concerns are not built into February data. But early indications on March and April sales prices seem to show that prices are holding up. But listing volume and transactions are declining.
Annualized existing home sales: Annualized existing home sales fell significantly from ~5.8M in February to ~5.3M in March. While troubling on a month-over-month basis, it’s an improvement year-over-year by about 100,000. Why it matters: We’re seeing very early indications of declines, but this is mostly the result of closed contracts from January and February. Things are still better year-over-year which means we’ll have to wait and see how deep the damage is in April and May. Two key challenges will be the reduced number of listings on the market, and the hurdles buyers are facing to qualify for mortgages.
Brokerages did see improvements in April. But they failed to offset the massive losses in March. There was some positive commentary on the real estate market being better than it could have been. Though there also wasn’t much new other than continued hiring freezes and layoffs. Continued furloughs, layoffs, and shelter-in-place policies seem bad for real estate. However, the markets seem willing to suspend disbelief or have already priced in most of the expected pain into stock prices.
Stock price: $4.34 | Up 44.2%
Enterprise value: $4.4B | Up $153M
What happened? Realogy clawed back some of it’s whopping ~68% declines in March. Other than broader improvements in the market, there wasn’t much to point to for the gains.
Stock price: $21.13 | Up 37%
Enterprise value: $2.0B | Up $644M
What happened? Redfin recovered a large portion of its March 43% declines. Most notably, Redfin announced cost control measures to furlough its agents alongside staff cuts aimed to weather the market challenges.
Stock price: $9.18 | Up 8.5%
Enterprise value: $566M | Up $47M
What happened? eXp posted solid improvements but didn’t gain as much as the broader market. The market did not respond much to the company’s continued agent growth. But it also didn't punish the company for headcount reductions.
Stock price: $26.29 | Up 19.9%
Enterprise value: $281M | Up $83.9M
What happened? Like other real estate brokerage companies, Re/Max saw some steady improvement that helped offset much of the roughly 25% decline it saw last month.
Stock price: $10.70 | Up 13.6%
Enterprise value: $2.87B | Up $190M
What happened? Vector Group clawed back almost 14% against its losses of 19% last month. There wasn’t meaningful company-related news for the month.
Similar to brokerages, portals saw some recovery month-over-month but did not completely offset declines seen in March.
Stock price: $43.54 | Up 28.2%
Enterprise value: $9.4B | Up $1.9B
What happened? Zillow posted solid gains, but failed to counter the 39% declines from March. That said, after Zillow’s strong 20.5% gains in February, it’s only down about 5% from the start of the year.
Stock price: $9.91 | Up 10.4%
Enterprise value: $8.6B | Up $609M
What happened? News Corp had a strong month, but not nearly good enough to offset a 25.7% loss in March.