It’s been a rough month. The Covid-19 pandemic weighed down stocks across the board. But real estate stocks were hit even worse. Agents can’t go on showings. Portals are discounting their marketing services.
There is a lot of uncertainty from Covid-19. No survey, indicator, or chart will provide much context on such an unknown. But furloughs, layoffs, shelter-in-place policies are certainly bad for real estate.
March S&P 500 Performance: The S&P was devastated in March, falling ~16.4% due to concerns over the economy and Covid-19. Why it matters: Interest rates reached their lowest point in 50 years. This means it's more attractive for buyers to get a mortgage. Low interest rates equals lower interest fees. And it’s a good time for homeowners to refinance their mortgage. But in the current environment, this doesn’t help much. Homebuyers are more concerned if they’ll have a job. And they've already had access to low interest rates. So, rates are better for buyers, but on a relative basis, it doesn't matter too much.
March 30-year Mortgage Survey Results: 30-year interest rates ended at 3.3%. It was a rocky month due to uncertainty. That said, low interest rates are not new. Why it matters: Interest rates are incredibly low. It’s more attractive for buyers to get a mortgage (low interest rates = lower interest fees). And it’s a good time for homeowners to refinance their mortgage (convert current interest rates to lower interest rates). But in the current environment, this doesn’t help much. Home buyers are more concerned if they’ll have a job in the next few months than if they’ll save a bit of money when buying a home. And interest rates were already low, so this wasn’t a huge change for buyers.
January Case Shiller Index Results: In January, home prices were up 3.8% year-over-year and 0.5% month-over-month. This continues a steady trend of improvement we’ve been seeing for quite a while. But this data is months old and we have no idea what Covid-19 will do to home prices. Why it matters: it doesn’t. We’ll have to wait to see how the pandemic and economic concerns impact new homes. This data isn't helpful at this point.
February one-unit housing starts: Private single family Housing starts increased month-over-month to just over 75,000. In isolation this is positive. Why it matters: it doesn’t. We’ll have to wait to see how the pandemic and economic concerns impact new home construction over the next two months.
It was a bad month for brokerages. Covid-19 put a halt to most real estate showings. In New York, agents aren’t even allowed to cold call. Fears around transaction volumes dragged down stocks. Estimates from experts are pretty negative. Robert Reffkin, the CEO of privately held Compass is projecting a revenue decline of 50% in the next 6 months. No one knows what is really going to happen, but everyone agrees it won’t be good.
Stock price: $3.01 | Down 67.5%
Enterprise value: $4.18B | Down $713M
Metrics to watch: Normally we look at revenue and net income. Given the macro environment, these aren’t that helpful.
What happened? Realogy’s stock price was in free fall from concerns over Covid-19. Shelter-in-place is doubly painful for Realogy. It's bad for all of real estate. But Realogy is also exposed to high-density metros that announced these measures first.
Stock price: $15.42 | Down 43.0%
Enterprise value: $1.35B | Down $1.08B
Metrics to watch: Usually look at revenue, revenue growth rate, and gross margins. But with a tough macro environment, these aren’t that helpful right now.
What happened? Redfin had a very rough month but coming off of gains of 15.1% and 11.2% in January and February makes it more palatable.
Stock price: $8.46 | Down 11.5%
Enterprise value: $519M | Down $69M
Metric to watchs: eXp ended the year with 25,400 agents, an increase of 9,900 from 2018. Agent count is one of the primary ways eXp grows revenue. But with the tough month, this isn’t that helpful.
What happened? eXp had a rough month but fared better than other companies. It posted a positive earnings report. Its model is defensible in a shelter-in-place world.
Stock price: $21.92 | Down 24.8%
Enterprise value: $197M | Down $130M
Metric to watch: Net income and revenue per agent are usually what we look at for Re/Max. But this month, things are so challenging there’s little they can mention there.
What happened? Re/Max had already declined almost 24% last month. The additional 25% this past month was particularly devastating.
Stock price: $9.42 | Down 18.9%
Enterprise value: $2.68B | Down $173M
Metric to watch: Normally we look at revenue growth and net income. But these aren’t that telling in this environment.
What happened? Vector Group had a challenging month, but not as bad as some others. There weren’t any meaningful real estate-related announcements from them.
Concerns around real estate agent advertising has been a drag on real estate portals. Zillow is offering discounts to agents. So is Realtor.com. Zillow’s reliance on iBuying is also a concern. There is very limited visibility on home prices and liquidity in the near future.
Stock price: $33.97 | Down 39.0%
Enterprise value: $7.5B | Down $4.3B
Metric to watch: Revenue and revenue growth are normally worth looking at. But this month is not a normal month, so there aren’t any key metrics to focus on.
What happened? Zillow had a rough month, with over $4B of enterprise value erased. But it was coming off gains of almost 21% in February.
Stock price: $8.97 | Down 25.7%
Enterprise value: $7.9B | Down $1.9
Metric to watch: Normally we look at revenue and profitability. But it’s harder to pay attention to any core metric this month.
What happened? News Corp had a rough month. It is coming off declines of 11.3% and 3.7%, so while it fared better in March than Zillow, it’s worse year-to-date.