Chris Perruna
Real Estate Development Executive, Individual Investor
Zillow is a Stage 4 stock in a clear downtrend, a reminder that a company can post decent numbers and still be a terrible stock. Rallies keep failing, and a recent bear flag preceded a 25% drop to new lows over six weeks. Housing stocks lack a favorable backdrop with mortgage rates above 6%. Down 67% from its highs, Zillow needs a 203% gain to break even, and laggards like this drag on performance. x.comÂ
Zillow's fundamentals show little growth: revenue and EPS have been roughly flat for five years with only a slight uptick, nothing exciting for a stock down 60%. Holding it has lagged even the laggard Magnificent 7 stocks, so there is no reason to own it over them. @AdamoMancino counters that real estate will rebound and Zillow's rental business is booming. x.com x.comÂ
Zillow is likely to fall further as home sales decline. The stock has already hit a 52-week low. x.comÂ
The market looks further ahead than today's weak housing conditions, so Rocket Companies and Zillow look bottomed. Both appear poised for big runs despite how bad the housing market remains. x.comÂ
Zillow looks very cheap after a very strong quarter with 18% revenue growth in a flat-to-down housing market. It is now a top-25 home loan originator, and while its push into Preferred changes revenue recognition, it still expects strong profits and double-digit growth. x.comÂ
Zillow's real lock-in is winning in rentals and mortgages, which the market does not see. As with Spotify in 2023, the stock is hated while the company outgrows its market, operating leverage kicks in and layoffs have been announced. If housing volume recovers and residential growth reaches 20%+, it becomes a rocket ship. x.comÂ
Opendoor, a meme real estate stock, is predictably struggling in a historically slow housing market with mortgage rates near 7.35%. Per @DudeWhoInvests, shares now trade around $2.50, far below the $7 insiders paid. x.comÂ
Ugly housing conditions provide the contrarian sentiment for a major homebuilder bull run over the next 12 months. Bears investing through the rearview mirror are going to be proven wrong. x.comÂ
Real estate stocks such as Rocket Companies, Zillow and Builders FirstSource will struggle to recover strongly until housing turnover increases. One possible offset: once rate hikes start, probably in September, 10- and 30-year Treasury yields and mortgage rates could tick down. x.comÂ
High Treasury yields keep US real-estate stocks from being a buy yet, despite a record low against the S&P 500. Each hike pushes the sector lower; the 10-year yield above 5% argues for waiting rather than assuming rotation is inevitable. A turn likely needs falling rates, perhaps a first cut or the 10-year back below 4%. x.com x.com x.com x.com x.com x.com x.com x.com x.com x.comÂ
US homebuilders remain a place to avoid as Fed Chair Warsh's rate hike lands on an already weak housing market. Lennar reported orders down 9%, incentives running at 12% of the sale price and mortgage rates near 6.8%. x.comÂ
As the AI infrastructure crash takes form, its recessionary effect suppresses bond issuance and powerfully caps yields, giving battered housing, mortgage and related stocks a lift. Starwood Property Trust, Rocket Companies and Builders FirstSource should get a powerful boost as yields fall, with huge short covering and fundamental improvement; many in the group trade well below book value. x.com x.com x.comÂ
