Residential real estate may have brighter days on the horizon, investors forecast.
Optimism has sent stocks for some legacy firms and proptech companies alike soaring in the new year after a dramatic market downturn over the past six months that cost hundreds of jobs.
Bumps have emerged across the board for some of the biggest names over the past 10 days: Anywhere is up 16 percent, Compass 65 percent, ReMax 11 percent, eXp 19 percent, Zillow 28 percent and Douglas Elliman 8 percent.
Mortgage rates ended 2022 at nearly double their levels a year ago, but recent declines have investors confident the worst of the downturn is in the rearview mirror, according to John Campbell, a Stephens Inc. analyst who tracks Re/Max and eXp.
“Even with the shaky environment… people are coming back to it.” Campbell said, adding that eXp and Re/Max were “big underperformers last year.”
Ron Kamdem, a Morgan Stanley analyst, attributed some of the wider optimism to Compass. The brokerage giant impressed analysts at a recent conference and was the subject of two analyst reports that were positive on the company’s goal of being cash-flow-positive by the end of June.
Brokerages aren’t entirely out of the woods yet, Kamdem said, because “there has not been clear fundamental signs” as to when the market will bottom out over the next three to six months.
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But the early confidence is a welcome change for the residential brokerage world, which endured a brutal fall and early winter.
Compass, which has been trying to claw its way to profitability, executed three rounds of layoffs in less than a year and earlier this month put its headquarters up for sublease last week.
Anywhere, the conglomerate that owns major brands like Corcoran, Sotheby’s International Realty and Century 21, conducted a second round of layoffs earlier this month and announced the closure of its iBuying business. Its latest wave of cuts marked 11 percent of its workforce laid off since August.
Redfin, which began 2023 with 30 percent smaller workforce than the previous year and stocks that have lost 90 percent of their value since a peak in early 2021, told the Associated Press this month the company shuttering iBuying was a “reckoning.” After acquiring a lending firm, Redfin was aiming to generate adjusted EBITDA in 2023.
Zillow, which executed two major waves of layoffs last year, said the third quarter saw a steep drop in revenue from the mortgage segment. Despite the drop, executives said the segment produces $50 billion in origination revenue a year and is a key to growth.