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President Trump’s recently announced plan to drive down mortgage rates has sent housing stocks surging again, and Opendoor Technologies is no exception.
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Even if these specific plans fail to drive a housing market resurgence, this announcement may be indicative of other housing policy changes ahead that, together, help to drive a rebound.
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A further wave of bullish macroeconomic developments could spark another meme rally for Opendoor, but you may want to stick with housing stocks with less hope and hype surrounding them.
Last August and September, Opendoor Technologies (NASDAQ: OPEN) was one of the hottest meme stocks around. Today, while shares in the real estate iBuyer have held onto the bulk of these gains, enthusiasm for the stock among retail investors has declined significantly.
However, based on recent events, a resurgence in popularity may be underway. A recent announcement from President Donald Trump has spurred a rally for Opendoor and other housing stocks. This specific announcement may mark the start of further promising news for the housing market.
As Opendoor continues to trade on hype instead of fundamentals, the resultant sentiment shift alone may be enough to drive another meme wave for the stock. With this in mind, let’s take a closer look and see whether this news should change one’s long-term view on the company’s shares.
On Jan. 8, Trump noted in a social media post he directed the federal government to repurchase $200 billion worth of mortgage securities. The plan entails having Fannie Mae and Freddie Mac, publicly traded but government-controlled entities, to make the purchases.
As the objective of this buyback is to drive down interest rates, shares in companies operating in the housing and mortgage markets reacted positively to the news, including Opendoor. The company’s shares surged by around 5% on the day of Trump’s announcement. As of this writing, the stock remained on an upward trend.
This makes sense for two reasons. First, other news points to additional efforts ahead by the Trump administration to jump-start to sluggish housing market. Second, much as past positive news has spurred outsize price moves for Opendoor, a similar bullish overreaction could arise on the heels of this news.
The Fannie/Freddie mortgage buyback announcement is just the tip of the iceberg. According to Federal Housing Finance Agency head Bill Pulte, the president has “between 30 and 50” other ideas to spur increased housing demand, with further announcements arriving in the weeks ahead.
