If you’re a real estate investor or you work for a real estate company, you’ve likely felt the impact of this past year’s slump – especially if you’ve been directly impacted by a layoff or you’ve seen your investment portfolio take a pounding.

According to Jim Dalrymple II on Inman, “Real estate stocks can’t get a break.” 

With the rise in both housing prices and mortgage interest rates, buyer demand has gone down. And while that helps narrow the gap between supply and demand, real estate companies have seen their share prices tumble over the past year. 

As of June 27th, 2022, Compass and Zillow have seen their share prices fall by over 72% over the past 12 months. Opendoor and eXp have seen drops of over 69%. And Redfin stock is down a whopping 85.41% since June 28th of last year. 

So, what’s the full story behind this drop in real estate stock values? 

Big Moves from Top Players

While stocks in general have been struggling over the past year, real estate stocks in particular have fallen behind.

Some of that has to do with specific and somewhat isolated incidents with key players in the industry. Last fall, when Zillow announced its decision to shut down its iBuying business, Zillow Offers, its share price immediately took a dive. And it hasn’t recovered since. 

Zillow wasn’t the only company to feel the impact, though. Opendoor and Redfin – both of them rivals of Zillow – saw their share prices go down, too, likely due to investors’ wariness about property technology, thanks to Zillow’s perceived setback. 

That shared consequence highlights an important lesson: one company’s problems can hurt rivals in the minds of investors. 

Self-fulfilling prophecy?

Another factor worth mentioning is the cautionary tone adopted by many real estate companies –  including Zillow, Redfin, eXp, Compass, etc. – about the coming months. 

The mention of “headwinds” like rising mortgage rates and housing prices, along with the inventory shortage and related supply chain disruptions, have put investors on alert. 

The message is clear enough: we don’t expect a housing bubble, but the next few months are likely to be less rewarding (financially) than the past two years. 

What may in fact be a self-fulfilling prophecy by the biggest names in real estate may help explain, at least partly, why this sector has been struggling in the stock market. 

A double whammy for real estate

One of the biggest factors in the slowdown of home sales is the rising mortgage rate, which makes it more expensive to borrow money and contributes to higher mortgage payments. 

Also, with tightening FICO restrictions, agents are seeing fewer qualified buyers. Buyers with a FICO score under 620 have a much harder time qualifying for a mortgage. 

So, real estate gets a double whammy with higher interest rates impacting the broader stock market and mortgage rates also affecting buyers’ ability to invest. 

Uncertain market has investors pulling back

According to Adam Gower – whose company (GowerCrowd) specializes in crowdfunding, investment, and digital real estate platforms – it’s gotten “more difficult and more expensive to find leads and to convert them into closed deals.” 

This seems like an ideal moment to bring up Chris Smith’s new, updated edition of The Conversion Code: Stop Chasing Leads and Start Attracting Clients. The data alone, updated and relevant to today’s market, is a marketing nerd’s best friend.

Gower’s point, though, is valid and worth considering: the types of investors he works with are pulling back from the real estate market. Investor confidence has taken a hit. 

So, what can real estate companies and agents do to build it back up again?

The big takeaway

The main takeaway from Dalrymple’s article is that real estate stocks are going through something – and that’s likely to continue for some time. 

From rising interest rates to tepid outlooks on the housing landscape to the general sluggishness in the broader stock market, we may have a long way to go before things start looking up for real estate stocks. 

Jeff Tucker, a senior economist at Zillow, expressed his fear that builders will stop building as fast as they have been. “If they’re not building and investing, that will guarantee that homes remain unaffordable for large swaths of people.”

Yet, while the housing market may not be as sizzling hot as it was a year ago, it’s still very much alive and carrying on. And every agent has a part to play. 

As a real estate agent, you have the ability to educate consumers on what it means to own the physical asset of real estate. Unlike stocks right now, home values aren’t taking a big dive. They continue to appreciate. The best thing for you to do right now is pretty much what it’s always been: 

  • Deepen your knowledge of the housing industry
  • Grow your skills (or the skills of your team) in marketing, sales, and engagement
  • Build real connections with potential clients (even those not yet ready or able to buy)

Get familiar with the best sources of industry news. Learn where your audience hangs out on social media and find ways to add value with short-form and long-form content. 

And stay on top of the latest developments so you can educate your clients and give them the nudge they need when the time is right. Always be learning. And always be educating. 

As someone on the front lines of the industry, you’re uniquely positioned to show your clients the real benefits of owning real estate for their long-term wealth.