The Real Estate Market Has Officially Closed on Opendoor
The COVID-19 pandemic provided a generational catalyst for the U.S. housing market. Median home prices soared over 40% in less than two years as record-low interest rates drove the cost of financing a home to new lows and work-from-anywhere policies allowed more young adults to move away from downtown urban areas. Now mortgage rates are soaring, causing housing prices to stagnate and even decline in many regions around the country.
One company feeling the brunt of this slowdown is Opendoor (NASDAQ: OPEN), an online home flipper. The company's profit margins are deteriorating due to declining home prices and poor acquisition decisions over the last few years, causing investors to get extremely pessimistic about its future prospects. Here's why the worst is yet to come from this disaster of a real estate disrupter.
Opendoor's Q4 2022 earnings were ugly. Revenue declined 25% year over year to $2.86 billion, with gross margins sliding from 7.1% to 2.5%. That gave Opendoor a whopping $71 million in gross profit last quarter, which wasn't even enough to cover the $113 million in interest expenses from the debt it uses to finance home purchases.
Source Fool.com
