Opendoor Technologies Inc. (NASDAQ:OPEN) disclosed a 12% uptick in preliminary weekly acquisition contracts for the week ending July 18, according to its latest operating update. The data, sourced from the company's accountable.opendoor.com dashboard, signals a potential boost in forthcoming home supply, though it also introduces increased capital risk if demand fails to keep pace.
Despite the contract growth, Opendoor shares closed at $4.38 on Wednesday, down 2.23% from the prior session. Trading volume surged to 95.74 million shares, representing 175% of the 65-day average, indicating heightened investor attention. Over a five-session span, the stock declined 4.16%, yet it outperformed its housing-related peers, which experienced steeper drops. For context, Offerpad Solutions (NYSE:OPAD) fell 5.78%, Zillow Group (NASDAQ:ZG) lost 7.77%, and Rocket Companies (NYSE:RKT) slid 9.80% over the same period.
The contract increase comes as mortgage rates climb, with the average rate on a 30-year fixed mortgage advancing to 6.69%—the highest level in 11 months, according to Reuters. This rise in borrowing costs, ahead of the Federal Reserve's July 28-29 meeting, could dampen resale activity and pressure home values. Mike Fratantoni, chief economist at the Mortgage Bankers Association, noted that rates are "likely to remain higher as a result" of inflation pressures tied to rising oil prices.
Opendoor's management had previously projected second-quarter revenue of approximately $900 million, with a contribution margin near the midpoint of its 5%-7% target range. Based on a 6% contribution margin, the estimated contribution profit stands at roughly $54 million. This figure represents a 69% increase from the first quarter's contribution profit of $32 million, with the $22 million gain accounting for 71% of the adjusted EBITDA loss for the quarter. Both metrics are non-GAAP and do not directly correspond.
The company anticipates adjusted EBITDA to be near breakeven for the second quarter. The earnings threshold is now clearly defined: contribution profit must align closely with the $54 million forecast, and adjusted EBITDA should meet management's breakeven target. Growth in contracts alone will not resolve the margin equation, especially as rising mortgage rates could slow demand.
In the first quarter, only 10% of Opendoor's homes were listed for more than 120 days, a sharp decline from 33% in the prior quarter, indicating improved inventory turnover. Chief Executive Kaz Nejatian stated in May, "The machine is working," per SEC filings. However, the dashboard data remains preliminary and subject to cancellations, and Deloitte has not audited or verified the information.
Opendoor carries a short float of 22.66% as of June 30, the highest among its housing-related peers. This leaves its shares susceptible to significant price swings, particularly as the market awaits second-quarter earnings on August 4 at 5 p.m. EDT. The upcoming Federal Reserve meeting adds another layer of uncertainty, with potential rate decisions influencing housing market dynamics.
Risks remain elevated: rising mortgage rates may curb resale activity or pressure home values, and accelerated acquisitions could lead to inventory buildup if demand does not keep pace. The market's focus will be on whether Opendoor can translate contract growth into sustainable profitability amid a challenging rate environment.
