Opendoor Technologies Inc. (OPEN) shares remained largely unchanged in Friday afternoon trading, hovering around $4.55, as investors weighed the company's ongoing turnaround against headwinds from rising mortgage rates and a softening housing market. The stock had rallied 3.9% on Thursday but failed to extend those gains in the final session before the Memorial Day holiday weekend.
Freddie Mac reported Thursday that the average rate on a 30-year fixed mortgage climbed to 6.51%, up from 6.36% the prior week. This uptick in borrowing costs comes as the U.S. housing market shows signs of strain. According to Reuters, single-family housing starts fell 9.0% in April, as builders grapple with elevated financing costs and higher material expenses, slowing the pace of new construction.
Opendoor's business model, known as iBuying, relies on purchasing homes quickly using data-driven cash offers, then reselling them for a profit. Higher mortgage rates reduce buyer affordability, making it harder for the company to flip properties quickly. The company faces the same affordability squeeze that is affecting the broader housing market, potentially leading to longer holding periods and pressure on pricing.
Quarterly Results Show Mixed Progress
In a regulatory filing on May 7, Opendoor reported first-quarter revenue of $720 million, down from $1.15 billion in the year-ago period. Net loss widened to $173 million from $85 million in the prior year. However, gross margin improved to 10.0%, and the number of homes purchased jumped 45% from the previous quarter. The company also signed more than 5,000 acquisition contracts in the quarter, its highest total since 2022.
CEO Kaz Nejatian expressed optimism in the earnings release, stating that the company's "machine is working" with improvements in buying, resale speed, and margins. The company noted that aged inventory fell to 10% of homes listed for over 120 days at quarter-end, down from 33% in the prior quarter, suggesting better inventory management.
Looking ahead, Opendoor expects second-quarter revenue to rise approximately 25% sequentially, with adjusted EBITDA near breakeven. Adjusted EBITDA excludes interest, taxes, depreciation, amortization, and certain other costs, and is not directly comparable to net income.
Sector and Market Context
Peer performance was mixed on Friday. Zillow Group (Z) declined, while smaller rival Offerpad Solutions (OPAD) traded higher, making it difficult to draw a clear sector trend.
The broader market was winding down ahead of the long weekend. Nasdaq trading was set to close at 4:00 p.m. ET on Friday, with U.S. stock markets closed Monday, May 25, for Memorial Day. Opendoor trading will resume Tuesday.
The key risk for Opendoor remains the trajectory of mortgage rates. If rates continue to rise, potential homebuyers may delay purchases, causing homes to sit on the market longer. This could force Opendoor to cut prices or slow its acquisition pace. The company has warned that housing downturns, significant swings in home prices, competition, access to debt, and its ability to profitably buy and resell homes could all materially affect results.
