Recent days have seen the Trump administration’s tariff policies inject chaos into the economy, with the stock market plunging late last week and erasing trillions from U.S. companies.
Real estate companies have not escaped the carnage. As Inman reported last week, shares in both Opendoor and Fathom have traded below the critical $1 threshold in recent days, and while their prices have been declining for some time the market sell off certainly added to their woes.
But other companies have suffered as well. Compass, a consistent stock market standout in recent months, has seen shares drop more than 15 percent in the last week. Zillow shares are down nearly as much. EXp has fared slightly better, with shares down around 7 percent, while RE/MAX shares have fallen about 13 percent. And with experts suggesting a recession may be more likely now, there’s plenty of reason to worry.
But wait!
In recent days, Inman has spoken to Wall Street analysts who specialize in real estate to figure out what the recent market chaos means for brokerages, portals and other companies in the housing business. And while there are plenty of unknown variables, they weren’t entirely pessimistic. In fact, the takeaway was that despite widespread uncertainty, real estate could be poised to outperform the rest of the struggling market.
“I’m actually quite bullish on housing from here,” John Campbell, managing director at Stephens, told Inman earlier this week. “I’ve been telling all the investors I talked to over the last month and a half, two months, it feels like some of these housing-related plays are kind of like safe havens.”
The safe haven school of thought
Campbell’s bullishness on real estate at the moment hinges on two ideas. The first is that the broader economy — job growth, GDP, etc. — has traditionally driven the real estate industry. And in that context, things like stock market crashes or a recession are bad news for housing.
John Campbell
But the second piece of this theory is the idea that over the last few years, rates have had a stronger influence over the housing market than the broader economy. And that means there’s still pent-up demand.
“It resulted in a market where there are a lot of people who wanted to move but just simply couldn’t,” Campbell said. “So I think with each passing day, week, month, year, you’re growing a pretty massive pipeline.”
Campbell also said that, unfortunately, a broader economic downturn would likely be worse for people who were less likely to buy a house in the first place. There are broader problems with that reality — Campbell lamented stratification between “haves” and “have-nots” — but at the practical level, it could mean that real estate professionals’ clients still want to transact in a low-rate environment.
This pent-up-demand theory has an upside for individual real estate professionals, but it could have implications for publicly traded shares as well — which Campbell argued have seen their values depressed in recent years. That could change in a lower rate environment.
“Zillow used to trade at, I don’t know, 25, 30 times EBITDA but is trading at 14 or 15 times now on next year’s numbers,” he said.
Tom White
Tom White — a managing director and senior research analyst for D.A. Davidson — made a similar point. In a conversation late last week, he too noted that economic downturns can drag on real estate, and he pointed to things like inflation and lower disposable income among consumers as factors that may block would-be homebuyers from transacting.
But White also pointed to a potential “silver lining” amid the chaos for the real estate industry specifically.
“One potential silver lining for this group of companies,” White said, referring to publicly traded real estate firms, “is that when people are worried about the broader economy, you generally tend to see an easing in interest rates. It raises the possibility that the Fed might seek to lower the benchmark interest rates. And both of those things presumably will have a similar impact on mortgage rates, too.”
None of this is to sugar coat the prospect of a recession, and mortgage rates have moved both down and up in recent days in the wake of Trump’s tariff announcements. But the gist here is that lower rates plus pent-up demand could be real estate’s saving grace.
The winners in hard times
Of course, not all real estate companies are created equal, and prolonged economic pain could play to some companies’ strengths more than others. For instance, White speculated that hard times might incentivize cash-strapped agents to seek out more ways to keep more of their commissions — which could benefit comparatively nimble virtual brokerages.
“It’s possible that big economic shocks could accelerate that migration,” White said, referring to agents’ moves to companies such as eXp and the Real Brokerage. “If the broader housing market gets impacted and we have a couple of more years of soft home sales, it could result in a larger swath of agents going to these platforms where their costs are lower, where they can try and preserve a little bit more of their way of life and their take home pay on fewer transactions.”
Campbell, too, mentioned eXp as a potential winner, adding also that Compass may be poised to do well. Campbell singled out Compass’ crusade against the National Association of Realtors’ Clear Cooperation Policy as an example of a strategy that may pay dividends down the road.
“Whether you agree with Reffkin’s approach on CCP or not, they’ve carved out their game plan and they’re executing on it,” Campbell said. “Whether that’s right or wrong, they’re taking a stance. They’re not afraid to ruffle feathers.”
Other likely winners if times do get tougher could be real estate companies that lie outside the brokerage ecosystem altogether.
“I think title insurance is actually one of the best ways to play it because you get refi and purchase,” Campbell said. “You get the title, the policy, the premium is based on a percent of the home value. So you get home price appreciation, and then they have a whole chunk of their business that is commercial.”
There are other speculative scenarios as well. President Trump has cited the migration of manufacturing overseas as justification for his tariffs. Economists are skeptical tariffs can revive manufacturing, but if some companies decide to bring factories back to the U.S., Campbell pointed out that could impact commercial real estate.
Time will tell how the situation plays out, and the consequences of Trump’s policies remain unclear. But the high level takeaway is that while no one is rooting for tougher times, there is a scenario where real estate shares, companies and professionals make it through to the other side.
“I think you’re going to see the potential,” Campbell said, “where a couple of different things converge to support a better purchase market.”
