The Stock Price price for Real Estate Companies is based on the future earnings potential of the company. And if Wall Street is firesaling real estate stocks like Zillow and Lennar, then that’s a sign that Wall Street is betting earnings will go down (and that the Housing Market Bubble will pop).
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If a home builder like Lennar experiences a decline in earnings, it’s typically the sign of a Housing Market Slowdown (aka, they’re selling fewer homes). Same with Zillow. If their earnings go down, that means they’re selling fewer leads to realtors. And that Opendoor is flipping fewer homes.
The individual declines in the business models for these companies would be a sign that the overall Housing Market is in decline. Just like it was in the mid-2000s when Lennar (the biggest home builder in America) saw its stock price crash about 12 months before the US Housing Market crashed.
One segment of real estate companies that Wall Street investors haven’t sold off on yet are Corporate Landlords. The price of companies like Invitation Homes and American Homes 4 Rent has held steady. But given the recent declines of Real Estate Tech Stocks and the Home Builders, it’s reasonable to thank that the corporate landlords could be next.
I’ve used Put Options as a way to make money off the decline of these real estate companies over the last six months. A put option is a derivative that bets a company’s stock price will decline. If you are interested in learning more about put options, seek the advice of a registered financial advisor (I am not a Financial Advisor and this is not to be construed as financial advice).
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