Here's why Opendoor is falling 32.6% after Fed forecasts higher rates

Here's why Opendoor is falling 32.6% after Fed forecasts higher rates

Opendoor Technologies shares were pulling back again last month on the heels of the housing market tightening, mortgage rates rose, and the Fed forecast that interest rates would stay higher for longer than it had previously predicted.

There was little company-specific news, but given its significant exposure to the housing market, the stock fell sharply in response to challenges in the real estate sector.

The real estate tech stock fell 32.6%, according to data from S&P Global Market Intelligence. It fell mainly in the second half of the month, as jitters about the housing market increased and the Federal Reserve made its interest rate decision and forecast.

In addition to the general movement in the housing market, the Fed's announcement, and rising mortgage rates, there were some analyst notes and insider transactions.

First, CEO Carrie Wheeler sold 613,286 shares of the stock, or about $2 million, on Sept. 15, but the news was published on Sept. 19 through a filing. Wheeler has a holding of more than 17 million shares of the stock.

Citigroup analyst Ygal Arounian lowered Citi's price target on Opendoor from $3.90 to $2.70 to reflect the lower stock price. Arounian also said that he expects to earn more net interest income from its cash balance with interest rates higher.

The stock's biggest sell-off was also last month, as the Federal Reserve announced its rate-hike decision, and Opendoor shares fell 20 percent over a two-day period.

Increased rates pose a significant challenge to Opendoor, as they frequently cause home prices to drop, devaluing the company's inventory.

With the Fed forecasting higher rates for longer, that means it will take Opendoor longer to get back to profitability.

Opendoor recovered some of those losses over the last few days of the month when tech stocks rallied, but the stock still behaves like a leveraged beta play on the housing market.

While it's not certain that Opendoor will be a bad business model, with mortgage rates remaining elevated, it's likely to suffer for the foreseeable future.

The company is in the process of reducing its inventory to manage through a sluggish housing market, which should help trim its losses even as it shrinks the business.