Why Opendoor Stock Popped Today
Key Points
President Trump has a plan to reduce mortgage rates.
Home buyers and sellers could both benefit.
- 10 stocks we like better than Opendoor Technologies ›
Shares of Opendoor Technologies (NASDAQ: OPEN) climbed on Friday, following several positive developments for the real estate market.
By the close of trading, Opendoor's stock price was up more than 13% after rising as much as 23% earlier in the day.
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President Trump wants to make home ownership more affordable for Americans
After the market close on Tuesday, President Trump said he was turning his attention to the housing market. In a social media post, he wrote:
I am instructing my representatives to buy $200 billion in mortgage bonds. This will drive mortgage rates down, monthly payments down, and make the cost of owning a home more affordable.
About an hour later, Bill Pulte, Director of the Federal Housing Finance Agency, said:
We are on it. Thanks to President Trump, Fannie and Freddie will be executing.
Pulte was referring to the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, two government-sponsored enterprises that buy mortgages from lenders and sell them as mortgage-backed securities to investors, thereby providing liquidity to the U.S. housing market.
On Friday, U.S. mortgage rates fell to their lowest levels in almost three years following Trump's and Pulte's comments.
Lower borrowing costs could spark a housing recovery
Reduced rates would enable more people to qualify for mortgages based on industry-standard debt-to-income ratios. It would also likely entice more homeowners, many of whom have been reluctant to swap their current low-rate mortgages for high-cost loans on new homes, to list their properties.
In turn, this combination of increased home affordability and higher housing supply should lead to greater transaction volumes for companies like Opendoor Technologies.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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