The Fed is expected to continue its rate hikes to control the raging inflation. The 30-year fixed-rate mortgage averaged 5.7% in the week ending September 1, 2022, up 97.2% year-over-year.

According to Sam Khater, Freddie Mac’s chief economist, “The market’s renewed perception of a more aggressive monetary policy stance has driven mortgage rates up to almost double what they were a year ago.”

Such circumstances have marred sales in the home and real estate industries. New home sales plunged 12.6% in July to the lowest level since January 2016.

In addition, Mauricio Umansky, CEO of The Agency, said, “The global real estate activity over the last two years has been unsustainable. We’ve experienced extraordinary sales and business, and we are seeing it soften/regulate.”

Given the backdrop, fundamentally weak real estate stocks Agree Realty Corporation (ADC), Opendoor Technologies Inc. (OPEN), and Redfin Corporation (RDFN) might be best avoided now.

Agree Realty Corporation (ADC)

ADC is a publicly traded real estate investment trust primarily engaged in acquiring and developing properties net leased to industry-leading retail tenants. It currently operates around 1,027 properties across 45 states with a total gross leasable area of roughly 21 million square feet.

ADC’s total operating expenses came in at $52.53 million for the second quarter that ended June 30, 2022, up 34% year-over-year. Moreover, its cash and cash equivalents came in at $26.27 million for the period ended June 30, 2022, compared to $43.25 million for the period ended December 31, 2021. Its total liabilities came in at $2.06 billion, compared to $1.81 billion for the same period.

ADC’s EPS is expected to decrease 15.4% year-over-year to $0.44 for the quarter ending September 2022. Over the past month, the stock has lost marginally to close the last trading session at $76.24.

ADC’s poor fundamentals are reflected in its POWR Ratings. The stock’s overall D rating translates to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

ADC has a D grade for Value and Sentiment. In the F-rated Real Estate Services industry, it is ranked #32 of 42 stocks. Click here for the additional POWR Ratings for Momentum, Growth, Stability, and Quality for ADC.

Opendoor Technologies Inc. (OPEN)

OPEN operates a digital platform for United States residential real estate. Customers can buy and sell homes online thanks to the company’s platform. Additionally, it offers escrow and title insurance services.

OPEN’s total operating expenses came in at $454 million for the second quarter ended June 30, 2022, up 46% year-over-year. Also, its total liabilities came in at $7.78 billion for the period ended June 30, 2022, compared to $7.26 billion for the period ended December 31, 2021.

OPEN’s revenue is expected to decrease 21.1% year-over-year to $3.01 billion for the quarter ending December 2022. Its EPS is expected to fall 41% year-over-year to negative $0.44 for the same period. The stock has lost 22.9% over the past month to close the last trading session at $4.41.

OPEN has an overall F rating, equating to a Strong Sell in our POWR Ratings system. It has an F grade for Stability and Sentiment and a D for Quality and Growth. It is ranked #40 in the same industry. We have also rated OPEN for Momentum and Value. Get all OPEN ratings here.

Redfin Corporation (RDFN)

RDFN is a residential real estate brokerage firm with operations in Canada and the United States. The business runs an online real estate marketplace and offers real estate services, such as helping people buy or sell a home.

RDFN’s net loss came in at $78.50 million for the second quarter ended June 30, 2022, up 254.5% year-over-year. Moreover, its loss per share came in at $0.73, up 151.7% year-over-year. Its current liabilities came in at $655.10 million for the period ended June 30, 2022, compared to $401.81 million for the period ended December 31, 2021.

Street expects RDFN’s revenue to decrease 9.9% year-over-year to $579.14 million for the quarter ending December 2022. Its EPS is expected to decrease 97% year-over-year to negative $0.53 for the same period. Over the past years, the stock has lost 85.3% to close the last trading session at $7.59.

RDFN has an overall F rating, equating to a Strong Sell in our POWR Ratings system. It has an F grade for Growth, Sentiment, and Quality and a D for Stability. It is ranked #41 in the same industry. We have also rated RDFN for Momentum and Value. Get all RDFN ratings here.

ADC shares were trading at $75.00 per share on Thursday afternoon, down $1.24 (-1.63%). Year-to-date, ADC has gained 7.93%, versus a -15.61% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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