In an encouraging sign for frustrated prospective homebuyers, housing starts in the U.S. popped up sharply against economists’ forecasts, leading to a conspicuous rise of 2% for Opendoor Technologies (NASDAQ:OPEN). Specializing in the iBuyer business model of leveraging technology to facilitate instant offers for current homeowners, Opendoor struggled since late 2021 as inflation followed by rising borrowing costs killed demand.
However, speculative traders also saw a contrarian opportunity materialize. Briefly, in the closing days of December last year, OPEN stock slipped below the one-dollar per share mark. Simultaneously, OPEN stock short interest as a percentage of its float increased steadily from its November 2022 lows. Gradually, shares gained momentum. Since the beginning of this year, Opendoor gained a remarkable 179% lift in market value.
Though still a risky wager, some fundamental justification now exists for the rally in OPEN stock. Specifically, data from the U.S. Department of Housing and Urban Development showed that in May, new privately owned housing starts hit 1.63 million (on an annualized basis). That’s up nearly 22% from April’s figure of 1.34 million.
Interestingly, Fintel contributor Will Ashworth pointed out that the opposite dynamic is true in Canada. Housing starts in May fell 23% compared to April, he wrote earlier this week, implying a severe shortage in the Canadian residential real estate market. In contrast, the implied increase in U.S. housing units should be a boon for both desperate homebuyers and OPEN stock.
Enter Pessimism
Nevertheless, Fintel’s data for options flow suggests that among traders in the derivatives market, the aforementioned hypothesis ran into contested ground. While several traders bought call options — which undergird optimism — many others sold calls, which carries a pessimistic overtone.
Against a broader view, OPEN stock faces a credibility challenge regarding forward economic viability. For instance, while the May jobs report saw the economy add 339,000 new employment opportunities, the unemployment rate also ticked higher by 0.3 percentage points to 3.7%.
Interestingly as well, “[t]he number of persons jobless 15 to 26 weeks increased by 179,000 to 858,000 in May,” or a near five-fold increase, according to the report from the Bureau of Labor Statistics . While investors should avoid reading too much into only one month’s worth of comparative data, this jobless statistic also implies that those seeking employment are taking longer to find it.
Combined with the mass layoffs that started in earnest last year — particularly in the high-paying technology sector — fewer people may be able to afford housing, even with the influx of new residential units. Therefore, while OPEN stock may be soaring right now, a deeper look into the granularity reveals concerning signs that investors shouldn’t ignore.
This article originally appeared on Fintel
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