Stocks benefit from changes in housing market News ad

After months of weakening data, home sales reports have finally picked up, giving investors new hope for a recovery in the real estate sector. However, there is no reason to celebrate just yet as other factors and themes need to return to normal before the skies clear for the industry. One month of positive data is not enough to erase quarters of decline.

Be that as it may, this does not mean that no one can emerge victorious from this situation as there is a larger trend behind the data that can fabricate long-term trends and growth potential in a particular real estate niche. Mainly, this trend is likely to expand opportunities in the real estate services sector, especially leasing and transaction services.

This is why stocks are loved Zillow Group Inc. NASDAQ: Z, SoFi Technologies Inc. NASDAQ: SOPHIEand even RE/MAX Holdings Inc. New York Stock Exchange: RMAX could be the next to see double-digit growth rates in the coming quarters, especially as the broader US housing market enters a secular cycle of growth and expansion due to the following dynamics.

Zillow Shares Gain Institutional Support Amid New Real Estate Trends

Over the last quarter, FMC LLC decided to increase its stake in Zillow shares to 179.5%, bringing its net position today to a high of $325.3 million, or 2.2% ownership in the company. The reasons for this distribution are more important than recent sales volumes.

Whether it’s a transaction or a lease, Zillow acts as an intermediary, connecting realtors and clients for a fee. Knowing this, cyclicality in each of these two markets is the driving force behind Zillow’s financial performance and ultimately its valuation.

Based on recent quarterly earnings, Zillow management is focusing more and more on the rental segment and why it makes the most sense in the world. With price-to-income ratios in today’s housing market near all-time highs and mortgage rates rising again to 7%, demand for new homes is currently very low.

Developers know this, which is why the number of building permits has dropped sharply over the past few quarters, reflecting this trend. While that space is shrinking, Zillow’s rental division will likely begin to take a larger share of the company’s net revenue. According to Bloomberg, up to 36% of Americans rent where they live, up 50% from pre-COVID levels.

Because these trends could become multi-decade themes, today’s Zillow stock price targets may not yet reflect the upside potential that may arise in the future. However, the targets set by Jefferies Financial Group reflect some of the attractive offerings in today’s market.

By reiterating their Buy rating and setting a $90 price target on Zillow shares, these analysts are directly calling for upside potential of up to 10% from where the stock is trading today, not to mention a new high for the year. After rising 110% over the last 12 months, investors can safely assume that there is enough bullish momentum to take care of new upside potential.

SoFi Mortgage: The Key to Reaching New Highs in a Potential Turnaround

Let’s assume the tenant-nation scenario doesn’t work out and instead there’s a healthy rebound. Investors can likely look to SoFi stock for new growth potential. With the mortgage market index now at its 1996 low, any tailwind could lift the index significantly.

In the last month alone, short interest in SoFi shares has fallen 10.2%, showing signs of bearish capitulation in the face of all these bullish factors poised to lift the stock. Moreover, institutional buyers replaced bearish traders who decided to cover their short positions and avoid further problems.

Representatives from State Street Corp. increased its holdings in SoFi stock by 1.7% as recently as November 2024, netting $142 million for a nearly 2% stake in the company ahead of these potential tailwinds. To support this view, Wall Street analysts have provided their earnings per share (EPS) growth forecasts.

Forecasts are set at $0.10 per share over the next 12 months, double today’s EPS level of $0.05, which is enough to justify a similar jump in the stock’s valuation.

RE/MAX Stock: Discounts and Upside Signal New Rally Coming

After rising 45% over the past 12 months, there’s reason to believe RE/MAX stock will benefit from all of these housing trends. Whether tenants take over or buyers find a way to return to the negotiating table, these promotions will act as the facilitator that makes these connections a reality.

Just like Zillow is a platform, RE/MAX is a dealer, so whatever success Zillow experiences, some of that momentum will end up on RE/MAX’s income statement. That’s why the stock is still 93.2% owned by institutional investors today and could rise soon given how cheap it is trading today.

Price action aside, RE/MAX stock trades at a P/B of just 0.6 times, meaning investors today are getting roughly a 40% discount to the company’s book value, which is enough to get anyone interested deal. Moreover, the company’s low market capitalization of $395 million allows it to quickly achieve double-digit growth rates.

Whatever the market turns, as expected for Zillow, this is one of the stocks in the industry that could likely hit a new high soon.

Before you consider SoFi Technologies, you should hear this.

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