Goldman downgrades Zillow, Redfin due to housing market conditions

You can’t hide behind the computer… maybe some can, but that is not the case for Zillow (ZG) and Redfin (RDFN). Both stocks closed down -1.36% and -7.45%, respectively, after trading on Monday. The decrease likely resulting from a downgrade by Goldman Sachs on both stocks.

It’s the real world… and despite Zillow and Redfin being internet-based companies, they are still subject to the conditions of the real-world housing market. The housing market is facing low supply, rising prices, and a tough mortgage lending environment. This spells out ‘underperformance’ for both companies for as long as this lasts.

Look out… because real estate tech is attracting venture capital investment and is becoming one of the fastest growing vertical markets in that regard. We have seen Zillow and Redfin launch their own “iBuyer” (buying homes directly from owners) initiatives, but there are already companies that do this exclusively. It will be interesting to see if and how these companies adapt and stay competitive in a tough market with no shortage of new competition.

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