Housing stocks rise as bond yields sink on tech sell-off

Housing-related equities posted sharp gains on Thursday. The move was driven by a decline in bond yields that followed a sell-off in technology stocks. Zillow (Z) shares rose 11%, while Opendoor (OPEN) surged 17%. Online brokerage Compass (COMP) jumped nearly 10%, and commercial real estate database CoStar (CSGP) increased by more than 6%. The movement reflects the direct link between mortgage rates and government debt yields.

Investors had previously avoided US government debt, which pushed yields and mortgage rates higher. However, the retreat from chip stocks on Thursday prompted a return to Treasurys as a safe-haven asset. As bond prices and yields move inversely, the increased demand for long-dated government debt caused yields to fall sharply. This drop suggests that home financing costs may ease after a recent period that saw mortgage rates climb to approximately 7.5%.

The 10-year Treasury yield, which closely tracks mortgage rates, declined by 10 basis points on Thursday afternoon. According to Mortgage News Daily, this shift corresponded to a 12-basis-point drop in average 30-year fixed-rate mortgage rates, bringing them to 7.33%. Freddie Mac data indicates that rates averaged 7.4% last week, a level near a three-year high.

Despite the recent positive movement, housing-linked stocks have faced significant headwinds. The housing market has remained largely stagnant for over three years, impacting company earnings and depressing share prices. Zillow shares are down 67% over the past five years. Opendoor has lost 90% of its value during the same period.