Why Opendoor Technologies, Medical Properties Trust, and Kilroy Realty Stocks All Popped on Thursday

Good news on inflation is great news for REITs and other real estate stocks.

Shares of Opendoor Technologies (OPEN 5.00%) stock jumped 6.6% through 12:15 p.m. ET Thursday, and it’s not the only winner in the real estate sector today. Real estate investment trusts (REITs) Medical Properties Trust (MPW 0.57%) and Kilroy Realty (KRC 5.84%) also spiked in morning trading, albeit with caveats.

As morning turns to afternoon, Kilroy stock is maintaining its momentum with a 5.7% gain, while Medical Properties Trust has abruptly turned tail. Fifteen minutes past the noonday mark, its early gains have turned into a 2% loss.

What’s happening in real estate today

So what’s the unifying factor behind all these real estate stock moves? Inflation. And interest rates.

This morning, the U.S. Department of Labor reported the Consumer Price Index (a proxy for the national inflation rate) declined 0.1% in June as compared to May. This puts inflation on course to fall to 3% for the year, its lowest level in 13 months, and a level approaching the Federal Reserve target of 2%. As CNBC commented, this gives the Fed cover to potentially begin lowering interest rates later this year — which could save heavily indebted REITs like Medial Properties Trust and Kilroy Realty a lot of money.

In fact, CNBC notes interest rates could begin falling as early as September.

Why this is good news for real estate stocks

Lower interest rates on debt would be obviously great news for Medical Properties Trust and Kilroy, which carry debt loads of more than $10 billion and $5 billion, respectively — both multiples of the companies’ own market capitalization, according to data from S&P Global Market Intelligence. It would be good news, too, for Opendoor, which owes $2.4 billion but has a market cap of only $1.3 billion.

Even better news for Opendoor is that lower interest rates would remove an obstacle to residential homebuying, and probably encourage more owners of existing homes to sell, knowing the interest on their next home won’t be too high. If you’re wondering why Opendoor is outperforming the others — that’s why.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Opendoor Technologies. The Motley Fool has a disclosure policy.

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