Why the Zillow Group plummeted nearly 15% this week

What happened

The housing market may be sputtering, so investors worry about the prospects of the online real estate company. Zillow Group (Z -5.88%) (ZG -5.98%). As a result, both classes of the company’s shares fell nearly 15% in price over the course of this trading week, according to data compiled by S&P Global Market Intelligence.

And what

Zillow publishes regular updates on the U.S. housing market, and the most recent one (released Thursday morning) was not encouraging. The company’s Zillow Home Value Index showed that in July, US home values ​​fell marginally by 0.1% compared to June.

Now, while it wasn’t exactly a drop in the rush for exits, it was the first drop in the company’s metric since 2012. It also represents a big slowdown in the hot growth in house prices over the past two years .

Most of the 50 largest metro areas included in the index experienced month-over-month declines. The most dramatic of these was San Jose, California (Silicon Valley’s largest city), where home values ​​fell 4.5%. Nearby San Francisco was the third steepest decliner during the period, falling nearly 3%. Other declining cities include Las Vegas (down 1.4%), Boston (0.7%) and Los Angeles (0.3%).

On the other hand, a group of large cities made gains, notably New York (+0.3%) and the Miami-Fort Lauderdale cluster (1.5%).

Now that

Falling home prices may give potential buyers some hope, but the market softness they imply is understandably worrying for real estate investors. If anything, these people are probably worried that the combination of higher interest rates and a possible stagnant economy will keep this downward trend in place. If that happens, we can expect more pain for Zillow stock and its peers.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zillow Group (A Shares) and Zillow Group (C Shares). The Motley Fool has a disclosure policy.

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About the Author: Chaz Cutler

My name is Chasity. I love to follow the stock market and financial news!