The Federal Reserve recently hinted at raising interest rates as soon as early 2023. The central bank also indicated that it might consider reducing its asset purchases before the end of the year. Nevertheless, the real estate market has remained red-hot amid the low-interest-rate environment. In addition, people’s desire to move to bigger and better living and remote-working spaces is driving the rise in demand.

With its passage of a $1 trillion infrastructure package on August 10, the Senate has now turned to a $3.5 trillion measure that could include more extensive investments in housing and changes to zoning policies. According to a Research and Markets report, the global real estate market is expected to grow at an 8% CAGR  from 2020 - 2025.

Given this favorable backdrop, Wall Street analysts expect real estate stocks Zillow Group, Inc. (Z), KE Holdings Inc. (BEKE), and Doma Holdings Inc. (DOMA) to rally by more than 30% in price in the near term. So, we think it could be wise to add them to one’s watch list now.

Zillow Group, Inc. (Z)

Z is a Seattle, Wash.-based digital real estate company that operates real estate brands that include Zillow Offers, Zillow Closing Services, Zillow Home Loans, Trulia, StreetEasy, and HotPads on mobile applications and websites in the United States. It operates through three segments: Homes; Internet, Media & Technology; and Mortgages.

In June, the company unveiled significant upgrades to its Zestimate home valuation model, which allows the algorithm to react more quickly to current market trends and improve the national median error rate to 6.9%. So, Z could witness increasing demand for its solution because the Zestimate can now react more quickly to dynamic market conditions, providing homeowners with a more accurate estimate of a home's current value.

Z’s revenues surged 70% year-over-year to $1.31 billion for its  fiscal second quarter, ended June 30, 2021. Its gross profit grew 92% year-over-year to $538.39 million, and its adjusted EBITDA came in at $182.77 million, representing a 1,053.9% year-over-year increase.

Z’s EPS is expected to increase 165.9% year-over-year to $1.17 in its fiscal year 2021. In addition, it surpassed the consensus EPS estimates in each of the trailing four quarters. The company’s revenue is expected to increase 205.6% year-over-year to $2.01 billion for the quarter ending September 30, 2021.

Over the past year, the stock has gained 20.7% in price to close yesterday’s trading session at $99.96. Wall Street analysts expect the stock to hit $139 in the near term, which indicates a potential 39.1% upside.

KE Holdings Inc. (BEKE)

Headquartered in Beijing, China, BEKE is an  integrated online and offline platform for housing transactions and services. The company operates in three segments: Existing Home Transaction Services; New Home Transaction Services; and Emerging and Other Services. It also owns and operates Lianjia and Deyou.

On July 6, BEKE acquired Shengdu Home Renovation Co., Ltd., which is expected to help accelerate the expansion of the home renovation business. Stanley Yongdong PENG, the chairman of the board, said, “We believe our proposed acquisition of Shengdu will enable us to strengthen our capabilities in providing better housing services to satisfy the evolving needs of housing customers."

The company’s gross transaction value increased 22.2% year-over-year to $189.10 billion for its  fiscal second quarter, ended June 30, 2021. BEKE’s net revenue grew 20% year-over-year to $3.70 billion, while its number of stores increased 25.1% year-over-year to 52,868. In addition, its number of agents increased 20.3% year-over-year to 548,600.

Analysts expect BEKE’s EPS and revenue to increase 633.3% and 640.1%, respectively, year-over-year to $4.18 and $80.99 in its fiscal year 2021. In addition, it surpassed the Street’s EPS estimates in three of the trailing four quarters.

Wall Street analysts expect the stock to hit $25.24 in the near term, which indicates a potential 33.1% upside.

Doma Holdings Inc. (DOMA)

DOMA, which is based in San Francisco, provides title, escrow, and settlement services to homeowners, lenders, title agents, and real estate professionals. It operates through Distribution and Underwriting segments. The company also  originates and underwrites businesses and provides services in purchase/resale and refinance transactions in the residential real estate market.

DOMA completed a business combination with Capitol Investment Corp. V on July 28. Its CEO, Max Simkoff, said, “For us, this transaction is about accelerating our ability to penetrate and revolutionize first the antiquated $23 billion title, escrow, and closing market, and eventually the broader $318 billion homeownership services market.”

DOMA’s revenues increased 29% year-over-year to $130 million for the second quarter, ended June 30, 2021. Its closed orders grew 44% year-over-year to 31,436, while its retained premiums and fees increased 46% year-over-year to $65 million. Its adjusted gross profit increased 31% year-over-year to $30 million.

For its fiscal year 2022, analysts expect DOMA’s EPS and revenue to increase 55.6% and 22.5% year-over-year, respectively.

Wall Street analysts expect the stock to hit $14.50 in the near term, which indicates a potential 80.6% upside.

Z shares were trading at $97.94 per share on Thursday morning, down $2.02 (-2.02%). Year-to-date, Z has declined -24.55%, versus a 20.18% rise in the benchmark S&P 500 index during the same period.

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.

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