The Federal Reserve Just Delivered Spectacular News for This Under-the-Radar Real Estate Stock | The Motley Fool

The U.S. Federal Reserve aggressively increased interest rates to a 20-year high in 2023, to fend off a surge in the rate of inflation. Consumers have since struggled under the weight of higher mortgage costs and less borrowing power, which has crippled the real estate market. In fact, U.S. existing home sales are currently hovering near a five-year low. Fortunately, the Fed is in the process of reversing its ultra-tight monetary policy. The central bank cut interest rates three times at the end of 2024, and it delivered its third cut of 2025 earlier this month. Its latest forecast points to further cuts in 2026, but it will take time for all of these policy adjustments to work their way through the economy. Douglas Elliman ( DOUG +0.20%) is one of America's largest residential real estate brokerage companies, so the sluggish housing market has been a headwind for its business. However, its stock is trading at an attractive valuation right now, so this could be a great opportunity for investors to buy with interest rates trending lower. Image source: Getty Images. A leader in the luxury real estate market Douglas Elliman currently employs 6,600 agents in 113 offices across the U.S., with a focus on high-end luxury markets in New York, Texas, California, Florida, and more. The company was founded in 1911, so it has more than a century worth of experience when it comes to navigating housing market downturns. Despite challenging conditions, Douglas Elliman sold $30.1 billion worth of real estate during the first three quarters of 2025 (ended Sept. 30), so it will almost certainly surpass its 2024 sales total of $36.1 billion by the time this year is over. As I mentioned earlier, U.S. existing home sales are near a five-year low. Plus, according to Redfin, there were 528,769 more sellers than buyers during October, which was a record high. It's hard for brokers to deliver sales in this environment, especially at favorable prices, so Douglas Elliman is doing exceptionally well given the circumstances. US Existing Home Sales data by YCharts As the positive effects of interest rate cuts flow through the economy, buyers should start to return to the market. The Fed's latest quarterly Summary of Economic Projections report, which was issued on Dec. 10, showed that the majority of Federal Open Market Committee ( FOMC ) members are in favor of even lower interest rates in 2026. That's good news for would-be homebuyers, so brokerage firms like Douglas Elliman should also reap the benefits. Growing revenue in tough conditions On the back of its higher sales, Douglas Elliman's revenue grew by 5% year over year to $787.6 million in the first three quarters of 2025. The company also carefully managed its costs during the period, resulting in $2.9 million in adjusted earnings before interest, tax, depreciation, and amortization ( EBITDA ). That was a positive swing from the $12.4 million adjusted EBITDA loss it generated in the year-ago period. In October, Douglas Elliman also announced...

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