Real estate technology company Opendoor Technologies (OPEN 3.77%) stock dropped 32% in December, according to data from S&P Global Market Intelligence. Mortgage rates went back up after receding earlier in the year, and the market became more pessimistic about the real estate industry again.

Challenges in real estate mean challenges for Opendoor

Opendoor operates a digital real estate platform and iBuying business. Its core business is buying homes and reselling them, a capital-intensive business that's extremely sensitive to interest rate movements. High interest rates lead to pressured home sales, since few people want to venture into new homes when mortgage rates are high. In some cases, it could double the price of the home. Fewer people buying new homes also means fewer people selling, limiting inventory available for Opendoor to purchase.

There was a glimmer of hope when the Federal Reserve cut interest rates back in September and mortgage rates looked to be beginning to fall. Opendoor stock jumped 34% in November, when things looked to be moving in the right direction. But the trend reversed course in November and December, and the median home price continues to climb. At its latest meeting, the Federal Reserve said it will cut rates slower than it had originally planned, and that will continue to weigh on Opendoor's performance.

Opendoor is making some progress, but it's still losing money, and its performance is well below what it was before interest rates were raised.

The future looks bright, but far off

Opendoor's digital platform, which relies on data and makes it easy to buy and sell, is an attractive model for buyers and sellers of homes. The company's limited track record indicates that customers like it, and given better circumstances, it could be a game-changer for the industry.

The business should improve as soon as the market does. In the meantime, it's making efforts to become more efficient and have a rich inventory ready for buyers. It's doing better year over year: Revenue increased 41% over last year in the third quarter, it sold 35% more homes, and it ended the quarter with a 64% increase in inventory balance. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and net loss both improved over last year.

The market isn't warming to Opendoor stock, which trades at a dirt cheap price-to-sales ratio of 0.2, its lowest over the past year. It clearly sees Opendoor as a huge risk right now, but risk-tolerant investors might see an opportunity here.