What happened
Not one but two gloomy internal pieces of research sent Redfin (RDFN -2.54%) stock hurtling downward on Monday. The online real estate marketplace operator's shares fell by nearly 11% as a result, a far steeper descent than even the sub-4% experienced by the weakening S&P 500 index on the day.
So what
Monday morning before market open, Redfin disseminated the findings of a homebuyer budget analysis produced by its researchers. The findings were sobering: In the three months ending April 30, the average such budget barely inched up, rising a weak 0.3% on a year-over-year basis. That was the lowest growth rate since June 2020, according to the real estate company's findings.
Redfin pointed out, sensibly, that a drop in home-buying budgets decline indicates that housing price growth has peaked and will soon fall.
As if that wasn't discouraging enough, the report comes one trading day after Redfin divulged the findings of a proprietary study on U.S. luxury home sales that was even more concerning.
The company said that such sales suffered a nearly 18% year-over-year drop in the same three-month stretch covered by the homebuyer budget analysis. This was a much sharper fall than the 5.4% of the non-luxury category, and is the steepest rate since the start of the coronavirus pandemic.
Now what
The real estate industry is facing numerous headwinds, including but certainly not limited to fears of inflation and future interest rate hikes, and concern about the fate of the wider economy. While neither of Redfin's analyses are particularly shocking or unexpected, they serve as stark illustrations of the challenges real estate companies are about to face in all aspects of their markets.
