What happened
Life isn't easy for real estate companies these days, as rapidly rising interest rates threaten to put a real damper on their markets. This was a major factor behind Redfin's (RDFN -0.74%) slump on Thursday, which was only slightly less pronounced than the 1% fall of the S&P 500 index. A new research report produced by the company highlighted the perilous state of American real estate just now.
So what
Redfin has a research unit, which tends to be fairly sober and honest about the state of real estate in this country. Thursday afternoon that team released its latest take on the market, and although it didn't contain any revelations, it wasn't exactly grounds for optimism.
According to the data compiled by Redfin pundits, certain indicators of homebuying interest are showing notable declines. The company noted that the number of home tours has fallen by 7%, with mortgage purchase applications seeing a 13% decline.
More worryingly, Redfin found that homebuyers have lost 29% of their purchasing power due to those climbing interest rates. The company added that the average 30-year, fixed-rate mortgage's rate now stands at 6.66%, more than double the 2.65% seen as recently as the beginning of 2021.
Now what
Redfin quoted its deputy chief economist Taylor Marr as saying that "sellers are pulling back in this market, but buyers are pulling back even more."
Somewhat alarmingly, he added, "Home prices are holding steady for now. It will take a few months before the prices of closed sales start to reflect this shock to the market." That shock certainly won't land comfortably at Redfin and its real estate-slinging peers.
