What happened

Shares of Redfin (RDFN -3.22%), an online real estate brokerage, were pulling back today although there was no company-specific news. Instead, a combination of rising mortgage rates and a broader sell-off in the market seemed to be pushing the stock lower.

As of 11:44 a.m. ET, the stock is down 5.6%. At the same time, the Nasdaq is down 1.6%. 

So what

Redfin was one of the few stocks to slide yesterday as the market surprisingly surged even though September inflation was higher than expected. Continued growth in consumer prices, which were up 0.4% month over month and 8.2% year over year, make it more likely that the Federal Reserve will raise interest rates again, and mortgage rates surged to 7% as a result. 

According to Freddie Mac, the average for a 30-year fixed-rate mortgage touched 6.92% for the week ending Oct. 13, a 20-year high.

The housing market had already been cooling off after a boom during the pandemic, but rapidly rising mortgage rates could crush demand, making homes more expensive and making potential sellers reluctant to move.

That's bad news for Redfin, which relies on commissions from home sales transactions for much of its revenue.

What also weighed on the market today was a consumer sentiment report from the University of Michigan that showed concerns about inflation were increasing. The broad market turned sharply lower once that data came out. 

Now what

As a digital real estate brokerage, Redfin is at the mercy of the broader real estate market. The stock surged during the pandemic, like much of the real estate sector, but is now facing some stiff headwinds. The company even laid off 8% of its staff in June to adjust to the downturn.

While Redfin's digital-first approach to real estate still looks promising over the long term, if mortgage rates continue to rise, the stock could move even lower in the coming months.