Shares of Redfin (RDFN -1.50%) fell on Wednesday after the real estate services company released some alarming housing data. As of 12:33 p.m. ET, Redfin's stock price was down more than 7%.
Soaring mortgage rates drove home listings and sales sharply lower in September, according to Redfin. Home sales plummeted 25% year over year, while new listings plunged 22%. These were the largest declines on record, other than those during the early stages of the pandemic.
"The U.S. housing market is at another standstill," Redfin economics research lead Chen Zhao said in a press release.
Typically, housing prices fall when mortgage rates surge, as higher interest costs make owning a home less affordable. But Zhao said home prices are being "propped up by inflation" and low inventory levels. Redfin noted that although the median home sale price was down 0.5% sequentially in September, it was still up 8% year over year.
"Many Americans are staying put because they already relocated and scored a rock-bottom mortgage rate during the pandemic, so they have little incentive to move today," Zhao said.
Unfortunately, economic trends suggest the housing market will remain under pressure in the coming months.
"With inflation still rampant, the Federal Reserve will likely continue hiking interest rates," Zhao said. "That means we may not see high mortgage rates -- the primary killer of housing demand -- decline until early to mid-2023."
That's concerning, as Redfin's core brokerage business relies on commissions from home sales to generate revenue. Fewer transactions mean lower profits -- and likely mounting losses -- for the struggling real estate services provider.