What happened
Shares of Redfin (RDFN -3.56%) climbed 14% on Monday, following a steep decline in mortgage rates over the past week.
So what
The average rate on a 30-year fixed mortgage fell to 6.57% on Monday, down from a high of 7.05% on Wednesday, as reported by CNBC. The sizable decline coincided with a drop in the yields of U.S. Treasury notes in recent days.
Investors have sought shelter in defensive investments following a series of recent bank failures. U.S. Treasuries are widely considered to be among the safest investments in the world. When people rush to buy Treasuries, the bonds' prices rise, and their yields fall.
Moreover, some Wall Street firms now expect the Federal Reserve to slow its pace of interest rate hikes to reduce the pressure on the beleaguered banking industry. Investment bank Goldman Sachs, for one, thinks the Federal Reserve might even choose to pause rate hikes at its next meeting on March 22 in order to give the financial sector more time to stabilize.
Now what
Lower mortgage rates would be welcomed by home buyers -- and Redfin's shareowners. Lower interest rates help to make homes more affordable, which, in turn, tends to increase demand for houses and home-sale transactions.
As a provider of real estate brokerage services, Redfin would no doubt benefit from a stronger housing market. Investors betting on a further decline in mortgage rates and a corresponding boost to Redfin's sales and profits bid up its stock price today.
