What happened
Shares of Redfin (RDFN 0.57%), the online real estate brokerage, were moving higher today as investors reacted positively to the Federal Reserve's rate hike announcement yesterday -- especially to the central bank's forecast that it would only issue one more 25-basis-point rate hike for the rest of the year.
As a real estate brokerage, Redfin is especially sensitive to interest rates, since they have a direct impact on mortgage rates. The stock jumped 11.1% as of 1:41 p.m. ET, while the Nasdaq had gained 1.7%.
So what
Yields on the 10-year Treasury note, seen as a benchmark for mortgage rates, have fallen more than 2% since the Fed announced its rate hike decision yesterday. Mortgage rates also fell on the news, with the 30-year fixed rate dipping 25 basis points to 5.875%.
Investors seemed to be encouraged by the Fed's "dot plot" forecast, which indicated that most of the central bankers expect just one more 25-basis-point rate hike this year, showing that the Fed is nearly done raising rates.
With the Fed's rate hikes nearly over, that should mean that there's a ceiling on mortgage rates moving higher, which is good news for Redfin, as higher rates have helped cool off the housing market following the pandemic-era boom.
Now what
Redfin stock collapsed last year as the housing boom fizzled out and transactions slowed to a crawl, as Americans who had taken advantage of low interest rates are reluctant to sell their homes as 30-year-fixed mortgage rates jumped from around 3% around a year ago to as high as 7%. As a result of the housing market slowdown, Redfin announced two rounds of layoffs last year and pulled the plug on its Redfin Now home-flipping business.
With just one more rate hike remaining, according to the Fed's latest forecast, the worst should be over for Redfin. While it will still take time for the business to recover, that news was enough to push the real estate stock higher today, considering how far the stock had already fallen.
