What happened

Shares of online brokerage Redfin (RDFN -2.81%) traded nearly 9% higher as of 2:23 p.m. ET Friday after the company issued a report saying that homebuyer demand among early-stage buyers had surged recently.

So what

Specifically, homebuying applications are up for the fourth straight week and Redfin's Homebuyer Demand Index (HDI) hit its highest level last week since last May. The HDI measures how many people are asking to look at homes, as well as looking to talk to a Redfin agent about buying a home or actually making an offer.

However, despite more enthusiasm among early-stage buyers, Redfin still noted a challenging real estate market, which has been crushed over the last year by rapidly rising interest rates. For the month ending March 26, pending sales across the country had fallen 19% on a year-over-year basis, which is the largest drop in roughly two months. 

"Prices are still rising quickly in some places while they are down by double digits in big tech hubs, so it's important for prospective buyers to work with an expert local agent," Taylor Marr, Redfin's deputy chief economist, said in a statement. "One thing that's true almost everywhere: It's difficult to find a desirable, well-priced home for sale, so offer and negotiation strategies differ depending on where you're looking."

Now what

The rate on a 30-year fixed mortgage is still high at 6.32%, according to Freddie Mac, so it makes sense that homebuying activity, which is a big driver of revenue at brokerages like Redfin, is still at depressed levels.

If the Federal Reserve does soon pause its rate-hiking campaign, that would likely jump-start homebuying again, which could help Redfin's business.

But there still could be a recession on the horizon, which may depress home values, and the stock has already more than doubled in 2023, although is still down by more than 50% over the last year. Given the uncertainty and the fact that there still could be some difficult quarters ahead even if there isn't a recession, I would rate the stock as a hold right now.