In June 2022, the Consumer Price Index (CPI) measure of inflation hit an annualized rate of 9.1%, which was the highest level in 40 years, and far above the U.S. Federal Reserve's target of 2%. To bring it down, the Fed aggressively hiked the federal funds rate from a historic low of 0.25% all the way to 5.50%.

The housing market has been a big casualty of that policy shift. Rising interest rates can reduce the borrowing capacity of the average homebuyer, which often leads to fewer sales. In fact, U.S. existing home sales came in at an annualized rate of 4.1 million units in May, which is 38% below the 2021 peak of 6.6 million units, when interest rates were sitting at record lows.

Real estate technology company Redfin (NASDAQ: RDFN) operates one of the largest brokerages in America, covering 98% of the entire geographic market. Unsurprisingly, its business cratered in the wake of soaring interest rates and slowing home sales, sending its stock down by 93% from its all-time high.

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Source Fool.com