Interest Rates and Real Estate: Why This Brokering Giant Is Cutting Staff

The real estate market has been on a tear over the past year, with U.S. home prices logging a 12-month gain of 20.5% as of March 31, according to the Case-Shiller National Home Price Index. Technology-backed real estate companies like Redfin (NASDAQ: RDFN) were among the biggest beneficiaries on the way up.

But that's all changing -- and quickly. The Federal Reserve is currently increasing interest rates at an aggressive pace in a bid to fight high inflation. At the beginning of January 2022, consumers were paying a fixed rate of 3.22% for a 30-year mortgage, but that has jumped to 5.23% as of this writing. 

The move is having a significant impact on the housing market already, with demand 17% below Redfin's expectations during May. The company is now laying off employees to compensate for the decline in sales, but that might not be its greatest threat right now.

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Source Fool.com