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.
Source Fool.com
