Why Redfin Stock Soared Today

Actions of Redfin (RDFN 19.42%) rose today in response to dovish remarks on interest rates from Federal Reserve Chairman Jerome Powell this morning at the annual Jackson Hole Economic Symposium.

Powell’s comments usually make the news, and the Fed chairman said the central bank was ready to cut interest rates, adding that “the time has come.”

This is a bullish sign for Redfin and other real estate stocks, as the housing market is very sensitive to interest rates. As a result, Redfin stock was up 16.6% at 10:36 a.m. ET.

Saved by the Fed

Like other real estate stocks, Redfin stock has soared during the pandemic in a hot housing market fueled by low mortgage rates as well as demand for second homes and larger spaces due to the pandemic.

However, as interest rates rose after the pandemic, the housing market cooled and Redfin stock fell, falling more than 90% from peak to trough.

When asked on a recent earnings call what the company would do if rates rose again, CEO Glenn Kelman said the company had built a more resilient model that could gain market share regardless of the direction of interest rates .

Where is Redfin stock going now?

There’s probably a lot of pent-up demand in the housing market due to the lock-in effect of low mortgage rates and slow home sales over the last couple of years, and Redfin should be able to take advantage of that with a lower interest rate. environment.

The company could also benefit from the new agreement by the National Association of Realtors, which is expected to reduce commissions for realtors.

One thing is clear. There’s plenty of upside for Redfin stock if interest rates fall. Redfin will have to capitalize on this opportunity, but investors seem confident that it can, based on the stock’s current rally.