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SEATTLE - Redfin (NASDAQ: RDFN), a technology-powered real estate brokerage with annual revenue of $1.04 billion, has released new reports indicating a continued softening of the U.S. housing market. According to InvestingPro data, the company’s stock has shown remarkable resilience with a 47.69% return over the past year, despite challenging market conditions. The company’s economists forecast that the median U.S. home-sale price will level off in the third quarter and decrease by 1% year-over-year by the fourth quarter. This projection comes as a significant change from the consistent year-over-year price increases seen since 2012, with the exception of a brief period in 2023.
The expected price decline is attributed to an increase in inventory coupled with a decrease in sales. April’s data showed a 1.1% year-over-year drop in existing home sales, reaching a six-month low. Homes that sold took an average of 40 days to close, five days longer than the previous year. Inventory rose by 16.7% year-over-year, reaching a five-year high, while new listings increased by 8.6%. InvestingPro analysis reveals that Redfin maintains a healthy liquidity position with a current ratio of 1.16, though the company faces profitability challenges in the current market environment.
The market’s downturn is a result of high mortgage rates, which have remained near 7% since early 2022, and broader economic instability. Redfin’s report suggests that buyers are now in a position to negotiate lower prices, particularly for homes that have been on the market for several weeks. Nearly half of sellers are offering concessions, approaching record levels.
Despite the national median home price expected to decline slightly, Redfin notes that prices may continue to rise in areas where demand remains strong, such as the Midwest and Northeast. The report also anticipates that homebuying will become more affordable as wages are expected to rise while prices fall.
On the mortgage front, Redfin predicts the weekly average mortgage rate to hover around 6.8% through the end of the year. The report mentions economic factors such as tariffs and the U.S. budget deficit as reasons for the high rates, with potential for a decrease if tariffs are further reduced.
Additionally, the report highlights an increase in home purchase cancellations. In April, approximately 56,000 U.S. home-purchase agreements were canceled, representing 14.3% of homes that went under contract, marking the second-highest April rate on record. With a beta of 2.5, Redfin’s stock typically experiences more pronounced movements compared to the broader market. For deeper insights into Redfin’s financial health and market position, including exclusive ProTips and comprehensive valuation metrics, investors can access the detailed Pro Research Report available on InvestingPro.
The reports indicate that cities like Atlanta, Orlando, and Tampa lead in canceled deals, while areas such as Nassau County, NY, and Boston have the lowest cancellation rates. The reports, which detail Redfin’s updated housing market forecast and April home purchase cancellations, are based on a press release statement from the company.
In other recent news, Redfin reported that U.S. home prices saw a minor decrease of 0.1% in April, marking the first drop since September 2022. The annual growth rate of home prices also slowed to 4.1%, down from 4.9% in March. Meanwhile, Redfin’s pending home sales in the U.S. declined by 3.4% year over year for the four weeks ending May 11, as potential buyers expressed concerns about the economy. The median U.S. asking rent decreased by 1% in April, with Austin experiencing the most significant decline at 9.6%. Redfin’s merger with Rocket Companies took a step forward as the Hart-Scott-Rodino Act waiting period expired, though it still awaits stockholder approval. Additionally, Redfin noted a significant drop in multifamily housing permits, with a 27.1% decrease from the pandemic building boom. This decline in construction permits could impact the rental market, with fewer options potentially leading to increased rents in the future.
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