Shares of Redfin (RDFN 8.94%) rose as the online real-estate brokerage benefited from continuing signs that the housing market could be at the early stages of a recovery, following an extended slump after the height of the pandemic.
Redfin said supply is improving in a report this morning, and RH, the home-furnishings company formerly known as Restoration Hardware, gave better-than-expected guidance for 2024, indicating that it was betting on a recovery in the housing market.
As of 11:27 a.m. ET, Redfin stock was up 8.8% and had gained as much as 10.5% on the day. Several of its peers also made solid gains, showing broader tailwinds in the real estate industry.
Is the housing market finally rebounding?
In a report this morning, Redfin said that new listings are up 15% over the last year, the biggest increase in three years, and the total number of homes for sale has risen by 6%, the biggest uptick in nearly a year.
In other words, supply is increasing in a housing market that has been desperate for increased supply as existing home sales have fallen to near-30-year lows.
Mortgage rates remain elevated, but the report, and last week’s existing home sales update that showed a 9.5% increase in February, indicate that the housing market seems to be adjusting to higher rates. Some homebuyers could also be planning to refinance as the Federal Reserve has forecast three rate cuts this year.
Additionally, RH’s guidance seems to have encouraged the broader housing market as the company seems optimistic that the worst of the headwinds in the sector have passed.
Will Redfin keep gaining?
Redfin stock plunged in the pandemic aftermath as the real estate market dried up, but it looks like a good candidate for a rebound as the housing market strengthens. As a brokerage, home transactions are its lifeblood, and the stock is likely to gain on further signs of an improving housing market.
Keep an eye on the Fed’s interest rate cuts as that could provide a significant boost for the stock later this year.
Jeremy Bowman has positions in RH and Redfin. The Motley Fool has positions in and recommends Redfin. The Motley Fool recommends RH and recommends the following options: short May 2024 $8 calls on Redfin. The Motley Fool has a disclosure policy.