Source: USA Today —
Soaring inflation in the U.S. has rocked the stock market for the last 12 months. The COVID-19 pandemic triggered the largest stimulus response in history from the Federal Reserve and the government during 2020 and 2021, and it’s almost impossible to avoid inflation when so much money is being pumped into the economy in a short time.
In June 2022, the core Consumer Price Index (CPI) soared to 9.1% on an annualized basis, which marked a 40-year high. Rising prices have been felt everywhere, from the grocery store to the gas pump, prompting the Fed to raise interest rates. This chain of events is placing further pressure on household finances.
But here’s the good news: It’s working.
CPI has declined every single month since the June peak, coming in at 6.5% in December. It’s still well above the Fed’s 2% target, but the rate is certainly trending in the right direction.
The real estate sector will be one of the biggest winners when inflation falls far enough for the Fed to stop raising interest rates. This is because consumers have a smaller borrowing capacity when rates are high, which serves as a cap on house prices.
It’s little surprise, then, that the recent declines in inflation have reignited the share prices of real estate technology companies Redfin(NASDAQ: RDFN) and Zillow Group (NASDAQ: Z)(NASDAQ: ZG). Here’s why both stocks are buys now.
Redfin is going back to basics
Redfin stock is off to a hot start to 2023, surging 42% in January so far. But context is important. The stock is still down an eye-watering 93% from its all-time high, so Redfin has a lot of work to do.
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