Redfin Corp (RDFN) shares took a significant hit, plunging 9.16% in trading, as the real estate company faces headwinds from a challenging housing market and received a neutral rating from a major financial institution.

The sharp decline comes as Redfin reported that demand for second homes in the U.S. has hit a seven-year low. According to the company's data, mortgage applications for second homes in 2024 fell to 86,604, marking a 5% decrease from the previous year and the lowest level since 2018. This downturn in the second home market could be impacting investor sentiment towards companies in the real estate sector.

Adding to the pressure, Redfin also reported that the median U.S. monthly housing payment reached an all-time high of $2,868 during the four weeks ending May 4. This record-high cost, coupled with broader economic uncertainty, is stunting the spring homebuying season. The combination of elevated home prices and high mortgage rates is creating affordability challenges for potential buyers, potentially limiting Redfin's growth prospects in the near term.

Furthermore, Citigroup maintained a neutral rating on Redfin stock, which may have contributed to the lack of investor enthusiasm. The neutral stance from a major financial institution could suggest limited upside potential for the stock in the current market conditions.