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Redfin Corp. shares sank further Wednesday as the outlook for the housing market weakens.  

Shares of the digital real estate company fell as much as 16% Wednesday after Needham & Co Inc. analyst Bernie McTernan cut his housing market forecast for 2023 and lowered revenue estimates for Redfin and its peers

Zillow Group Inc. and

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Compass Inc. McTernan said in a note Wednesday that he is taking a more conservative approach to Redfins future market share gains, especially in 2024.

We think management has the right sense of urgency to get the cost structure in the right spot (layoffs, price increase) but it is unclear how much further there is to go on these measures, making market growth and market share gains increasingly important, McTernan wrote in a note.

Total volume for US home sales is expected to be down 18% this year from a year ago, according to McTernan, who previously forecast a 10% decline. 

Higher mortgage rates and home prices have driven housing affordability to 15-year lows, according to the note. Worsening macro conditions could put our estimates to the test, and worsen the affordability issues while housing supply remains tight, the note said. 

We think revenue growth is more necessary to drive Z and RDFN equity higher, and we think will be difficult with November and December existing home sales down YoY -36% and -37%, respectively, McTernan wrote. 

Among the digital real estate companies, McTernan said Compass remains top pick in the space, citing the companys recent cost-cutting efforts as helping. 

Compass rose as much as 2.9%, while Zillow was down as much as 7.8% Wednesday.