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On some level, everyone in real estate understands why a homeowner with a low monthly payment would be reluctant to sell right now: Why leave a home with a rate below 4 percent only to end up in a home with a rate near 7 percent?
But in a few years, one group of homeowners won’t be facing this dilemma because the lower rates they locked in are adjustable. And in time, those rates will be coming up — whether they like it or not, Redfin CEO Glenn Kelman said in a new CNBC’s “Squawk on the Street” interview Wednesday.
“Those [adjustable rates] are going to reset in the next couple of years,” Kelman said. “You’re going to start to see people move.”
People with adjustable-rate mortgages made up 3.3 percent of outstanding mortgage holders in the first quarter of 2023, and recent buyers have been even more likely to forego a fixed rate on their loan. Adjustable-rate loans made up 6.3 percent of mortgage applications in the same period, down from the previous quarter.
Demographic shifts will also apply upward pressure on home sales in time, Kelman said.
“Many millennials still want to buy a home,” he said on the program. “I think they’re frustrated by the Supreme Court decision on student loan repayments. But they’ve still got to find a place to live.”
But Kelman doesn’t expect these changes to be sudden. And in the meantime, he said, the market continues to be mired in a low-inventory environment that causes a strange mix of problems for buyers and sellers.
“There’s just very little demand and even less inventory, and so that’s created a real crunch,” Kelman said. “The problem for us, obviously, is sales volume. But for buyers, they’re still trying to find a place to live, and it’s hard to do because there’s so few homes for sale.”
Despite the lack of demand, a dearth of housing supply on the market continues to push prices up in most parts of the country, Kelman said. This means the relatively few homebuyers who remain on the market aren’t even benefiting from the number that have dropped out.
Kelman said he doesn’t expect home prices to fall much going forward. Rent prices, he added, could be a different story.
“Vacancies are up,” he said. “Builders have been very busy creating new apartment buildings that property management companies have to fill. It’s been a real challenge for them, because household formation isn’t happening the way it used to. More people are living in Mom’s basement.”
Correction: A previous version of this article misreported the share of outstanding mortgage holders with adjustable-rate loans. That rate was 3.3 percent in the first quarter of the year, according to Redfin.
