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Rising mortgage rates and home prices continue to plague the real estate market, chipping away at consumers’ hopes of ever achieving the American Dream.
Glenn Kelman
“If you look at the survey data, about 17 percent of people renting a home believe they’d never buy a house last year,” Redfin CEO Glenn Kelman said on Yahoo News’ Thursday Wealth! newscast. “But that number has zoomed up to 40 percent.”
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“First-time homebuyers are losing faith in the American Dream because more inventory has been slow to come to the market [and] rates have been really high,” he added. “If you are a homeowner who’s just trying to move up, you at least have the consolation that your current equity is worth more every year, but if you’re trying to get your foot into the door, that door is being slammed on your big toe.”
Kelman said home prices tend to decline as mortgage rates rise; however, that hasn’t been the case over the past 18 months. As a result, the median mortgage payment has ballooned by 13 percent, making almost every major market unaffordable for a household making a median income.
“In 2020, 2021 or 2022, it was easy to get into the market. You could move from California to the middle of the country and cut your mortgage payment in half,” he said. “Now, it’s gotten really hard because home prices are higher almost across the United States.”
A Redfin study published on Tuesday put numbers to Kelman’s comments. The typical homebuyer purchasing a median-priced home for $420,000 with a 7.1 percent mortgage rate has a monthly mortgage of $2,864 — that’s $650 more than what a buyer would’ve spent for the same house in 2019.
Kelman said getting more inventory and lower rates will be key to experiencing a market rebound. If the current uptick in inventory continues and the Federal Reserve follows through on cutting rates to 4.6 percent by the end of 2024, Kelman said the market could enter 2025 on a high note.
Until then, the Redfin CEO said he’s encouraging homebuyers who can afford current housing costs to stop biding their time and purchase a home that will fit their needs for at least the next five to 10 years.
“I know I’m going to sound like a real estate broker, but that’s what I am,” he said while bursting out into laughter. “My advice would be to date the rate and marry the house. You can refinance a house later.”
“We have seen multiple-offer bidding wars ease somewhat, so if you’re trying to get into a property right now, it’s a little easier to do that if you can afford the mortgage payment,” he added. “And six months from now, a year and a half from now, you can refinance that mortgage and still have a house that’s cheaper than what you would have paid in 2025 or 2026.”
