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A day after announcing his company’s first-quarter earnings results, Redfin CEO Glenn Kelman appeared on CNBC’s “Squawk on the Street” to talk about home sales, mortgage rates, sticky inflation and the potential trends that could emerge as the housing market goes through an uneven recovery.
Glenn Kelman
“I’m just trying not to count my chickens before they hatch,” he said. “We’ve had our hearts broken before where we thought we might get lower rates later in the year.
“Maybe I’m just being cautious because 2023 was such a disappointment where it started off like gangbusters, and then rates went up, and then they went up again later in the summer,” he added. “We just have to be careful here.”
Kelman said he expects 4 million people to move this year, which would put 2024 on par with 2023 in terms of existing-home sales. He said people who move this year will do so because they must, due to work or familial circumstances.
“Interest rates have been so persistently high,” he said. “I think some homebuyers put off their plans in 2023, and they’re less likely to do so in 2024 just because they’re going crazy living with their ex-wife and there’s no space in the house. But still, the overall economic conditions for buying a house are rough.”
For homebuyers who decide to enter the fray, Southern markets offer the greatest opportunities thanks to more robust housing starts and completions. Meanwhile, buyers in New York and California will have tougher luck as many of the most popular markets have reached the limits of urban sprawl, and count on existing-home owners to beef up inventory.
“We’re starting to see [some price pressure] for the first time in Texas and Florida, states that are really easy to build houses,” he said. “We expect that to continue in other red states where there has been more new construction, but we still have a bottleneck in places like California and New York where there just aren’t enough homes for sale.”
Kelman said the key to repairing stagnant inventory levels lies in getting control of mortgage rate growth. Mortgage rates have eased over the past week; however, a further decline in rates and home prices will be needed to spark new life into the market.
“The issue is that the correction hasn’t been a correction. [Home] prices are up 5 percent, and that’s because interest rates rose so fast this time, and there hasn’t been a recession,” he said. “The [Federal Reserve’s] soft landing has been good for America’s economy overall, but it’s been bad for the housing market because it’s kept rates high.”
“That’s why there isn’t more inventory reaching the market, and that’s why homes haven’t become more affordable,” he added. “Normally in a market like 2008, you see prices come down 30 [percent] to 50 percent and suddenly buyers are back in the game. But this time, prices are still really high.”
Kelman said a tough housing landscape doesn’t scare Redfin, which saw its first-quarter revenue grow 5 percent year over year to $225.5 million — $7 million above analyst expectations.
The company still needs to control its net losses; however, investments in several successful initiatives have left Kelman feeling confident. A $9.25 million settlement for the Gibson buyer-broker commission lawsuit adds to that confidence, as it allows the company to “[remove] uncertainty” and focus on a two-fold mission to gain market share as a brokerage and portal.
“Redfin isn’t betting on [a market turnaround] right now,” he said. “The reason that we’re so confident about our own prospects is because we have to make our own way.”
