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The luxury market is back.
That was Compass co-founder and CEO Robert Reffkin’s primary message during his latest appearance on CNBC’s “Squawk on the Street,” where he talked about home price trends, mortgage rates, and stock market ebbs and flows.
Robert Reffkin
“The seasonally adjusted annual rate of home sales was down 2 percent versus the prior month, but up 12 percent versus the low in November, where it was 3.7 million at a seasonally adjusted annual rate,” he said. “But what we’re seeing is the low end is slower than the high end. The million-dollar-plus home market increased to 44 percent in the month of April.”
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While homebuyers on the lower end of the market are beholden to mortgage rate fluctuations, Reffkin said homebuyers on the higher end of the market are more sensitive to stock market fluctuations.
“The stock market is at an all-time high,” he said. “You don’t need low mortgage rates if your stock portfolio is at an all-time high.”
As luxury buyers ride stock market highs, mortgage rates will need to drop below 6 percent to unlock pent-up demand among everyone else.
“You can ask any agent and they’ll basically say, ‘You give me a 5.999 [percent], and I’ll give you the pre-pandemic craze all over again,'” Reffkin said. “Anything with a five in it, we think, will make the market explode.”
“Now, if we can reach 6.5 [percent], we’ll make a very strong market,” he added. “I would say 6.5 [percent] would give you 4.7 [million] to 4.9 million homes sold.”
Despite a slower-than-average start to the spring market, Reffkin said he expects May and June to be more robust as rates slide to 7 percent. The change from 7.5 percent to 7 percent has been enough to move more sellers off the sidelines and boost inventory levels in most markets.
“We are now seeing more sellers than buyers. Sixteen percent more inventory has come on the market and 40 percent more in the million-dollar-plus home market,” he said. “But buyers are pushing back.”
Now more than ever, homebuyers are sensitive to pricing and will simply ignore overpriced listings until sellers adjust.
“Of the inventory on the market, 34 percent has a price drop. So sellers who are bringing their homes on the market during this period need to be aware of how buyers are pushing back,” he said. “If your home is well-priced in this environment, it will sell quickly.”
“But if it’s not, it’ll sit in the market,” he added. “Then you’re going to have a price drop.”
