Housing has hit rock bottom, says Redfin CEO Glenn Kelman

Redfin reporting a revenue beat for the quarter, but highlighting deteriorating market conditions. CEO Glenn Kelman joins us now to unpack it. Glenn, welcome. Good to see you. Good to see you again. How you been doing all right, trying to trying to figure out what is going on in the housing market. Glenn, you say market conditions got worse, but Redfin got better. What’s happening out there? Well, Redcon got better because we’re taking share. The problem is that the size of the market is probably getting smaller. So housing has just hit rock bottom. About 4 million people are going to move this year. That is the lowest number that we’ve seen in many, many years. And it’s just because interest rates have been so persistently high. I think some home buyers 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 because they have their baby and there’s no space in the house. But still the overall economic conditions for buying a house are rough. ex-husband that is so Glenn it’s hard to it’s hard to see it because we’ve seen prices stay elevated and keep rising and we’ve seen home builders do really well because of this this crazy low inventory. So where do you think it all shakes out at some point is there going to be pressure on the on prices. Well, we’re starting to see that for the first time in Texas and Florida, states that are really easy to build houses in. And 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. So the most encouraging sign at the beginning of this year was that we finally saw more inventory hitting the market. That has started to slow as interest rates have risen because people aren’t going to leave their old place when it also entails leaving their old mortgage. You know, Glenn, I, I when I hear this and obviously I, I know it to be the case, I do wonder what I mean. I can remember a period, I guess it’s a long time ago in the late 90s where rates were roughly similar levels and the housing market was a lot stronger. So what what happened? Why the inability to adjust to these higher rates in a way that would at least promote more than what is a recent low in terms of actual home sales? Well, the issue is that the correction hasn’t been a correction. Prices are up 5% and that’s because interest rates rose so fast this time and there hasn’t been a recession. So the soft landing has been good for America overall, good obviously for the economy, but it’s been bad for the housing market because it’s kept rates high. And so that’s why there isn’t more inventory reaching the market and that’s why homes haven’t become more affordable. Normally in a market like 2008, you see prices come down 30 to 50% and suddenly buyers are back in the game. But this time prices are still really high and especially first time home buyers are shut out. Millennials have been waiting a long time to buy a house and they just can’t get a break. Meantime, the Fed chair really went off on the the notion of new rents and that they’re down eight straight months and that eventually will feed into shelter, even though the lag is a lot longer than a lot of people have expected. Do you think that’s going to start to show up in shelter OER some, but one reason inflation has been so persistent is because housing is such a large component of inflation, not just purchase homes but also rents. And so we see some softness there, but probably not enough to really bring rates down. Obviously the rest of the economy is starting to soften. The jobs report wasn’t that strong. If you look at some of the earnings reports coming out now, they haven’t been that strong. So that’s probably why mortgage rates have been coming down over the past couple of weeks, even though the main signal is going to come on May 15th with the latest inflation print. I highlighted some comments from Neel Kashkari, the Minneapolis Fed president, earlier, Glenn. He said the strength of the housing market and some of the stalled progress on inflation means monetary policy might not be as tight as the Fed thinks it is. It sounds like you totally disagree. I don’t totally disagree. I’m just trying not to count my chickens before they hatch. We’ve had our hearts broken before where we thought we might get lower rates later in the year. Redfin isn’t betting on that right now. The reason that we’re so confident about our own prospects is because we have to make our own way. And so maybe I’m just being cautious because 2023 was such a disappointment where it started off gangbusters and then rates went up and then they went up again later in the summer. So we just have to be careful here.