Housing demand remains low but inventory is even lower, says Redfin CEO

Housing Demand Remains Low, but Inventory Is Even Lower, According to Redfin CEO - Redfinn data shows only 1% of homes changed hands this year, the lowest share in nearly a decade. - The home builder index of confidence is up, but demand is low, and inventory is even lower, leading to a competitive market. - High mortgage rates are a concern, but adjustable rate mortgages may offer some relief in the next couple of years. - Bidding wars are back, driven by low inventory, despite high mortgage rates. - Buyers are sensitive to interest rate changes, leading to increased demand even with small rate drops. - Cash buyers are more common, but many people are still borrowing to purchase homes. - The housing market is facing a crunch due to low demand and limited inventory, impacting sales volume. - The wave of pandemic-driven migration to areas like Austin and the Southeast may see some reversion to the mean, affecting rental prices and migration numbers. - Rental prices are slowly decreasing in some areas, while strong demand continues in states like Arizona and Florida. - Lower tax places are experiencing a long-term trend of increased demand for housing. - Prices in the purchase market are expected to remain relatively stable, but rents may decline due to higher vacancies and increased apartment supply. Redfinn CEO, Glenn Kelman, discussed these housing market trends during an interview. He acknowledged the confusion surrounding the market's behavior, with a mix of warming up indicators but missed starts and permits. Despite the slight increase in the home builder index of confidence for seven straight months, the low inventory remains a significant concern. This scarcity of available homes has led to bidding wars even in a market with high mortgage rates. The issue of high mortgage rates was discussed, and Glenn Kelman explained that the problem may persist as long as rates stay high. However, he also pointed out that about a third of the market has adjustable rate mortgages, which will reset in the next couple of years, potentially leading to increased movement and home sales. Regarding the demographic aspect, Kelman mentioned that millennials still aspire to buy homes, despite the Supreme Court's decision on student loan repayments causing some frustration. As millennials seek a place to live, the demand for homes continues, exacerbating the problem of limited inventory. The discussion then turned to the prevalence of bidding wars and buyers paying over asking prices in a market with high mortgage rates. Kelman emphasized that low inventory is the primary driver of these competitive situations. The list price has even been lower than the final selling price for two consecutive months, a rare occurrence in a market with rates near 7%. Buyers are sensitive to even minor rate changes, leading to increased demand. On the topic of cash buyers, Kelman noted that while there is a higher proportion of people using cash than before, many buyers are still borrowing to finance their home purchases. The housing market's overall situation was summed up as being at a bottom level with low demand and even lower inventory. The sales volume is affected, leading to challenges for companies like Redfinn. However, for buyers, finding a place to live is becoming increasingly difficult due to the limited number of homes available for sale. Regarding the pandemic-driven migration patterns, Kelman mentioned seeing some reversion to the mean, particularly in rental prices and migration numbers. While rental prices are slowly decreasing in some areas, states like Arizona and Florida continue to experience strong demand despite climate-related concerns. Looking ahead, Kelman predicts that prices in the purchase market will likely remain stable, but rents may decline due to increased vacancies and a surplus of apartment buildings. The housing market continues to present challenges for both buyers and sellers, with low inventory and high demand contributing to a competitive landscape. As the market dynamics evolve, it remains essential for industry players to adapt and respond to changing trends.

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