Redfin CEO Glenn Kelman: The housing market is looking up, but 'we're not out of the woods yet'

By Aarthi Swaminathan

Redfin CEO Glenn Kelman talks to MarketWatch ahead of spring home-buying season

With newly listed homes hitting the market, the spring home-buying season is poised to be a lot brisker than it was a year ago. But one real-estate exec isn't ready to call it a recovery just yet.

New listings were up nearly 15% in February compared with a year ago, according to a report from real-estate brokerage Redfin (RDFN). That's the largest annual gain since May 2021.

Zillow (Z) reported that new listings of resale homes were up 21% in February compared with last year, setting home buyers up for a better experience with more options this spring.

But the market is only "slightly thawing" as listings rise, Redfin CEO Glenn Kelman told MarketWatch in an interview.

Even if February's data - which show a meaningful increase - indicate that more homes are being listed this year, "we just can't say we're out of the woods yet," Kelman said.

Kelman's optimism is also more muted given the false start the housing market saw at this time last year. Home sales cratered to a 29-year low in 2023 as mortgage rates rose to 8% and demand dried up.

Once bitten, twice shy

Back in early 2023, a dynamic similar to the current one started to play out. Rates dipped to the low 6% range, bringing buyers back. Freddie Mac data shows that the 30-year mortgage rate fell to 6.09% in early February 2023.

Some people bought homes during this dip, Kelman said, but when rates went back up, buyers who were still looking pulled back.

Now people seem "battle-hardened," he added. Buyers are facing volatility as mortgage rates bounce around, and the lack of a clear view into when rates will fall is affecting their behavior.

"So if you're wondering why my optimism is so cautious, it's just because I've been hurt before," Kelman said. "We had a great start in 2023 and just a dreadful end. And that could happen again."

Housing supply is ramping up in the Sun Belt

But based on the data, the market is looking up as supply improves.

New listings rose the fastest from a year ago in Dallas; in Austin, Texas; and in Charleston, S.C., Redfin data show. Home builders have been active in the Sun Belt, which may be part of the reason for the increase in new listings.

Condo owners in Florida who are facing higher homeowners association fees and insurance costs are also putting their units on the market, contributing to supply, Redfin said.

The rise in listings suggests that the so-called lock-in effect may be easing, as homeowners who have ultralow mortgage rates become more willing to give them up as their life circumstances require them to move.

Buyers are adjusting to new normal of 7% rates

Demand is also looking up, as some buyers adjust to 7% mortgage rates.

The 30-year mortgage rate was averaging 6.84%, according to Freddie Mac, as of March 14. The median home price was $412,778, Redfin said.

But as demand picks up, bidding wars are making a comeback. As MarketWatch reported previously, some buyers were again dealing with multiple competing offers as they look for a house.

And some buyers are looking to get ahead of the competition, which is expected to heat up if the mortgage rates fall, pending a rate cut by the Federal Reserve.

"I recently listed an estate-sale fixer-upper for $550,000 and it got 14 offers, sold for $75,000 over the asking price, and the buyer waived every contingency," David Palmer, a Seattle-based Redfin agent, said in Redfin's report.

Among the biggest winners at the moment are Americans over the age of 40 who own their home, have a rock-bottom mortgage rate of 2% or 3% and are seeing significant appreciation of their home value, Kelman said.

"They can rent it out, they can borrow against it - they're the ones who win, and that's the reason why we have a supply crisis," he added.

Some of these homeowners are able to finance their next home with cash, beating out millennial buyers who need a mortgage.

The share of all-cash buyers rose to a third of home sales in January, according to the National Association of Realtors. The last time the share was that high was a decade ago, in June 2014.

Only 6% of first-time buyers made an all-cash offer in 2023, versus 26% of repeat primary-home buyers.

American dream of owning a home is not dead

With affordability a challenge for aspiring homeowners, a recent poll found that renters believe the American dream of owning a home is dead.

"I never thought the American dream could face such incredible challenges," Kelman said. "I'm not willing to say that it's dead ... but I do think that it's under incredible pressure."

See also: What's in, what's out, and what to expect this spring home-buying season

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-Aarthi Swaminathan

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03-15-24 1626ET

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