The housing market has been the record-shattering domain of sellers since the start of the pandemic, but Redfin CEO Glenn Kelman believes a shift is coming.
Kelman told CNBC’s Closing Bell the housing market will look relatively similar to now in six months. He did have an encouraging prediction for buyers, though.
“Rates are probably six percent, inventories are increasing, sales volume will be somewhat fine, but prices are going to soften,” Kelman said.
Softening prices would be a big deal for potential buyers, who have contended with the rising cost of purchasing a home for months. The S&P CoreLogic Case-Shiller Index in February posted a 19.8 percent annual gain, the third-largest reading in 35 years.
Kelman said a market pinch was coming due in part to rising mortgage rates that shot up from historic lows in the wake of the pandemic. Homeowners locked into a lower mortgage rate likely wouldn’t be inclined to pay both higher prices and higher rates for their next homes, which could signal a retreat in the market.
“Buyers are saying ‘I’ve had enough’ and sellers are starting to freak out a little bit,” Kelman said.
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Kelman pointed to secondary markets where sellers would be most inclined to “freak out” as prices start to take a step back, including Tacoma, Washington, and Sacramento, as well as a more affordable market in Sarasota, Florida.
A lack of sellers has caused housing listing inventory to collapse across the country. A recent estimate by Realtor.com found the country is short by more than 5 million homes. The number of homes on the market dropped to a record low of 456,000 in March, according to Redfin data, a 50 percent decrease from two years ago.
Fannie Mae economists recently warned a “meaningful slowdown” in home sales could take root during the second and third quarters as a result of low inventory and rising mortgage rates. The economists forecasted 6.1 million total home sales this year, a reduction from previous estimates that would represent an 11.1 percent decline from last year.
The Redfin CEO also noted that home flipping has become a more dicey proposition for those looking to make a quick buck.
[CNBC] — Holden Walter-Warner