When it comes to the quick pace of home price corrections, Redfin CEO Glenn Kelman is pointing the finger at an unlikely culprit: himself.
Kelman spoke to Fortune about the recent correction in the housing market, where home prices are declining for the first time in a decade. Kelman said the pivot was due to investors — including Redfin’s iBuyer business — pulling back from the market just as quickly as they came in during the pandemic’s early days.
“When the shiitake mushrooms hit the fan, you [investors] want to get out first,” Kelman said.
The Redfin chief elaborated, noting investors’ increase in inventory share prompted a faster correction, especially as strategies shifted. Kelman said when investors started marking down properties, neighborhood comps were driven down too.
“What we always told investors is that we would protect our balance sheet by acting quickly,” Kelman continued. “We don’t have hope as a strategy. We immediately started marking down things.”
Investors jumped into the housing market when it heated up during the pandemic, encouraged by low mortgage rates, high appreciation and rent increases that made turning homes into single-family rentals appealing.
Investors accounted for 20 percent of home purchases across 40 major metros in the first quarter, according to a report from Redfin. That marked a record for investors, who primarily focused on lower-priced homes.
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Investors can’t take all the credit for the market frenzy in recent years. The same factors pushed individual homebuyers, freed up by remote work to a wider array of markets and better equipped to stomach high prices with low mortgage rates.
Investors aren’t necessarily pulling out of the market, as some are scoring deals on homes from builders, which could speak to Kelman’s point. As traditional buyers increasingly find themselves on the sidelines, builders have been offering bulk discounts to investors to offload inventory.
U.S. home prices recorded a record slowdown in August, according to the lagged S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index. Prices grew by 13 percent year over year, down 2.6 percentage points from the previous month, the sharpest decline since the report’s origin 35 years ago.
— Holden Walter-Warner