The housing market has hit ‘rock bottom’ and the sales slump will last a long time, Redfin CEO says

Redfin

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  • The housing market cannot get a lot worse from right here, in response to Redfin CEO Glenn Kelman.

  • Excessive mortgage charges and excessive costs have crushed affordability for consumers.

  • The market is in a freeze and the gross sales slowdown that may final for a “very long time,” Kelman warned.

The one good factor proper now concerning the US housing market is that it might’t get a lot worse from right here, in response to Redfin CEO Glenn Kelman.

The pinnacle of the actual property itemizing website pointed to powerful market situations over the previous yr, with affordability plunging to an all-time-low, in response to Goldman Sachs’ housing affordability gauge.

That is the fault of excessive mortgage charges, which have raised the price of borrowing for potential homebuyers, whereas additionally discouraging potential sellers from itemizing their houses. That is exacerbated the provision scarcity and pushed up house costs at the same time as demand falls resulting from greater charges.

The median gross sales value for a single-family house inched again nearer to its all-time-high final month, clocking in at $420,846 in August. In the meantime, mortgage charges have stayed stubbornly above 7%.

“It has been a slow-building catastrophe,” Kelman mentioned in an interview with CNBC on Tuesday. “The housing market is simply taking a beating as a result of affordability is at a four-decade low.”

Current house gross sales have plunged to a seasonally adjusted price of round 4 million a yr, down from round 6.6 million a yr in late 2020, in response to the Nationwide Affiliation of Realtors. And the small quantity of houses which were hitting the market are largely from owners who’re promoting out of necessity, resulting from occasions like marriage or job modifications.

That differs from earlier housing slowdowns, the place owners have been compelled to promote their properties resulting from foreclosures danger.

“The one people who find themselves shifting are those who completely need to,” Kelman added. “I would not name {that a} Goldilocks state of affairs, I might name that all-time low. However that is the place we’re proper now, and the one reduction is that it might’t go a lot decrease.

The gross sales slowdown is sure to final “an extended, very long time,” Kelman warned, as specialists say affordability will not enhance till mortgage charges dial again. However that is unlikely to occur over the subsequent yr, with central bankers conserving a hawkish eye on inflation,

Fed officers raised rates of interest aggressively over the previous 18 months to tame excessive costs, a transfer that is helped push mortgage charges as much as two-decade highs. Markets are pricing in an 44% probability rates of interest will keep greater than 5% by the top of 2024, per the CME FedWatch software. In the meantime, Redfin expects the 30-year mortgage price to ease to simply round 6% by the top of 2023.

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