For years, the number of available homes in hot markets like Seattle, Portland and San Francisco has been virtually zero, but in recent months that has changed. More houses are on the market, and one of the main reasons for that is frustrated buyers unwilling to pay increasingly skyrocketing prices.
This isn’t a huge problem now, as the housing market tends to slow toward the end of the year. But if the trend holds into next spring — the busiest time of year in real estate — some long-term consequences could be on the horizon, Redfin CEO Glenn Kelman said at the 2018 GeekWire Summit.
“If next spring the buyers don’t come back in force willing to pay those prices, this is a change in the U.S. economy,” Kelman said.
There are a lot of tailwinds in the economy, from a soaring stock market to high levels of consumer confidence. But any major hiccup — Kelman named a trade war as a possibility — would first impact the housing market.
Kelman has warned about problems with the housing market in the past. He sounded off on the lack of development caused by restrictive zoning and shared early signs of a slowdown.
These warnings come as Redfin, as well as competitors Zillow, Offerpad, Open Door and others wade deeper into buying and selling houses themselves. Redfin has steadily increased its commitment to Redfin Now, taking the experiment tag off the program earlier this year, making buying and selling a permanent part of the company’s business.
Kelman said “conditions right now are perfect” for Redfin Now. It remains a seller’s market and businesses have so much more access to loans than individuals do.
That said, Kelman acknowledged the risk Redfin and others are taking expanding home buying operations in the face of a potential slowdown.
After warning of a slowdown on an earnings call, Kelman said he “did walk down the hall to the Redfin Now team and say ‘take it easy on the number of houses we buy because we could end up unable to sell them.’”
But clearly Kelman and leaders of his competitors see it as a risk worth taking. Redfin’s goal is to change the industry. And while tech improvements have made a lot of difference, the fundamental problem in U.S. real estate remains unsolved: it just costs too much.
“We realized that if really we wanted to change real estate, we have to be the listing agent,” Kelman said. “Asking other brokers to change how they do business when it’s their listing is hard, but another step would be not just listing the property but owning the property.”