How low can the housing market go? Not much, according to Redfin chief executive officer Glenn Kelman.
Kelman referred to the market as a “slow-building disaster” in an interview with CNBC’s “Squawk on the Street,” citing affordability’s seat at a low point and Federal Reserve policy’s lean into high interest rates, helping spike rates for 30-year mortgages up to an average of 7.51 percent.
The “sales volume cramp” is likely here to stay because of mortgage rates more than double those from the early days of the pandemic and stubbornly high home prices, the Redfin chief said. Kelman’s comments come shortly after the most recent S&P CoreLogic Case-Shiller pricing index showed home prices had turned away from a pattern of decline seen earlier this year to hit a record high in July.
Kelman noted that “the only people moving are the ones that absolutely have to,” forced to relocate because of marriage, family or work reasons. Despite this, Kelman said he thinks the end of the existing home sales drought is near.
“The only relief is that it can’t go much lower,” Kelman said.
Kelman said Redfin was focused on survival in current conditions, as opposed to long-term planning.
“Remember when Rambo was asked, ‘Rambo, how would you live?’ and he says, ‘Day by day’? That’s how we’re planning this business,” Kelman said.
He also said he believes the company could still turn a profit in this market — as long as it reduces costs and looks to grain ground among its residential competitors.
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“There’s no free lunch here; we have to take someone else’s lunch to be able to grow, because we are in a shrinking market and we feel poised to take a significant share of the next six to nine months,” Kelman said.
Kelman added that he felt “ashamed” of having to lay off employees, but that hasn’t stopped him from doing it repeatedly in recent months. April brought the third wave of layoffs at Redfin over the course of a year, when 201 employees of the Seattle-based brokerage lost their jobs.
— Holden Walter-Warner