In his newest CNBC look, Redfin CEO Glenn Kelman talked about mortgage charges, the lock-in impact, and the way buyer-broker compensation adjustments are already impacting market dynamics.
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Redfin CEO Glenn Kelman has learn the tea leaves, and so they’re pointing to a sturdy 2025 housing market.
Glenn Kelman | Credit score: Redfin
“We saw an improvement at long last. We had seen interest rates fall in August and homebuyers had almost no reaction because they were waiting for the Federal Reserve to cut rates,” he mentioned throughout his newest look on CNBC Cash Movers. “That finally happened and now many people who had been on the fence are coming back into the market.”
Kelman mentioned the Federal Reserve’s Sept. 18 determination to chop the federal funds price by half a share level has improved shopper sentiment, regardless of charges steadily ticking up from the 2024 low of 6.03 p.c on Sept. 17. Nonetheless, buy functions have been on the upswing in comparison with the earlier month — a little bit of momentum he expects to proceed into 2025.
“Well, already we’re seeing more people come off the sideline. So homebuying demand is up about 10 percent. Purchase applications are up about 10 percent,” he mentioned. “There’s been a market increase and every time rates come down further we’ll see more. This rate cut was probably too late in the season to have a major impact on 2024, but I think in 2025 many homebuyers are going to say game on.”
As mortgage charges inch towards extra favorable ranges, Kelman mentioned the market nonetheless has a big stock situation. Current-home stock will proceed to be stifled, he mentioned, as owners resist letting go of their mortgage loans with 2 p.c to three p.c rates of interest.
“On that front, I don’t expect to see much progress. We’re talking to many people who were rate-locked. They got a mortgage at three percent or three and a half percent a few years ago and they still can’t afford to buy their own home,” he mentioned. “Two-and-a-half percent of American homes changed hands in the past 12 months which is a 30-year low.”
Kelman mentioned existing-home gross sales may prime out at 4.5 million this yr, however it’ll be some time earlier than the market reaches 5 or 6 million gross sales once more because of the lock-in impact amongst owners.
“I think it can be medium good, but as I said it can’t be great because there’s still so many homes on the sidelines there’s not going to be a rush to list properties,” he mentioned of the spring 2025 market. “Usually when we go through a housing market correction, we correct the problems that we had.”
“So in 2008 there were too many people underwater on their mortgage and then we saw a wave of foreclosures and short sales, but this time the inventory shortage hasn’t been addressed and I think it’s going to be a long-term problem,” he added.
Past mortgage charges and stock ranges, Kelman mentioned the current adjustments to buyer-broker compensation and written settlement procedures are starting to affect the market.
“There are places where there hasn’t been much change at all. If you go to North Carolina or New Jersey, almost all homebuyers’ agents are being paid about 3 percent,” he mentioned. “But in other markets, like San Francisco or Boston, there are significant negotiations taking place.”
“Part of it is that homes are just more expensive there, and, so, people are asking their agent for a better deal,” he added.
He mentioned negotiations on buyer-broker compensation will possible escalate into the spring, as market tailwinds encourage extra shoppers to enter the market.
“We’re going to see more activity in the spring; that’s when I expect more bidding wars and that’s when I expect more pressure on fees,” he mentioned. “Right now we’re just going through this trial period, and in some places, there’s negotiation; in some places, there isn’t much.”
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