In an interview with CNBC on Wednesday, Redfin CEO Glenn Kelman laid out some of the variables that could begin to unlock home inventory in the coming years, including adjustable rate resets.
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On some level, everyone in real estate understands why a homeowner with a low monthly payment would be reluctant to sell right now: why leave a house with a rate below 4% to end up in a house with a rate close to 7%?
But in a few years, around a third of homeowners will no longer face this dilemma because the lower rates they have locked in are adjustable. And over time, those rates will rise — whether they like it or not, Redfin CEO Glenn Kelman said Wednesday in a new CNBC “Squawk on the Street” interview.
“There is relief in sight [for home inventory] simply because about a third of the market — 37.5% — has variable rate mortgages,” Kelman said. “So those are going to reset in the next two years. You will start to see people move.
Changing demographics will also put upward pressure on home sales over time, Kelman said.
“A lot of millennials still want to buy a house,” he said on the show. “I think they’re frustrated with the Supreme Court decision on student loan repayment. But they still have to find a place to live.
But Kelman doesn’t expect these changes to be sudden. And in the meantime, he said, the market continues to be mired in a low inventory environment that’s causing an odd mix of problems for buyers and sellers.
“There’s just very little demand and even less inventory, which has created a real crisis,” Kelman said. “The problem for us, of course, is the volume of sales. But for buyers, they’re still trying to find a place to live, and that’s hard to do because there are so few homes for sale.
Despite the lack of demand, a shortage of housing supply in the market continues to drive up prices in most parts of the country, Kelman said. This means that the relatively few buyers who remain in the market do not even benefit from the number of buyers who have given up.
Kelman said he doesn’t expect home prices to drop much in the future. Rent prices, he added, could be a different story.
“Vacancies are on the rise,” he said. “Builders have been very busy creating new apartment buildings for property management companies to fill. This has been a real challenge for them, because household formation does not happen as before. More people live in mom’s basement.
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