Housing prices in these states will become 'more affordable,’ Redfin CEO says
FILE - A house for sale in the Aqualane Shores neighborhood of Naples, Florida, US, on Feb. 13, 2024. Photographer: Lisette Morales McCabe/Bloomberg via Getty Images
The Federal Reserve’s handling of rate cuts will play a key role in the affordability of housing this year, but according to one expert, certain U.S. states are already seeing "good" signs.
Redfin CEO Glenn Kelman on Monday discussed the state of the housing market and what the potentially "sticky" inflation data could mean for buyers and sellers.
"So, we saw the same phenomenon where rates started low in the first part of 2023, ticked up in the spring and then went higher in the summer," Kelman said during an appearance on FOX Business' "Cavuto: Coast to Coast."
Economists have predicted that mortgage rates will remain higher in 2024 and will only begin to fall once the Fed starts cutting rates. Even then, rates are unlikely to return to the lows seen during the pandemic.
"People have been putting off their homebuying plans for a long time, and so we are going to probably still have 4 million home sales this year, which is about as low as you can go, but it won't go lower," Kelman said.
Despite some hesitancy from potential buyers, Kelman suggested that people purchasing homes now are "going to get a better price than people who buy a year or two from now when rates come back down."
"People buying now are going to refinance later, but they're still going to have a less expensive house than folks who have been on the sidelines. So, I think the cash buyers who can afford to get into the market today, will be glad that they did," Kelman added.
Homes in these states likely to become 'more affordable'
Kelman also noted the shift in markets as potential buyers pull back from states like Texas and Florida, which were both popular moves during the pandemic.
The expert claimed that once prices come down in those states, people will "step back in."
"Both Florida and Texas were two of the first states to see price declines, and I wouldn't even say that's unhealthy. Normally, in a correction, prices come down. And that's what drives sales up," he said.
Kelman added that "the rest of the United States that really has a problem [is] where home prices have been persistently high."
"The fact that we're able to build more houses in states like Florida and Texas, where there's a better regulatory environment for new construction, that's a good sign. It means that homes are going to get more affordable and that people are going to keep moving there," he said.
However, Kelman noted that sellers and buyers are "always going to be sticky," given the uncertainty of the real estate industry.
"Buyers are looking at the next six months, the sellers are looking at what they could have gotten over the previous six months," Kelman stressed.
US home prices have surged 47% since start of 2020
A recent analysis by ResiClub of the Case-Shiller National Home Price Index showed that home prices have surged 47.1% since the start of 2020 – easily outstripping the gains seen in recent decades.
The analysis showed that home prices in the 1990s and 2010s grew a respective 30.1% and 44.7%.
Years of underbuilding fueled a shortage of homes in the country, a problem that was later exacerbated by the rapid rise in mortgage rates and expensive construction materials.
Higher mortgage rates over the past three years have also created a "golden handcuff" effect in the housing market. Sellers who locked in a record-low mortgage rate of 3% or less during the pandemic began have been reluctant to sell, limiting supply further and leaving few options for eager would-be buyers.
FOX Business and Megan Ziegler contributed to this story.