'Housing Prices Are Going To Stay Fairly High. It's Going to Be a Real Affordability Crisis' — According To Redfin CEO –Here's Why Nobody Is Selling Their Homes

The housing crunch in the United States has put potential sellers in a bind, leaving them reluctant to dive into a messy market flooded with high mortgage rates. 

Redfin CEO Glenn Kelman didn't mince words when highlighting the scarcity of housing inventory as one of the top concerns plaguing the market. He noted that political gridlock and financial challenges have hindered new construction and discouraged homeowners from listing their properties — especially when they have secured attractive 30-year fixed rates below 3%. As a result, there is a prevailing reluctance among homeowners to sell, while a significant number of people are eager to make a move.

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Delving into the quirks of the housing market correction, Kelman shed light on the contributing factors. At the forefront is a glaring shortage of available housing options. In 2020, when mortgage rates dipped below 3%, houses were snapped up in a frenzy. But now, with rates hovering around double that figure, homeowners are holding out for better days. But rates have stubbornly clung to the 6% to 7% range this year, deterring potential sellers. 

While these rates don't reach the astronomical heights of the 1980s when they skyrocketed past 18%, their sharp increase from the pandemic's record lows is worth noting. Kelman explained that most people can't fathom trading up from their current homes when they can't even afford the houses they bought a couple of years ago. This has resulted in a persistent shortage of housing inventory. As a consequence, when inventory is low, the demand-supply dynamics push prices to remain high. 

The latest monthly report from Redfin further illuminates the challenges faced by hopeful homeowners. Imagine this: At a mortgage rate of 6.79%, the highest recorded for the week ending June 1, the median monthly mortgage payment for a home at the listed price hit a record-breaking $2,651. That's a 14% increase compared to the previous year. 

To add to the woes, new listings for home sales have taken a nosedive, plunging 25% from the previous year to hit rock-bottom levels for early June. And if that's not enough, the total number of homes on the market has shrunk by 5% year over year, hitting the lowest level on record for the same period. Kelman, with a hint of sarcasm, predicts that this year's sales volume will be 4.2 million units, falling short of the usual 5 million benchmark.

All this scarcity has given a boost to housing prices, making potential buyers gulp at the numbers. Redfin reports that the median home price in the United States currently stands at $379,463, showing a decline of 1.6% compared to the previous year — just a minor dip in the grand scheme of things. But regions like Cincinnati, Miami and Milwaukee are witnessing price increases. 

The result? Younger generations who missed out on the low-rate bonanza are now facing Mount Everest-like obstacles on their path to homeownership. Kelman explained to CNBC, "Housing prices are going to stay fairly high. It's going to be a real affordability crisis for the millennial generation. Many people want to move, and they just can't do it because housing prices aren't going to come down in this market correction." 

The housing market is certainly not devoid of interest. Redfin's Homebuyer Demand Index, which measures requests for property tours and other services from the company's agents, is revving up close to its highest level in a year. It seems potential buyers are patiently biding their time, eagerly waiting for mortgage rates to dip or housing prices to take a tumble before they make their move. Who can blame them? It's always better to strike when the iron is hot and the rates are not.

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