Glenn Kelman said Wednesday that supply shortages, once limited to places like San Francisco, have spread. And that means competition for homes will be intense this year.
Redfin CEO Glenn Kelman said Wednesday afternoon that the problem of extremely low housing inventory has spread to numerous markets in the U.S., and is setting up the coming months to be a period of intense competition among buyers.
“This is why Redfin has braced for the most intense season of bidding wars since at least the first half of 2018,” Kelman said.
The comments came during an earnings call in which Kelman discussed his company’s better-than-expected revenue haul last year. While commenting on the housing market, Kelman recalled hearing about a recent sale of a property in a “far-flung” area in Oregon. Ultimately, 30 buyers lined up trying to get the property.
“The property being fought over was a mobile home,” Kelman added.
The anecdote highlights the just how intense competition has become, including for properties that lie outside of conventionally desirable areas.
“Price pressure that used to be limited to a few cities like San Francisco or Portland is now widespread,” Kelman explained.
Kelman also said during the call that in the Seattle area, where Redfin is based, there is only a few weeks worth of inventory. In other parts of the country, inventory is down to a couple of months — far less than the six months that is conventionally seen as characterizing a balanced market. And these conditions are already being felt by buyers.
“The inventory shortage is pretty significant right now,” Kelman said. “Our buyers are really frustrated, and it’s early for them to feel that way.”
Aside from frustration, Kelman argued that inventory shortages create an array of other problems. Agents struggle to put together offers when there are major, competitive bidding wars and rapidly rising prices. Appraisers also “initially refuse to support higher offers.”
And some sellers become reluctant to move forward.
“In a frenzied market, they refuse to sell their new home without finding a new one to buy,” Kelman said.
Kelman went on to say that eventually the market will change and today’s lower interest rates will tick up. But he doesn’t expect that to happen in the near future.
“We think that the sellers market will last at least through the first half of 2020,” Kelman said.
Ultimately, this situation may be difficult for buyers, and Redfin does “want more inventory,” according to Kelman. But the executive also said that his company’s diversified business — Redfin employs agents, has an iBuying division, and has branched out into services such as mortgage, among other things — leave it poised to grow whatever the market does.
“I think the way to be prepared for different markets is to have different products,” he said.