With mortgage rates at 20-year highs and and inventory at record lows, it’s slim pickings for U.S. homebuyers.
“It’s dry out there,” said Redfin chief economist Daryl Fairweather.
Many would-be buyers are getting priced out due to higher mortgage rates. Meanwhile, homeowners who locked in low rates over the past several years may be wary of moving.
“It’s a lack of affordability for buyers, and buyers have very few choices,” Fairweather said in an interview with GeekWire.
The slow market is hurting companies like Redfin. The Seattle-based online brokerage and real estate data hub has seen its stock fall by more than 40% this month.
The total number of homes for sale is down 18% year-over-year, and new listings are down 16%, according to the latest Redfin data.
“We’ve already hit rock bottom in terms of sales. There’s really no room to go but up,” said Fairweather. “But when we go up is the big question.”
Before joining Redfin in 2018, Fairweather worked at Amazon, studying behavioral economics related to employee engagement.
Her first economics job was at the Federal Reserve Bank of Boston during the foreclosure crisis. She would call people on the verge of foreclosure and survey them on how they got to that point.
We sat down with Fairweather this week in Seattle to chat about the housing market, when mortgage rates will come down (if ever), housing affordability, the impact of climate risk on home-purchasing decisions, and how AI could change real estate.
Her answers below were edited for brevity and clarity.
On the housing market
“We’ve been bouncing around at a low level of sales all year. We thought rates would go down by now, but they haven’t. They’re still going up. So it’s hard to say how likely it is that rates will fall. We think they will fall, but we’ve been saying that, and it might get delayed another year. There’s no way of really knowing that.”
On what impacts mortgage rates
“When you have inflation, you get higher interest rates because the Fed has to raise interest rates to fight inflation. That’s been the main story for most of this year. Now, it seems like inflation is kind of getting under control. The reason that interest rates are still saying high, though, is that it’s starting to look like government spending is not going to get reined in.”
On what she would advise homebuyers
“I think interest rates will be lower next year and they’ll be lower the year after that. How much lower is an open question. When it comes to somebody deciding if they want to buy now versus later, it really just comes down to affordability. Can you afford the monthly payment that you have to pay for the next year? If you can’t, then you probably shouldn’t buy.”
On housing affordability
“I’m not optimistic about lower-wage workers and affordability improving in a place like Seattle. We’re going to need more government intervention like low-income housing or purposeful investment to make sure people have a place to live. It’s probably not going to come about through market forces.”
On how to improve affordability beyond increasing supply
“There are places not that far from Seattle that are a lot less expensive. If we had rail lines going out there, then people could afford to work in Seattle and live in the greater metro area. But if you have people commuting in by car, then you have all this traffic and it becomes an extra cost for people. Focusing on transit is just as important as increasing supply.”
On climate risk and real estate
“The number one thing that motivates somebody to move somewhere is affordability. That’s always top of the list. Climate is on the list. But it’s not the top.”
“We are seeing insurers starting to pull out of places like California and Florida because of climate risk. And I think that’s probably going to spread to more parts of the country or be a larger consideration in terms of the premiums people are able to get. It’s not going to be some abstract cost in the future.”
On Redfin and ChatGPT integration
“With ChatGPT, there’s this extra element that people can personalize or convey what they’re looking for in a way that’s not really possible with the search filters or maps right now. And when people have abstract questions, ChatGPT can handle that better than search filters.”
On AI replacing real estate agents
“Agents still play a very big role. They can guide people through their personal decisions. ChatGPT could replace a bit of that, but not enough to the point that you wouldn’t need the agent. But one question is, if agents are playing less of a role, should their fees come down?”
On AI replacing her job
“Humans are good at judgment. AI is good at prediction. But somebody has to be there and look at what the AI did and say, is this reasonable or not? Did the AI make a mistake? I don’t see like my judgment role going away. But maybe we won’t need as many analysts to do the data work or to write the code.”
