2025 Housing Market: Insights from REDFIN’s CEO

Hey folks, Dan Frayer here with your market update for November 22nd, 2024. Some mortgage rates, they're just staying steady and I love it. So what's going on today's economic news? We're going to talk about where rents are going that might help the inflation number. We're going to also tell you about where the next forecast for housing in 2025 is. So every day I find a forecast, I'm sharing that with you guys to just show you how their variance is. And we also talk about Altos Research and that's the way you can find out exactly what your neighborhood's doing. So without further ado, let's get over to the economic calendar. We have the data, but there's really nothing here that it should be market movers. So let's get through it. This is why I waited till this time to post this. We have manufacturing PMI, we have composite PMI, servicing PMI, Michigan's inflation numbers. Look at the numbers, the previous numbers on all these, let's say 48, 48, 54, 55, 55, 57 on the servicing sector. That's not bad. 2.6, 2.6, nothing, there's nothing there. Everything is just steady as a, as steady as, whatever you want to call steady. Let's get over to the bond market and see how it's reacting today on the basically no news. MBSs are up five. So if you're new to the channel, what does that mean? By any time you can see this price, this is a price of a mortgage bond. Anytime you see the price is going up, the yields are coming down. There's a inverse or a yin-yang effect there. So let's get over to the pricing of homes, preliminary 2025 housing forecast. Now this is from right through here, the calculated risk newsletter. And I do follow this, so that's why I'm sharing this with you. You go down through here, they're saying expectations are for next year is just humdrum. It's basically flat as a pancake next year as well. So here's their housing projections. You just want to look over this section right through here. This is basically what I projected for last year. And I think my projections are going to hold steady for 2025 as well. I don't see any appreciation really in most places. Some places will probably see two, three, 4%. Like here in Chicago, we're steady Eddie. We just see two, three, 4% a year going up. We don't see huge upticks, thus we won't have big downticks as well. So please make sure you go to Altos Research to check out your neighborhood's data. So let's get over to the interview I want to share with you guys today. This is, hold on, if you guys don't recognize him, he is Redfin's CEO. Now last night, we had a other person on there with Compass, he was Compass's CEO. So now let's see what Redfin's CEO has about the housing market in 2025. So take it away. While mortgage rates climb back towards 7%. So joining us now is Redfin's CEO, Glenn Kelman. Glenn, it's great to have you on. And let's start right there. Why are you seeing these green shoots in housing? I don't know. One reason might be the Fed rate cut. On September 18th, it had already been priced into the mortgage market, but consumers have been waiting to see it nonetheless. And the other reason is the election. So consumers are defying the laws of gravity, coming in droves to buy houses exactly at the wrong time in the housing market, and as interest rates rise. So it's not something I've seen before, and I don't know how long it'll last, but it has been a pronounced effect. Have you, so that's interesting. Okay, we'll halt there for one second. We have had quite a bit of people calling in since September 18th, and they were kind of just freaking out on what's going on with things. And then the election had a lot of people on edge, and they didn't know what the Federal Reserve was gonna do. So now that we know everything that's going on, you have to really follow rates on a daily basis to figure out your entry point on a lot of these things. If that's your main concern is your interest rate, which it shouldn't be, but it is a big piece of the puzzle. But let's keep seeing what he has to say about the market. Interesting, so we've always talked about the 7% mortgage rate as kind of a key psychological level that does keep consumers sitting on their hands. The fact that that's not happening right now, I mean, does it just speak to the fact that higher rates have become more normalized? I think so. People have become a nerd to higher rates. So we had plenty of people who would get into the market in 2023, then see rates pop and decide to pull back. And now people seem to be unfazed. We'll see if they pull the trigger. Home buying demand has been strong. Some of that has been pulling through to sales. Usually when touring activity is this high, you are gonna see more offers. It's only just started to come through. I think the real tale will be told in January and February. That's when the home buying season really kicks off in earnest. And we'll just see if people can shake off these higher rates. Some of it is definitely just psychological, where there is more confidence in the economy post-election. Some of it is that people are just tired of waiting where they've been in the wrong place for a long time and they've decided it's time to go. Yeah, we've talked a lot about sort of the life decisions that need to be made and can't really be delayed no matter what rates do. The other important metric last couple of weeks, Glenn, has been starts and permits, especially in multifamily. And I wonder if you are worried about the pipeline for inventory going into say late next year. Well, there's so many buildings that are now just being completed. So even though there are some starts in multifamily that are declining, mostly I think rents will actually come down, especially as more people look to buy. So my guess is that home buying is gonna become less affordable, but renting is actually gonna become on the margins, slightly more affordable next year because so many buildings are just opening. So that's the pressure I think on the property management companies is to fill those buildings and it'll put a little bit of pressure on rents. So the good news about that, because there's a lot of built to rent properties going up, there's actually one right across the street from the bank here. It's a huge subdivision. And it actually, I'll try to post a sign or go over there one day and show you a sign. It's the whole community is built to rent. So that's what's happening. So as these properties come to completion, you're gonna see the rent prices coming down. That's gonna help the inflation numbers because the housing or the rent factor in the inflation numbers makes up 40% of it. So just think if that number comes down substantially, inflation numbers are gonna come down just because of that alone. So let's keep taking back up. Pushing them a little bit down, I hope. So Glenn, as we have this broader conversation, how is Redfin positioned to navigate it? Oh, I think we're positioned well. We're adding hundreds of agents, which is new. We've mostly been cutting over the past two or three years. We offer consumers a better deal, a 1% listing fee. We get them into homes faster than anybody else. There is going to be pressure on commissions coming into the next year because of all these industry changes triggered by a plaintiff's class action lawsuit. So if more people want good value, I think the world will be the path to our door. So we're pretty optimistic about 2025. Do you think you'll take market share? I do. I wouldn't be here if I didn't. Okay. Thank you for the question. So when you look around the country, what are the areas where you see the most growth potential? We still see a flight to affordable areas, but what's changed is that some people are feeling the pressure in places like Florida because insurance rates are shooting through the roof. All the climate-related risk is now being priced into that. And so you don't just have to worry about the price of the home and the price of the mortgage. You actually have to worry about the price of insurance. And we're not talking about $100 or $200 a month. In some cases, people are paying thousands of dollars a month, and so they are refactoring the math around whether they can afford to live in Florida, at least in the coastal places. And so that has been new. In 15, 20 years of being in this industry, it was only two things that mattered, and now there's a third. And I think you're going to see the same effect in some Western states where there's some wildfire risk. I have to give him, he's right on the button there. I do own a property in Florida, and it is on the coast, and the insurance is nuts. It went skyrocketing. Basically, my association fee has doubled, so that's not good news there. So if you're moving to Florida, be careful. If you're on the coastline, I would check and see, get an insurance quote before you actually start looking right on the coast. So just nice tidbit that he had there. It's just really hard to insure a home in certain parts of the country. It used to be kind of a little snag that we had to worry about. Now it's a big deal where it sometimes breaks up deals. Yeah, that's interesting. There have been a lot of maps of where property insurance has risen the most. Florida's obviously, it stands out. Louisiana as well. Where do you think, to the degree that there is outward migration from those coastal states, where do you think they're going, Glenn? I've heard suggestions that Tennessee, for example, is benefiting from some of that. Yeah, I still think the southeast is a major growth area. So North Carolina, South Carolina, Georgia, Tennessee. I think you can see some growth in the Midwest. For a long time, people were leaving California. There is a return to office that is still slowly happening in the more progressive states. So this exodus that we saw out of the Western states, I think some of it will reverse and people are going to come back to Oregon, California, and Washington, my home state. It was crazy during COVID when everybody was buying. It's amazing. You'd have people moving all over the country. And the hardest part of that was getting their income calculated. Okay, you're moving over here. Is your job transferring? Are you a remote worker? Are you a traveling nurse? So it was difficult. So everything he said, I have to validate with a complete double thumbs up. So that's what we're seeing right through there. Let's check the MBS prices one last time before we go. They're up nine ticks. So we might see a little bit of ease on the market right now. Hopefully we can get to 6.99 by the end of the day. I think 5.99 would be a lot better to open up the housing markets that we're seeing. So let's get over to the equity markets right now. And it is still on a roll. Look, all the way across the board is green. The VIX is coming down. So that's basically a Cinderella story right through here. Let's check cryptocurrency. Is it 100 grand? Almost at $100,000. Our position on this, we doubled our money in the portfolio. So just letting you guys know, check out, I haven't done it this week. My apologies. We usually have Stock Talk Tuesdays. And we talked about Bitcoin about two months ago. We put a position on there and we doubled our money in about 90 days. So check out that video if you can find it. Let's go over to oil, see what it's doing. It's probably up a little bit on intensified war. Yes, it is up at $70, $71 a barrel. Okay, as long as it stays right there in the $70 range, we're okay. And then the bond market is all red across the board. So bond yields are down across the board. Other than in the UK, they're up a little bit. So that's your report for today. So now, who am I? What do I do? I'm just a loan officer out here. If you guys are looking to buy, anybody's out there looking to buy their first house, first investment property, you want to pull equity out of your current home to buy that next home, whatever it is, we'd love to help you. How do you find us? We'll go to the rateupdate.com. Here's our website. Couple different tools to use. You want to kick the apply now button, do so. It'll launch you right to our application link. If you want to find some grants out there to see if you can get some free money to buy that first house, check them out right here. And then if we have a one-on-one consultation, call right through here. My apologies, I'm going to work on this today. If you do schedule a one-on-one consultation, please check your email about a half hour before the consultation. I'll send you a request there to see what's the best phone number to reach you at that time. So that's that report. If you want to check out any information other than that on our website, we got blogs, we have for financial calculators, we have all kinds of stuff on there. But at the bottom, you're going to find our 800 number where you can call us at 800 or 844-775-5626. Or you can email me directly at dan at the rateupdate.com. Thanks so much for watching guys. God bless. Have a fantastic day. See you here at the closing bell. Bye-bye.