“Home prices are going to stay pretty high.” “It’s going to be a real affordability crisis” – said Redfin’s CEO – “Here’s why nobody is selling their homes.”

The housing crisis in the United States has left potential sellers in a bind, reluctant to dive into a chaotic market swamped by high mortgage rates.

Glenn Kelman, CEO of Redfin, didn’t mince his words when he highlighted the shortage of housing stock as one of the biggest problems in the market. He noted that the political gridlock and financial challenges have hampered new construction and discouraged homeowners from listing their properties for sale – especially when they have secured attractive 30-year fixed rates below 3%. As a result, there is a great deal of reluctance among homeowners to sell, while a significant number of people are keen to move.

Cash:

Kelman delved into the idiosyncrasies of the housing market correction and highlighted the factors that contributed to it. In the foreground is a blatant lack of available housing. In 2020, when mortgage rates fell below 3%, homes sold at breakneck speed. But now that interest rates are about double, homeowners are waiting for better days. But rates have remained stubbornly in the 6% to 7% range this year, deterring potential sellers.

While these rates don’t reach the astronomical highs of the 1980s, when they skyrocketed to over 18%, their sharp rise from the pandemic’s record lows is worth noting. Kelman explained that most people can’t imagine moving away from their current home if they can’t even afford the homes they bought a few years ago. This has led to a persistent shortage of housing. Therefore, when inventory is low, demand-supply dynamics cause prices to remain high.

Redfin’s latest monthly report further sheds light on the challenges hopeful homeowners face. Picture this: With a mortgage rate of 6.79%, its highest for the week ended June 1st, the average monthly mortgage payment on a home at the quoted price hit a record-breaking $2,651. This is an increase of 14% compared to the previous year.

Adding to concerns, new listings for home sales took a nosedive, falling 25% year-on-year to bottom in early June. And as if that weren’t enough, the total number of homes on the market has shrunk by 5% year over year, to an all-time low for the same period. Kelman predicts, with a touch of sarcasm, that sales volume this year will be 4.2 million units, below the usual 5 million mark.

All of this scarcity has pushed up house prices and left potential buyers baffled by the numbers. Redfin reports that the median home price in the United States is currently $379,463, down 1.6% year over year — a small decline by and large. But regions like Cincinnati, Miami, and Milwaukee are seeing price increases.

The result? Younger generations, who missed out on the low interest rate environment, now face Mount Everest-like obstacles on the road to home ownership. Kelman told CNBC, “Home prices are going to stay pretty high. It’s going to be a real affordability crisis for the millennial generation. A lot of people want to move but just can’t because house prices aren’t going down in this market correction.”

The real estate market is certainly not uninteresting. Redfin’s Homebuyer Demand Index, which measures the company’s agents’ requests for home viewings and other services, is nearly at its highest level in a year. It seems that potential buyers are patiently waiting and anxiously waiting for mortgage rates to fall or house prices to fall before making their purchase. Who can blame them? It is always better to strike the iron when it is hot, but the irons are not.

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This article “Home prices are going to stay pretty high.” “It’s going to be a real affordability crisis” – According to Redfin’s CEO, “Here’s Why Nobody Is Selling Their Homes” originally appeared on Benzinga.com

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