Redfin chief economist Daryl Fairweather. (GeekWire Photo / Taylor Soper)
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.
“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.”
“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.”
“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.”
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
