The U.S. housing market is now tilting in favor of buyers, who are resisting high home prices demanded by sellers, according to Compass co-founder and CEO Robert Reffkin.
He said CNBC Wednesday that 30% of inventory on the market has seen its price drop, which is more than ever in the last 10 years. Meanwhile, the market saw its inventory increase by 16%.
“It’s a different environment. We are now seeing more sellers than buyers,” he said.
Reffkin said there have been more price drops in the South, which had seen big increases previously, as Americans left the most expensive states during the pandemic.
Florida’s real estate market has also been hit by a surge in home insurance costs, which have climbed 40% year-over-year and are weighing on asking prices, he said.
“Sellers putting their homes on the market during this time need to be aware of how buyers will respond,” Reffkin said. “If your home is priced well in this environment, it will sell quickly. But if it doesn’t, it will stay on the market. We will then have to lower prices. Buyers will then see that they will benefit from a price reduction. The sharks are coming out and it will hurt you even more.
Buyers at the high end of the housing market have also been supported by recent stock market gains, he told CNBC.
Although rising mortgage rates earlier this year, combined with high housing prices, have further eroded affordability, this is of less concern to buyers who are taking advantage of the wealth effect of their investments.
“You don’t need lower mortgage rates if your stock portfolio is at an all-time high,” Reffkin said.
His comments follow a report released earlier this month that showed Texas and Florida dominated the best places for shoppers in Zillow’s New Market Heat Indexwhich takes into account the share of homes for which an offer was accepted by a buyer within 21 days or less, the share of homes that were reduced in price, and engagement with active listings on the website and the application.
“Prospective buyers who witnessed intense competition in sunny Texas and Florida markets at the start of the pandemic are not seeing such a frenzy now,” according to Zillow.
Redfin CEO Glenn Kelman also sounded optimistic about the housing market in the second half of 2024 after hitting “the bottom» in the first quarter.
But that outlook depends on rate cuts from the Federal Reserve, he cautioned, warning that sales could slow or even decline without any cuts.
For now, he’s not ready to “party here and drink champagne,” Kelman said. “It’s just a little better, it’s a little better, and it’s worth noting.”
