‘Strongest Buyer’s Market’ In A Decade: Redfin CEO On Falling Home Prices | Glenn Kelman
Summary
Market Outlook: The podcast discusses the current housing market, highlighting a potential national housing crisis due to high costs and slow sales, with a focus on the impact of falling home prices on affordability.
Economic Conditions: There is significant uncertainty in the market, with concerns about a possible recession and the effects of fluctuating interest rates on the housing sector.
Housing Market Dynamics: The conversation emphasizes the divide between homeowners wanting high prices and young buyers seeking affordability, with falling prices making homeownership more attainable for younger generations.
Government Role: The discussion touches on the potential for government intervention to ease housing supply constraints and the bipartisan support for increasing housing construction to address affordability issues.
Regional Trends: The Midwest is experiencing a surge in housing demand due to affordability, while areas like Austin and Florida face price declines due to overbuilding during the pandemic.
Investment Opportunities: The podcast suggests that single-family homes are currently more stable investments compared to condos, which are more volatile and sensitive to market changes.
Future Predictions: The potential impact of tariffs on inflation and the economy is debated, with the expectation that lower interest rates could strengthen the economy if inflation remains under control.
Buyer Behavior: Buyers are gaining more negotiating power, often offering below asking prices, as they anticipate further price declines and wait for more favorable market conditions.
Transcript
I feel careful. I think, you know, if you're trying to sell a property and you've got a good buyer, I would take it. If you don't, you're going to have to wait. David, what's your prediction for the economy? How would you compare 2026 forecast to uh this summer, for example, where you you called it one of the strongest buying markets in a decade? Uncertainty. It's always my pleasure to welcome CEO of Redfin, Glenn Kelman, on the show. Glenn's been on several times. You can check out our last interviews where he's made uh calls on the housing market. We'll get his update on the housing market today. It's the last quarter of the year, Glenn. So, it's good to see you and uh let's see what happens after the Fed pivot, after mortgage rates are moving a little bit and um what's going to happen into Christmas. Welcome back to the show. It's great to be here. Great to be here, David. Let's take a look at this article here. Uh start with this Trump administration to target housing costs. The uh Trump administration is considering declaring a national housing crisis as a real estate market struggles to reach stable ground uh says Treasury Secretary Scott Bassent. We may declare a national housing emergency in the fall. Bent told the Washington Examiner this would constitute the ninth national emergency since returning to the Oval Office in January if it goes ahead. The cost of homes has been slowing, deflating um has been slowing, deflating after the CO 19 pandemic drove rates high. However, homes have been selling at the slowest summer pace in a decade while sellers outnumber buyers. Okay, before we continue any further with the stats, I know you have many for us, Glenn. Is Trump right to declare a housing crisis? Is there a housing crisis? Well, he's right and he's wrong. I think there is a housing crisis. One of the reasons that Donald Trump was elected is because so many young people can't afford a home. That's right. So, he's right to focus on that, but I think complaining about falling home prices isn't the approach that I would take because, of course, for homes to become more affordable, the prices need to decline. We've talked about this on your show before. When the price of bread or gasoline falls, people host a party. But when housing prices fall, it's a calamity. And I don't think that's the way we should think about housing. We're obviously divided on this because half of Americans, half of the world owns a home and the other half doesn't. So the people who own a home want to keep the price of that home high. But even now, we are seeing deflation. Home prices are up about 2% year on year when inflation is about 3% yearon year. So in real terms, homes are getting more affordable. In markets like Texas and Florida where builders have been busy, actual home prices are falling. So, we shall see what becomes of that. But for me, uh it's a good thing that home prices are falling. It means that the American dream is becoming more attainable for people in their 20s and 30s. Is that the reason why, according to this article, and I'll get you to comment with your own stats, that uh home sales soared 20% in August to a three-year high, sales of new built uh newly built homes rose much larger than expected, 20.5% in August compared with July to the highest level since January 2022. Does this align with the data from u what you've been seeing? No, it doesn't. The home builders are notoriously unreliable in reporting their results. So my guess is that that is aberrational. Pending home sales, okay, as reported by the National Association of Realtors are up 2% down actually for the month, uh, but up year-over-year. So that 20% gain is unlikely to be followed by another gain. It will probably be restated or at least there will be a correction. About 15% of sales right now are being cancelled. The problem is that even as rates come down, they aren't coming down as fast as people hoped and there is now significant concern about some kind of recession. So, we're trying to get a soft landing where capital can be more affordable, but people still have a job. And that is a very difficult tight rope to walk. And many people are feeling the effects. 44% of Americans who are considering either a major home purchase or a car purchase are saying they're now deferring that because they're worried about losing their jobs or about the economy overall. So, I think it's just really tough um to have interest rates come down and still have the economy be strong. Usually, when you get a good jobs report, you get inflation and other problems. Uh the Fed is really in a pickle. So going back to uh this potential housing emergency, suppose we do have the government declare a housing crisis, Glenn, what will they do about it? Well, there is bipartisan support for very few issues in the United States, but one of them is housing where Republican and Liberal senators have come together to make it easier for builders to build more housing. That is not going to prop up. In fact, it will increase the supply and put more downward pressure on prices. But again, for many people, the crisis isn't that I can't sell my home for enough money. The crisis is more that I'm 28 years old, I want to start a family, and I can't buy my first home. So, it depends on which problem we're trying to solve, but the one that Congress has been most focused on has really been around new construction. It seems like a natural fit for Donald Trump. He has been a builder most of his career. And so the idea that we could just build more housing, build more apartments, uh build more single family homes should be appealing to our president. What should be done or can be done to bring the housing prices more aligned with what you think is fair? Like you said, young people can't buy a home. It's probably better uh long-term if prices come down a little bit. Well, I mean, should the government be involved in building projects and construction and expanding this housing supply or should you leave that to the free markets to decide, Glenn? Well, the problem is that the government has always been involved. So, to break ground, you have to apply for a dozen different permits. You have to assure people that you'll have enough parking. You have to do a traffic and environmental impact study. So, the towns that have done the best at lowering the cost of housing, at bringing jobs into uh the local are the ones who have preapproved almost all of that. I think there's a city in upstate New York right now of all places um that is really aggressive about that and it's seen its economy boom. So, I'm in favor of free markets, but the idea that the government would somehow be subsidizing housing when in fact mostly it sometimes made it more difficult to build housing, I don't know that I agree with that either. So, my position is that the government does have a role here. It is a really uncertain time to be a builder. Rates go up and down and yet you're breaking down and then trying to sell a place 3 years later. Uh, I think there's a place for government guarantees and definitely for cutting red tape. So I still think we can do a better job of building more houses. The places in America where we've done that are the places where most people are moving. While this is a change in policy of the Federal Reserves, let's talk about the Fed's pivot. You and I spoke earlier the year when this was not the case. So how ultimately will the Fed pivot affect the housing market? Mortgage rates already start to come down a little bit. Will it come down more, Glenn? Hard to say. Again, I think the challenge that the Fed has is it has so many economic indicators that it's looking at. The mortgage markets are very efficient. So, there are all sorts of Fed watchers who are trying to price in different factors, inflation and jobs and the prospect of a recession. So, really uh the Fed is going to do a couple more rate cuts, but all of that is already priced into mortgages. And the real question is some economists predicted that tariffs would have a big impact on inflation. Uh that hasn't quite materialized yet. Uh some of the retailers have been under earnings pressure because they've been absorbing that cost. They can't do it forever. So at some point uh we may see some pressure on inflation but it's being offset right now by housing. That is home prices fall for the first time we are seeing housing have this deflationary impact. about 40% of the inflation index here in the United States is comprised of housing. 50 depending on how you measure it. So, um there are puts and takes here and all of that right now is priced into a mortgage that's around 6.3%. Before we continue with the video, let me tell you about a very important topic. How to protect your privacy. Now, your private information doesn't just live in the inbox of your phone. It's being collected, packaged, and stored, and tracked by data broker websites all over the internet, even without you knowing. That's where today's sponsor comes in. Delete Me. I use Delete Me to protect my privacy. And here's how. It helps you. It's a platform that helps you remove your personal data, like your name, address, and contact info from hundreds of these data broker websites. When you sign up, you'll get a detailed privacy report showing where your data was found and what's already been removed. And delete Me keeps working throughout the year, scanning and clearing your information regularly. It's an easy way to take back control of your digital footprint without trying to track everything down yourself. Go to joinme.com/davidin and use the promo code davidin at checkout to get 20% off of US plans. Link down below or scan the QR code to get started today. The data that you sent me um offline, I believe, and correct me if I'm wrong, Glenn, home prices accelerated by 2.2% 2% year-over-year. You already mentioned that. At the same time, builders are cutting prices at the highest rate since co 39% reducing prices by an average of 5%. How do you reconcile home prices growing slightly but builders slashing costs? Well, uh, new construction is only about 20% of the market and the rest is existing home sales. And so I think in supply constraint markets where it's harder to build a home, you are still seeing some home price appreciation. Obviously, there's regionalization here where the Midwest is doing fairly well. The West is doing reasonably well, but in places like the American South, home prices are really falling fast. Uh we saw that first in Austin, Texas, which is one of these small towns that just went crazy during the pandemic and then had a bust. Uh we're now seeing the same phenomenon across most of Florida. So the challenge is just that in places where it has been easy to build, we do now have a glut and that's bringing home prices down. And that just comes back to what we were talking about earlier that some people view that as hallelujah and other people say oh no. And it just depends on whether you're on the outside looking in because you haven't bought a house yet or if you have a place and you want to keep the price high. Milwaukee is up 11%, Cleveland's up 9%, San Francisco down 6%, Austin's down 6%. Um that's according to Zillow that is just revised forecast for over 400 markets. Um what's driving this surge in the Midwest uh versus um you know versus some other large diver. So Midwest did not have the same kind of boom that other places did. In Austin, home prices doubled over the span of two years during the pandemic and that kind of rise is just unsustainable. Whereas Milwaukee, Pittsburgh, Cleveland had very modest home price appreciation. So, those are some of the last places where you can still get a nice house for $200,000 a year. And people are still moving to the Midwest in search of that affordability because they moved almost everywhere else during the pandemic. So, Florida used to be much more affordable than it is now. Texas used to be more affordable than it is now. Um, Pittsburgh is sort of the new hot spot. Detroit is the new hot spot. Milwaukee is the new hot spot. And that's just because it's easy to start a family there. Is this a cyclical trend, uh, Glenn, where is this sort of a permanent rebalancing of Americans moving? I don't think it's just cyclical. I mean, what was crazy in the past 10 or 15 years is it used to be that it was San Francisco that defied the laws of physics where no matter how high home prices got, they could still go higher in San Francisco because there were so many lucrative jobs in San Francisco, New York, and maybe LA. But eventually the rest of the country isn't just chopped liver. There are great jobs and great companies there too. So you saw businesses relocate from San Francisco or New York, move to the middle of the country because housing was more affordable and that that made labor more affordable. So just as the CEO of Redin, I'd have people come into my office here in Seattle and say, "I can't afford a house and I work for a housing company. I'm going to move to Idaho." And secretly, I felt relieved because I wouldn't have to give them a 20% raise every year, which is really hard to do. So, I think you're just seeing companies get more flexible about people living outside of these coastal hubs, even though there's been a stronger return to office mandate every year. Okay. So, you wrote uh to me, summer 2025 was the strongest buyers market in over a decade. So, what specifically happened this year that wasn't present maybe 10 years ago in 2015? Inventory. So, we've been inventory constrained for more than a decade. I don't think there's been this level of canceled home sales since 2013. There hasn't been this ratio of buyers to sellers since the end of the great financial crisis. Uh we just have way more buyers out there than excuse me, I said that wrong. Way more sellers out there uh than buyers right now. There's a bunch of wouldn't sell their place in June and July. Uh there were many buyers who thought they were going to wait for rates to come down. Rates came down, but maybe not as much as people hoped. And now there's just significant inventory that's probably going to sit on the market until the end of the year. So that means that there will be continued downward pressure on prices. It's really hard right now, David, to bring buyers and sellers together because the sellers are thinking about what they could have gotten six months ago in April, March, February, and the buyers are thinking, gosh, time is on my side. If I wait another 6 months, how much lower could the price be? And so, especially in the Sunb Belt, um, we are seeing deals fall apart. As soon as the inspection comes back and somebody sees that there's one little problem with the house, they say, "You know what? There's plenty of new construction right down the street. If I don't take this place, I'll find another." And that's a real fear uh for people trying to sell an older home. Well, if I were sitting on a second investment property right now, I'd probably think to myself, well, rates are coming down. We're in a pep fed pivot era, so I'll probably wait a little bit for rates to come down a little bit more because that may that may be the time where demand is even stronger. So, ironically, we're probably seeing housing prices not move to the upside because people are thinking like I am. Is that what's happening, Glenn? I'm just speculating here. Yeah. I mean, I think it's just a really uncertain time, David. So, it's quite possible that if you're trying to sell a place that next year it'll be on like Donkey Kong again and the market will be really strong because rates are below 6%. If we cross that threshold, it will bring significantly more buyers back into the market. But the challenge is to have an economy where rates can fall that far while still protecting employment. So, you know, if the Fed is responding because there's more unemployment, it goes above 5%, the stock market takes a dip, inflation is stronger, then you're going to be in a situation where people aren't buying a house for another reason. Even though the mortgage rate is attractive, they're worried about keeping their job. So, I feel careful. I think, you know, if you're trying to sell a property and you've got a good buyer, I would take it. If you don't, you're going to have to wait. What about buyers? What are buyers thinking right now? Your data suggests or shows that uh buyers have now $20,000 in purchasing power more or gain $20,000 in recent months. And um yet they're still waiting on the sidelines. What are they waiting for, Glenn? More negotiating leverage. So buyers are putting in offers, but they're just putting it in for another 10 or $20,000 below the asking price because they think that's where the market is headed. So once the market hits an inflection point, people freak out. You know, if prices just go up and up and up, a buyer is lined up and ready to pay because he just thinks if I don't get it now, it's only going to get worse for me. But when you do get into that situation where time is on your side, um everything about the house has to be perfect or you're going to walk away from the deal. And just coming into the deal, when you make the initial offer, buyers have gotten significantly more aggressive um and put out terms that sometimes their agents are a little hamfisted about presenting um because it is such a low offer. But in many cases, the sellers are taking it. You know, there's sort of a broader effect on families right now. We know so many families that contacted us a year, 2 years ago because they had a baby or they went through a divorce. Um, you've got couples that are sharing the same house even though they can't stand each other anymore. And the reason they're doing it is because they can't afford to buy their own house. So, they got that house when rates were at 3%. If they had to buy that property again with rates above 6%, uh, the mortgage payment would be unsustainable for them. So, I think there is so much pent up demand just from the basic life events that make people want to move out, move out from mom and dad, move out from their ex, um or just go up from a condo to a single family home cuz they had a second or a third baby. And all of those folks right now are still kind of sheltered in place because they are waiting for a five handle on the rate. Based on the data you're seeing, do you see more demand for single family units, uh, detached homes or condos or town houses next year? Single family homes. So, only in a bull market do you see really strong demand for condos and town houses? Um, those are the most volatile sectors of the market. So, as soon as the shiitakei mushrooms hit the fan, it's condos where you see it first. Condos get really sell, especially downtown. Um and then as soon as the market takes off, uh condos are again where you see it first where suddenly those get really easy to sell, but single family homes hold their value much better. Uh just in general, there has been a movement toward the suburbs in America. Um where it used to be everybody wanted to live in a city, you were young, you were urban, you were Gen Z or a millennial or what have you, and that's just where people wanted to be. And now uh the suburbs are more diverse. Um, you know, some of the major cities still have different problems with property crime and so uh we actually see stronger demand outside the city than in the city and usually that's where you see single family homes. Have tariffs impacted the housing market directly or indirectly this year? Well, they're affecting builder costs. So, United States imports lumber from Canada, for example. And by the way, I want to be clear. I have no beef with Canada. Let there be peace between us. I'm sorry for all the crazy stuff that's happened. But having said that, um we need lumber and we need other raw supplies um from overseas. Uh but we also need labor. So many of the skilled artisans who build homes come from outside the United States. And so this is going to be a test of uh the conservative movement. You know, one of the reasons that conservatives have wanted to limit immigration is to create more opportunities for Americans and the housing industry should be an industry where people want to work. Um, but many of the folks who build our houses actually come from outside the United States. And by the way, I always feel that if you're trying to bring back manufacturing, what's the one good that can't be manufactured in China? Well, it's a house. You can get the raw materials, but the house itself has to be built on site. And so if we had to pick a place where we wanted to create jobs for folks who didn't graduate from college, who don't have a PhD in computer science, let them build houses. That's what I say, David. I think the Trump administration recently imposed tariffs on on cabinets and other furniture. So very specific. Um I'm not sure what that's about. This is a New York Times article proposing potential fixes for the housing crisis. Um I won't read the entire article. I'll just summarize it for you. One of the proposed solutions You read this, hey Glen, I love it. I love it. Give that guy a job in the administration. One of the proposed um solutions is to impose tariffs on steel, aluminum, and copper. Abstain from imposing tariffs on furniture. Um and then additionally, we're going to also one more suggestion. It says here, "Leave Fanny Mack and Freddy Mack alone. Put them under conservatorship once more." Anyway, um just let's just comment on uh the the other one we already talked about in expanding the housing supply and then ease immigration restrictions to bolster the construction workforce. Um okay, I mean that I think there's twofold there. If you increase immigration, you could also increase demand, but I'll let you comment on what's being proposed here. Well, I don't know where to start because I thought this article was gold. I would not privatize Fanny and Freddy. I'm not a regulator, so it's not up to me. But the government has just been this huge backs stop. It's an incredible risk to give somebody a loan over 30 years given how volatile the global economy is. And having Fanny and Freddy stand behind all the mortgages in the United States, package them up for mortgage into mortgage back securities and absorb some of the short-term risk has really been great. I think they've been a very progressive force in the housing industry. They've stabilized the cost of capital for American home borrowers. Um, so I don't know why you would uh mess with something. It ain't broke. Don't fix it. And then I also agree with just being really selective. I know that there's a rationale on tariffs for many goods, but the rationale for tariffs on housing related supplies I think is less strong. And so I would ease up on that. Um, that's where I stand. I think it's a really good point. This is a pretty interesting stat from this article that I just showed you from the New York Times article. Uh, one of the biggest issues is supply, especially smaller starter homes. So, in 2023, just 9% of new homes were smaller than,400 ft² a typical measure. 1982 40% hit that mark. So, 9% were smaller than,400 ft versus 40% some 40 years ago. Why is that? Because we have a K-shaped economy. So right now the wealthy segment of the United States economy is driving our overall prosperity. That is the strongest segment in luxury home sales, in the stock market, in luxury retail goods. Uh those are the companies that are doing really well. And it's in the service industry where people are just getting by that you're seeing real economic pain. Um delinquencies on mortgages are up just a little bit. It's nothing to panic over yet. I'd be the first to tell you. I promise you. I'd be candid about it. But we do see warning signs that the folks who have less than a four-year college degree, who are earning less than $50,000 a year, these are the people who are really struggling. Maybe the other factor is that during the great financial crisis, uh, builders were really aggressive about building starter homes and so they had massive volume but really low unit profits. And this time I think they've just been a little more greedy about focusing on the types of homes where they can command a higher margin and take less risk because they know that the market could reverse at some point. And I think they forgot about that in say 2005 2006. Well, I guess my next question depends on the district and the region, but if you're a developer, are you are you making more money from large homes or or or smaller condos right now? Large. You're making money from large homes. And in fact, rents came down because builders had shifted from small starter homes to also apartment buildings. So, they were either building luxury properties or apartment buildings. And that really brought the rent down in 2023 and 2024. Since then, apartment building construction has slowed and rents are starting to rise again. So, if we get into this situation where rents are rising and housing doesn't get affordable, that's where people really get pinched. So, what you're saying is capitalism is at fault for the unaffordability crisis. Oh, I don't know if it's that simple. Because if there's more of a financial incentive to not build the smaller homes while the people that you you just talked about who need the smaller homes aren't going to have more supply. Yeah. I mean I think the larger issue is the technology has just gotten to be a longer and longer lever and the people who are standing on that lever in technology are wealthier and wealthier. So, you know, you're going to see rising income inequality and there isn't much will on the part of governments to stem that and so businesses are going to cater to it. But I think it's a bigger problem than just capitalism. I think it's endemic to technology. It used to be that you know if you had a horse you were richer than anybody else but now it's chat GPT and there's a lot more horses than there are chat GPTs. That's a really analogy but sort of true. It's a quote of a quote from Glenn. So, if you were to look ahead at 2026, uh how would you, you know, taking your crystal ball, how would you compare 2026 forecast to uh this summer, for example, where you you called it one of the strongest buying markets in a decade? Uncertainty is I know that's a weeny answer, David. That's okay. But, uh well, what needs to happen to provide more clarity for you? Let's put it that way. Uh, I think we need to see if tariffs are going to cause inflation and if they don't and economists just have to step back from that position, we're going to have lower rates and then if we have lower rates, we're going to have a really, really strong economy. It's also just interesting to me, you know, if there is a real impact from tariffs on the overall economy and it affects jobs and inflation, will the administration step back from that? generally has been very reactive to anything that threatens the economy uh more so than almost any other administration. And so my guess is that we're going to have this little back and forth where I do think there will be an impact from tariffs. I think it'll affect jobs and inflation and then I think um the US government is is going to step back from some of that. That's my guess. Is it true that even if mortgage rates come down a little bit and interest rates come down, uh home ownership costs having risen will offset lower uh rates, we're talking about higher insurance, higher maintenance, higher renovation costs, so on and so forth. Is that true? I don't think so because right now home prices, yes, they're going up 2%, but in real terms, they're going down because inflation is 3%. And so, you know, if you're going to buy almost any asset, this is the one um right now where there's deflationary pressure, non-inflationary pressure. It's less than the rest of the assets in the US. Well, I'm looking forward to when uh you and your refin team put out your annual uh year ahead outlook. Um we've we've done that. We've done that in the past and it's it's turned out to be, you know, a lot of it has turned out to be true. So, I'm looking forward to that. When does that come out again? Oh, I don't know. Around Thanksgiving, isn't that right, David? What's your prediction for the economy? What's my What's my prediction for the economy? Oo, I don't think anyone's asked me that already. Um, all right. Well, I live in Canada, so a lot of the a lot of Canada's growth depends on what happens in the US. So, let's talk about the US. I think I largely agree with you. I think if inflation doesn't really uh really kick in to the extent that some people fear, although we are starting to see Home Depot for example, Macy's, a large lot bunch of other box stores are just announcing they're going to raise prices of goods. You know, they just made that announcement a couple weeks ago. So, we might see some things move up on the peripheral, but generally speaking, if um consumers spending power doesn't decrease too much in the next year, yeah, we'll see a we'll see a much stronger economy uh where at least continued growth. You know, I was just traveling. I was traveling a couple times this this year for for well, some some for personal, some for business in the US. I was in Vegas in May. Um big slowdown in Vegas. I was in Denver just last uh two weeks ago and the Uber driver was telling me hey why are you know he was telling me it's a little bit slower now than maybe a year ago and he was asking me well have you noticed this anywhere else is maybe this is just because of seasonality I said I I've noticed this other places like Vegas as well so maybe it's just the economy so I think the slowdown already happened in discretionary spending the question is whether or not lower rates is going to turn that around um so I think that Yeah, you've got your ear to the ground always, David, interviewing home home depot clerks and Uber drivers and everything else. Yeah, I Yeah, you really get a good sense of what people are feeling just talking to everyday regular people and because the economic data is always lagging by a couple weeks to a month. Um, so I think the slowdown already happened. Let's see if things pick up once rates fall. I I'd imagine not immediately a 25 basis point cut is going to do anything. But if we get more aggressive rate cuts without seeing inflation skyrocket that I think growth will come back. I'm buying. David, it's good to see you. Thanks for having me on the show. I keep forgetting to wear a tie, but next time I'm going to clip one on or even knot it up. Well, you you Yeah, I mean that would be that would be great. You don't need to. You look great already. Um so so don't don't don't feel pressured to change your style, but we agree. Sorry. We we we uh we we we um we look forward to seeing you again soon and thank you for your time today. Good to see you, David. Thank you, Glenn. Take care.
‘Strongest Buyer’s Market’ In A Decade: Redfin CEO On Falling Home Prices | Glenn Kelman
Summary
Transcript
I feel careful. I think, you know, if you're trying to sell a property and you've got a good buyer, I would take it. If you don't, you're going to have to wait. David, what's your prediction for the economy? How would you compare 2026 forecast to uh this summer, for example, where you you called it one of the strongest buying markets in a decade? Uncertainty. It's always my pleasure to welcome CEO of Redfin, Glenn Kelman, on the show. Glenn's been on several times. You can check out our last interviews where he's made uh calls on the housing market. We'll get his update on the housing market today. It's the last quarter of the year, Glenn. So, it's good to see you and uh let's see what happens after the Fed pivot, after mortgage rates are moving a little bit and um what's going to happen into Christmas. Welcome back to the show. It's great to be here. Great to be here, David. Let's take a look at this article here. Uh start with this Trump administration to target housing costs. The uh Trump administration is considering declaring a national housing crisis as a real estate market struggles to reach stable ground uh says Treasury Secretary Scott Bassent. We may declare a national housing emergency in the fall. Bent told the Washington Examiner this would constitute the ninth national emergency since returning to the Oval Office in January if it goes ahead. The cost of homes has been slowing, deflating um has been slowing, deflating after the CO 19 pandemic drove rates high. However, homes have been selling at the slowest summer pace in a decade while sellers outnumber buyers. Okay, before we continue any further with the stats, I know you have many for us, Glenn. Is Trump right to declare a housing crisis? Is there a housing crisis? Well, he's right and he's wrong. I think there is a housing crisis. One of the reasons that Donald Trump was elected is because so many young people can't afford a home. That's right. So, he's right to focus on that, but I think complaining about falling home prices isn't the approach that I would take because, of course, for homes to become more affordable, the prices need to decline. We've talked about this on your show before. When the price of bread or gasoline falls, people host a party. But when housing prices fall, it's a calamity. And I don't think that's the way we should think about housing. We're obviously divided on this because half of Americans, half of the world owns a home and the other half doesn't. So the people who own a home want to keep the price of that home high. But even now, we are seeing deflation. Home prices are up about 2% year on year when inflation is about 3% yearon year. So in real terms, homes are getting more affordable. In markets like Texas and Florida where builders have been busy, actual home prices are falling. So, we shall see what becomes of that. But for me, uh it's a good thing that home prices are falling. It means that the American dream is becoming more attainable for people in their 20s and 30s. Is that the reason why, according to this article, and I'll get you to comment with your own stats, that uh home sales soared 20% in August to a three-year high, sales of new built uh newly built homes rose much larger than expected, 20.5% in August compared with July to the highest level since January 2022. Does this align with the data from u what you've been seeing? No, it doesn't. The home builders are notoriously unreliable in reporting their results. So my guess is that that is aberrational. Pending home sales, okay, as reported by the National Association of Realtors are up 2% down actually for the month, uh, but up year-over-year. So that 20% gain is unlikely to be followed by another gain. It will probably be restated or at least there will be a correction. About 15% of sales right now are being cancelled. The problem is that even as rates come down, they aren't coming down as fast as people hoped and there is now significant concern about some kind of recession. So, we're trying to get a soft landing where capital can be more affordable, but people still have a job. And that is a very difficult tight rope to walk. And many people are feeling the effects. 44% of Americans who are considering either a major home purchase or a car purchase are saying they're now deferring that because they're worried about losing their jobs or about the economy overall. So, I think it's just really tough um to have interest rates come down and still have the economy be strong. Usually, when you get a good jobs report, you get inflation and other problems. Uh the Fed is really in a pickle. So going back to uh this potential housing emergency, suppose we do have the government declare a housing crisis, Glenn, what will they do about it? Well, there is bipartisan support for very few issues in the United States, but one of them is housing where Republican and Liberal senators have come together to make it easier for builders to build more housing. That is not going to prop up. In fact, it will increase the supply and put more downward pressure on prices. But again, for many people, the crisis isn't that I can't sell my home for enough money. The crisis is more that I'm 28 years old, I want to start a family, and I can't buy my first home. So, it depends on which problem we're trying to solve, but the one that Congress has been most focused on has really been around new construction. It seems like a natural fit for Donald Trump. He has been a builder most of his career. And so the idea that we could just build more housing, build more apartments, uh build more single family homes should be appealing to our president. What should be done or can be done to bring the housing prices more aligned with what you think is fair? Like you said, young people can't buy a home. It's probably better uh long-term if prices come down a little bit. Well, I mean, should the government be involved in building projects and construction and expanding this housing supply or should you leave that to the free markets to decide, Glenn? Well, the problem is that the government has always been involved. So, to break ground, you have to apply for a dozen different permits. You have to assure people that you'll have enough parking. You have to do a traffic and environmental impact study. So, the towns that have done the best at lowering the cost of housing, at bringing jobs into uh the local are the ones who have preapproved almost all of that. I think there's a city in upstate New York right now of all places um that is really aggressive about that and it's seen its economy boom. So, I'm in favor of free markets, but the idea that the government would somehow be subsidizing housing when in fact mostly it sometimes made it more difficult to build housing, I don't know that I agree with that either. So, my position is that the government does have a role here. It is a really uncertain time to be a builder. Rates go up and down and yet you're breaking down and then trying to sell a place 3 years later. Uh, I think there's a place for government guarantees and definitely for cutting red tape. So I still think we can do a better job of building more houses. The places in America where we've done that are the places where most people are moving. While this is a change in policy of the Federal Reserves, let's talk about the Fed's pivot. You and I spoke earlier the year when this was not the case. So how ultimately will the Fed pivot affect the housing market? Mortgage rates already start to come down a little bit. Will it come down more, Glenn? Hard to say. Again, I think the challenge that the Fed has is it has so many economic indicators that it's looking at. The mortgage markets are very efficient. So, there are all sorts of Fed watchers who are trying to price in different factors, inflation and jobs and the prospect of a recession. So, really uh the Fed is going to do a couple more rate cuts, but all of that is already priced into mortgages. And the real question is some economists predicted that tariffs would have a big impact on inflation. Uh that hasn't quite materialized yet. Uh some of the retailers have been under earnings pressure because they've been absorbing that cost. They can't do it forever. So at some point uh we may see some pressure on inflation but it's being offset right now by housing. That is home prices fall for the first time we are seeing housing have this deflationary impact. about 40% of the inflation index here in the United States is comprised of housing. 50 depending on how you measure it. So, um there are puts and takes here and all of that right now is priced into a mortgage that's around 6.3%. Before we continue with the video, let me tell you about a very important topic. How to protect your privacy. Now, your private information doesn't just live in the inbox of your phone. It's being collected, packaged, and stored, and tracked by data broker websites all over the internet, even without you knowing. That's where today's sponsor comes in. Delete Me. I use Delete Me to protect my privacy. And here's how. It helps you. It's a platform that helps you remove your personal data, like your name, address, and contact info from hundreds of these data broker websites. When you sign up, you'll get a detailed privacy report showing where your data was found and what's already been removed. And delete Me keeps working throughout the year, scanning and clearing your information regularly. It's an easy way to take back control of your digital footprint without trying to track everything down yourself. Go to joinme.com/davidin and use the promo code davidin at checkout to get 20% off of US plans. Link down below or scan the QR code to get started today. The data that you sent me um offline, I believe, and correct me if I'm wrong, Glenn, home prices accelerated by 2.2% 2% year-over-year. You already mentioned that. At the same time, builders are cutting prices at the highest rate since co 39% reducing prices by an average of 5%. How do you reconcile home prices growing slightly but builders slashing costs? Well, uh, new construction is only about 20% of the market and the rest is existing home sales. And so I think in supply constraint markets where it's harder to build a home, you are still seeing some home price appreciation. Obviously, there's regionalization here where the Midwest is doing fairly well. The West is doing reasonably well, but in places like the American South, home prices are really falling fast. Uh we saw that first in Austin, Texas, which is one of these small towns that just went crazy during the pandemic and then had a bust. Uh we're now seeing the same phenomenon across most of Florida. So the challenge is just that in places where it has been easy to build, we do now have a glut and that's bringing home prices down. And that just comes back to what we were talking about earlier that some people view that as hallelujah and other people say oh no. And it just depends on whether you're on the outside looking in because you haven't bought a house yet or if you have a place and you want to keep the price high. Milwaukee is up 11%, Cleveland's up 9%, San Francisco down 6%, Austin's down 6%. Um that's according to Zillow that is just revised forecast for over 400 markets. Um what's driving this surge in the Midwest uh versus um you know versus some other large diver. So Midwest did not have the same kind of boom that other places did. In Austin, home prices doubled over the span of two years during the pandemic and that kind of rise is just unsustainable. Whereas Milwaukee, Pittsburgh, Cleveland had very modest home price appreciation. So, those are some of the last places where you can still get a nice house for $200,000 a year. And people are still moving to the Midwest in search of that affordability because they moved almost everywhere else during the pandemic. So, Florida used to be much more affordable than it is now. Texas used to be more affordable than it is now. Um, Pittsburgh is sort of the new hot spot. Detroit is the new hot spot. Milwaukee is the new hot spot. And that's just because it's easy to start a family there. Is this a cyclical trend, uh, Glenn, where is this sort of a permanent rebalancing of Americans moving? I don't think it's just cyclical. I mean, what was crazy in the past 10 or 15 years is it used to be that it was San Francisco that defied the laws of physics where no matter how high home prices got, they could still go higher in San Francisco because there were so many lucrative jobs in San Francisco, New York, and maybe LA. But eventually the rest of the country isn't just chopped liver. There are great jobs and great companies there too. So you saw businesses relocate from San Francisco or New York, move to the middle of the country because housing was more affordable and that that made labor more affordable. So just as the CEO of Redin, I'd have people come into my office here in Seattle and say, "I can't afford a house and I work for a housing company. I'm going to move to Idaho." And secretly, I felt relieved because I wouldn't have to give them a 20% raise every year, which is really hard to do. So, I think you're just seeing companies get more flexible about people living outside of these coastal hubs, even though there's been a stronger return to office mandate every year. Okay. So, you wrote uh to me, summer 2025 was the strongest buyers market in over a decade. So, what specifically happened this year that wasn't present maybe 10 years ago in 2015? Inventory. So, we've been inventory constrained for more than a decade. I don't think there's been this level of canceled home sales since 2013. There hasn't been this ratio of buyers to sellers since the end of the great financial crisis. Uh we just have way more buyers out there than excuse me, I said that wrong. Way more sellers out there uh than buyers right now. There's a bunch of wouldn't sell their place in June and July. Uh there were many buyers who thought they were going to wait for rates to come down. Rates came down, but maybe not as much as people hoped. And now there's just significant inventory that's probably going to sit on the market until the end of the year. So that means that there will be continued downward pressure on prices. It's really hard right now, David, to bring buyers and sellers together because the sellers are thinking about what they could have gotten six months ago in April, March, February, and the buyers are thinking, gosh, time is on my side. If I wait another 6 months, how much lower could the price be? And so, especially in the Sunb Belt, um, we are seeing deals fall apart. As soon as the inspection comes back and somebody sees that there's one little problem with the house, they say, "You know what? There's plenty of new construction right down the street. If I don't take this place, I'll find another." And that's a real fear uh for people trying to sell an older home. Well, if I were sitting on a second investment property right now, I'd probably think to myself, well, rates are coming down. We're in a pep fed pivot era, so I'll probably wait a little bit for rates to come down a little bit more because that may that may be the time where demand is even stronger. So, ironically, we're probably seeing housing prices not move to the upside because people are thinking like I am. Is that what's happening, Glenn? I'm just speculating here. Yeah. I mean, I think it's just a really uncertain time, David. So, it's quite possible that if you're trying to sell a place that next year it'll be on like Donkey Kong again and the market will be really strong because rates are below 6%. If we cross that threshold, it will bring significantly more buyers back into the market. But the challenge is to have an economy where rates can fall that far while still protecting employment. So, you know, if the Fed is responding because there's more unemployment, it goes above 5%, the stock market takes a dip, inflation is stronger, then you're going to be in a situation where people aren't buying a house for another reason. Even though the mortgage rate is attractive, they're worried about keeping their job. So, I feel careful. I think, you know, if you're trying to sell a property and you've got a good buyer, I would take it. If you don't, you're going to have to wait. What about buyers? What are buyers thinking right now? Your data suggests or shows that uh buyers have now $20,000 in purchasing power more or gain $20,000 in recent months. And um yet they're still waiting on the sidelines. What are they waiting for, Glenn? More negotiating leverage. So buyers are putting in offers, but they're just putting it in for another 10 or $20,000 below the asking price because they think that's where the market is headed. So once the market hits an inflection point, people freak out. You know, if prices just go up and up and up, a buyer is lined up and ready to pay because he just thinks if I don't get it now, it's only going to get worse for me. But when you do get into that situation where time is on your side, um everything about the house has to be perfect or you're going to walk away from the deal. And just coming into the deal, when you make the initial offer, buyers have gotten significantly more aggressive um and put out terms that sometimes their agents are a little hamfisted about presenting um because it is such a low offer. But in many cases, the sellers are taking it. You know, there's sort of a broader effect on families right now. We know so many families that contacted us a year, 2 years ago because they had a baby or they went through a divorce. Um, you've got couples that are sharing the same house even though they can't stand each other anymore. And the reason they're doing it is because they can't afford to buy their own house. So, they got that house when rates were at 3%. If they had to buy that property again with rates above 6%, uh, the mortgage payment would be unsustainable for them. So, I think there is so much pent up demand just from the basic life events that make people want to move out, move out from mom and dad, move out from their ex, um or just go up from a condo to a single family home cuz they had a second or a third baby. And all of those folks right now are still kind of sheltered in place because they are waiting for a five handle on the rate. Based on the data you're seeing, do you see more demand for single family units, uh, detached homes or condos or town houses next year? Single family homes. So, only in a bull market do you see really strong demand for condos and town houses? Um, those are the most volatile sectors of the market. So, as soon as the shiitakei mushrooms hit the fan, it's condos where you see it first. Condos get really sell, especially downtown. Um and then as soon as the market takes off, uh condos are again where you see it first where suddenly those get really easy to sell, but single family homes hold their value much better. Uh just in general, there has been a movement toward the suburbs in America. Um where it used to be everybody wanted to live in a city, you were young, you were urban, you were Gen Z or a millennial or what have you, and that's just where people wanted to be. And now uh the suburbs are more diverse. Um, you know, some of the major cities still have different problems with property crime and so uh we actually see stronger demand outside the city than in the city and usually that's where you see single family homes. Have tariffs impacted the housing market directly or indirectly this year? Well, they're affecting builder costs. So, United States imports lumber from Canada, for example. And by the way, I want to be clear. I have no beef with Canada. Let there be peace between us. I'm sorry for all the crazy stuff that's happened. But having said that, um we need lumber and we need other raw supplies um from overseas. Uh but we also need labor. So many of the skilled artisans who build homes come from outside the United States. And so this is going to be a test of uh the conservative movement. You know, one of the reasons that conservatives have wanted to limit immigration is to create more opportunities for Americans and the housing industry should be an industry where people want to work. Um, but many of the folks who build our houses actually come from outside the United States. And by the way, I always feel that if you're trying to bring back manufacturing, what's the one good that can't be manufactured in China? Well, it's a house. You can get the raw materials, but the house itself has to be built on site. And so if we had to pick a place where we wanted to create jobs for folks who didn't graduate from college, who don't have a PhD in computer science, let them build houses. That's what I say, David. I think the Trump administration recently imposed tariffs on on cabinets and other furniture. So very specific. Um I'm not sure what that's about. This is a New York Times article proposing potential fixes for the housing crisis. Um I won't read the entire article. I'll just summarize it for you. One of the proposed solutions You read this, hey Glen, I love it. I love it. Give that guy a job in the administration. One of the proposed um solutions is to impose tariffs on steel, aluminum, and copper. Abstain from imposing tariffs on furniture. Um and then additionally, we're going to also one more suggestion. It says here, "Leave Fanny Mack and Freddy Mack alone. Put them under conservatorship once more." Anyway, um just let's just comment on uh the the other one we already talked about in expanding the housing supply and then ease immigration restrictions to bolster the construction workforce. Um okay, I mean that I think there's twofold there. If you increase immigration, you could also increase demand, but I'll let you comment on what's being proposed here. Well, I don't know where to start because I thought this article was gold. I would not privatize Fanny and Freddy. I'm not a regulator, so it's not up to me. But the government has just been this huge backs stop. It's an incredible risk to give somebody a loan over 30 years given how volatile the global economy is. And having Fanny and Freddy stand behind all the mortgages in the United States, package them up for mortgage into mortgage back securities and absorb some of the short-term risk has really been great. I think they've been a very progressive force in the housing industry. They've stabilized the cost of capital for American home borrowers. Um, so I don't know why you would uh mess with something. It ain't broke. Don't fix it. And then I also agree with just being really selective. I know that there's a rationale on tariffs for many goods, but the rationale for tariffs on housing related supplies I think is less strong. And so I would ease up on that. Um, that's where I stand. I think it's a really good point. This is a pretty interesting stat from this article that I just showed you from the New York Times article. Uh, one of the biggest issues is supply, especially smaller starter homes. So, in 2023, just 9% of new homes were smaller than,400 ft² a typical measure. 1982 40% hit that mark. So, 9% were smaller than,400 ft versus 40% some 40 years ago. Why is that? Because we have a K-shaped economy. So right now the wealthy segment of the United States economy is driving our overall prosperity. That is the strongest segment in luxury home sales, in the stock market, in luxury retail goods. Uh those are the companies that are doing really well. And it's in the service industry where people are just getting by that you're seeing real economic pain. Um delinquencies on mortgages are up just a little bit. It's nothing to panic over yet. I'd be the first to tell you. I promise you. I'd be candid about it. But we do see warning signs that the folks who have less than a four-year college degree, who are earning less than $50,000 a year, these are the people who are really struggling. Maybe the other factor is that during the great financial crisis, uh, builders were really aggressive about building starter homes and so they had massive volume but really low unit profits. And this time I think they've just been a little more greedy about focusing on the types of homes where they can command a higher margin and take less risk because they know that the market could reverse at some point. And I think they forgot about that in say 2005 2006. Well, I guess my next question depends on the district and the region, but if you're a developer, are you are you making more money from large homes or or or smaller condos right now? Large. You're making money from large homes. And in fact, rents came down because builders had shifted from small starter homes to also apartment buildings. So, they were either building luxury properties or apartment buildings. And that really brought the rent down in 2023 and 2024. Since then, apartment building construction has slowed and rents are starting to rise again. So, if we get into this situation where rents are rising and housing doesn't get affordable, that's where people really get pinched. So, what you're saying is capitalism is at fault for the unaffordability crisis. Oh, I don't know if it's that simple. Because if there's more of a financial incentive to not build the smaller homes while the people that you you just talked about who need the smaller homes aren't going to have more supply. Yeah. I mean I think the larger issue is the technology has just gotten to be a longer and longer lever and the people who are standing on that lever in technology are wealthier and wealthier. So, you know, you're going to see rising income inequality and there isn't much will on the part of governments to stem that and so businesses are going to cater to it. But I think it's a bigger problem than just capitalism. I think it's endemic to technology. It used to be that you know if you had a horse you were richer than anybody else but now it's chat GPT and there's a lot more horses than there are chat GPTs. That's a really analogy but sort of true. It's a quote of a quote from Glenn. So, if you were to look ahead at 2026, uh how would you, you know, taking your crystal ball, how would you compare 2026 forecast to uh this summer, for example, where you you called it one of the strongest buying markets in a decade? Uncertainty is I know that's a weeny answer, David. That's okay. But, uh well, what needs to happen to provide more clarity for you? Let's put it that way. Uh, I think we need to see if tariffs are going to cause inflation and if they don't and economists just have to step back from that position, we're going to have lower rates and then if we have lower rates, we're going to have a really, really strong economy. It's also just interesting to me, you know, if there is a real impact from tariffs on the overall economy and it affects jobs and inflation, will the administration step back from that? generally has been very reactive to anything that threatens the economy uh more so than almost any other administration. And so my guess is that we're going to have this little back and forth where I do think there will be an impact from tariffs. I think it'll affect jobs and inflation and then I think um the US government is is going to step back from some of that. That's my guess. Is it true that even if mortgage rates come down a little bit and interest rates come down, uh home ownership costs having risen will offset lower uh rates, we're talking about higher insurance, higher maintenance, higher renovation costs, so on and so forth. Is that true? I don't think so because right now home prices, yes, they're going up 2%, but in real terms, they're going down because inflation is 3%. And so, you know, if you're going to buy almost any asset, this is the one um right now where there's deflationary pressure, non-inflationary pressure. It's less than the rest of the assets in the US. Well, I'm looking forward to when uh you and your refin team put out your annual uh year ahead outlook. Um we've we've done that. We've done that in the past and it's it's turned out to be, you know, a lot of it has turned out to be true. So, I'm looking forward to that. When does that come out again? Oh, I don't know. Around Thanksgiving, isn't that right, David? What's your prediction for the economy? What's my What's my prediction for the economy? Oo, I don't think anyone's asked me that already. Um, all right. Well, I live in Canada, so a lot of the a lot of Canada's growth depends on what happens in the US. So, let's talk about the US. I think I largely agree with you. I think if inflation doesn't really uh really kick in to the extent that some people fear, although we are starting to see Home Depot for example, Macy's, a large lot bunch of other box stores are just announcing they're going to raise prices of goods. You know, they just made that announcement a couple weeks ago. So, we might see some things move up on the peripheral, but generally speaking, if um consumers spending power doesn't decrease too much in the next year, yeah, we'll see a we'll see a much stronger economy uh where at least continued growth. You know, I was just traveling. I was traveling a couple times this this year for for well, some some for personal, some for business in the US. I was in Vegas in May. Um big slowdown in Vegas. I was in Denver just last uh two weeks ago and the Uber driver was telling me hey why are you know he was telling me it's a little bit slower now than maybe a year ago and he was asking me well have you noticed this anywhere else is maybe this is just because of seasonality I said I I've noticed this other places like Vegas as well so maybe it's just the economy so I think the slowdown already happened in discretionary spending the question is whether or not lower rates is going to turn that around um so I think that Yeah, you've got your ear to the ground always, David, interviewing home home depot clerks and Uber drivers and everything else. Yeah, I Yeah, you really get a good sense of what people are feeling just talking to everyday regular people and because the economic data is always lagging by a couple weeks to a month. Um, so I think the slowdown already happened. Let's see if things pick up once rates fall. I I'd imagine not immediately a 25 basis point cut is going to do anything. But if we get more aggressive rate cuts without seeing inflation skyrocket that I think growth will come back. I'm buying. David, it's good to see you. Thanks for having me on the show. I keep forgetting to wear a tie, but next time I'm going to clip one on or even knot it up. Well, you you Yeah, I mean that would be that would be great. You don't need to. You look great already. Um so so don't don't don't feel pressured to change your style, but we agree. Sorry. We we we uh we we we um we look forward to seeing you again soon and thank you for your time today. Good to see you, David. Thank you, Glenn. Take care.