What’s up everyone
Just a few months after Redfin said the Housing Market had started to recover, they blamed housing market conditions for their latest layoffs.
Geekwire reported that Redfin laid off 201 employees last week, or 4% of its workforce, marking its third round of cuts in less than a year.
So what’s really happening? If they truly believe the housing market is on way back up, why the layoffs?
And what does the data tell us about the future of the housing market?
Lets dive right in
Redfin CEO Glenn Kelman said during the company’s first quarter earnings that would be buyers were starting to schedule more tours, a “leading indicator” that the market was on the rise.
After the market “bottomed out” in November, when mortgage rates were over 7%, buyer demand started to return when rates eased, Alina Ptaszynski (tats-inski), a Redfin senior communications manager, told GeekWire on Thursday.
“We’re not out of the woods yet, but homebuyers are coming off the sidelines,” Redfin deputy chief economist Taylor Marr wrote.
Tour requests experienced a year-over-year decline of 40% in November, but only a 20% decline in January and February.
But one of the big problems is that these buyers, who are back in the market regardless of higher interest rates, cant find enough homes to see because a lot of sellers aren’t coming to the market. They simply don’t want to trade in their low interest rate to buy something with a much higher one.
Redfin data journalist Dana Anderson wrote: “People are reluctant to sell because they don’t want to give up their low mortgage rate, it’s hard to find another home to buy and many Americans recently moved.”
They cite a lagging supply as a key factor in declining home sales.
Stubborn inflation, high interest rates, and a crisis in confidence in the banking system are also keeping many would-be buyers and sellers sidelined, the spokesperson noted.
In Redfin’s latest Housing Market Update, they report new listings of U.S. homes for sale dropped 25% from a year earlier during the four weeks ending April 9, continuing an eight-month streak of double-digit declines.
That’s the biggest drop since the start of the pandemic, but there was a holiday weekend effect: Easter fell a week earlier this year than last year, so it’s possible that Easter weekend made the new-listings decline larger than it would have been if Easter fell during last year’s comparison period.
With less transactions in 2023, Redfin is cutting costs to preserve their bottom line with another round of layoffs.
Redfin and Zillow both posted losses last year, and both have shut down their home-flipping programs.
Redfin’s net loss in 2022 was $321 million, more than double its $110 million loss the year before according to the Seattle Times.
In the 4th quarter alone, Redfin’s revenue fell 25% and reported a net loss of $61.9 million, compared to $27 million in the year-ago quarter.
They eliminated 13% of its workforce in November after an 8% workforce reduction last June.
Redfin said last year that it expected the market in 2023 to contract 30% from 2021 during its third quarter earnings announcement.
That expectation has not changed and the company believes that sales could remain sluggish into 2024, Ptaszynski said.
As for the most recent layoffs, she cites that some local markets are performing even weaker than the national numbers, leaving excess staffing in those areas.
But as we’ve talked about in recent videos, not all housing markets are the same.
In fact, home prices are falling and rising concurrently, depending on where you look, with declines in the West and gains in the South and East.
Even the national housing predictions differ depending on who you ask.
Zillow economists predict a 0.5% increase in home prices between January 2023 and January 2024.
CoreLogic expects home prices to increase year over year by 3.7% by February 2024
The National Association of Realtors predicts home prices will rise by 1.3% by the first quarter of 2024.
And then you have the economists at Moody’s Analytics who expect prices to drop 4.2% between December 2022 and December 2023.
“Likely increases in unemployment and a US recession later this year will additionally pressure sales and prices,” analysts from Moody’s Investors service wrote in a report early this month.
And Redfin chief economist Daryl Fairweather said, “The Fed has made some progress cooling inflation with rate hikes but there’s still work to be done,”
“Even if the Fed chooses not to hike rates next month, which would likely bring down mortgage rates, the limited supply of homes for sale would remain a major obstacle for would-be buyers. Rates dipping below 6% would probably pique the interest of more buyers, but enough homeowners have rates in the 3% or 4% range that we’re unlikely to see a big uptick in new listings.”
As for the recent layoffs, Redfin’s Ptaszynski said that “ some markets are doing better than the national numbers” But stood by the layoffs by adding, “we need to staff appropriately and respond to economic conditions”.
Let’s take a look at the latest data from Redfin that covers the four week period ending April 9th to see the trends moving forward.
The median home sale price was $364,366, down 2.3% from a year earlier, the biggest decline in more than a decade and the seventh week in a row of prices declining annually after more than a decade of increases.
The median asking price of newly listed homes was $391,200, essentially flat (up 0.1%) year over year. That’s the smallest increase since May 2020.
Pending home sales were down 18.8% year over year, the biggest decline in more than two months.
*This is startling considering we are in the busiest time of the year.
Pending home sales fell in all 50 of the most populous U.S. metros. They declined most in Las Vegas (-45.7% YoY), followed by four West Coast metros: San Jose, CA (-42.9%), Seattle (-42.4%), Portland, OR (-41.9%) and Oakland, CA (-41.1%).
New listings of homes for sale fell 25.4% year over year, the biggest decline since May 2020. If not for Easter falling on April 9, the decline likely would have been in line with the prior four-week period’s 22% drop.
New listings declined in all 50 of the most populous U.S. metros. They declined least in Texas: Fort Worth (-7.6% YoY) saw the smallest drop, followed by Austin (-11.1%), Dallas (-11.6%), Nashville (-13.5%) and Houston (-13.9%).
Active listings (the number of homes listed for sale at any point during the period) were up 10.4% from a year earlier, the smallest increase in more than five months. The total number of homes for sale posted an unseasonal early-spring decline.
All this means is homes are staying on the market longer.
Homes that sold were on the market for a median of 37 days, the shortest span since November. That’s up from 22 days a year earlier and the record low of 18 days set in May.
On average, 4.9% of homes for sale each week had a price drop, up from 2.3% a year earlier.
Months of supply—a measure of the balance between supply and demand, calculated by the number of months it would take for the current inventory to sell at the current sales pace—was 2.8 months, down from 3.2 months a month earlier and up from 1.9 months a year earlier. Four to five months of supply is considered balanced, with a lower number indicating seller’s market conditions.
Here in the DC area, good houses are selling in multiple offers and still going way above asking. There’s not enough inventory and buyers are very frustrated.
What about where you live? Are you seeing foreclosures? Price reductions? Bidding wars?
We’ve definitely have a big discrepancy across our country when it comes to the housing market. A recent report from Black Knight breaks it down in my last video so check it out! https://www.youtube.com/watch?v=T0dR-XapYPc&t=9s