The housing market seems to be defying economic logic. While the overall economy is experiencing a boom, the residential real estate sector is facing a recession, according to a leading industry expert.
Glenn Kelman, CEO of Redfin, a major real estate company, described the situation as unprecedented in his 20-year career. “Housing is in this recession, and the rest of the economy is booming,” he said in a recent interview.
Kelman highlights the unusual nature of the downturn. Typically, a decline in sales volume is accompanied by a drop in housing prices, making homes more affordable and eventually stimulating the market. However, in this case, prices remain stubbornly high despite the slump in sales.
This disconnect is attributed to a significant rise in mortgage rates, the highest in over two decades. While rates have eased slightly, they are still a far cry from the record lows seen during the pandemic. This surge in borrowing costs has priced out many potential buyers, leading to the current slowdown.
Kelman expressed concern, particularly for millennials who have been delaying homeownership. “Millennials who’ve delayed starting a family, putting off plans, can only wait so long,” he remarked. The high cost of entry into the housing market could further delay their plans for homeownership.
This unique situation presents a challenge for policymakers and industry leaders. Addressing the affordability issue without jeopardizing the broader economic recovery will be a delicate balancing act.
