Redfin’s Glenn Kelman has a theory on falling house prices


Investors, including iBuyers, who entered the housing market in 2020 and 2021 are at least partly responsible for the dramatic price correction that occurred in 2022, Kelman said in a new interview.

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red fin CEO Glenn Kelman Monday suggested in a new interview with Fortune that an influx of real estate investors into the housing market over the previous two years amid the COVID pandemic is partly to blame for the dramatic price correction that occurred in 2022.

The housing market frenzy in the age of the pandemic has seen real estate investors, institutional and independent, flock to the market at unprecedented rates, while homebuilders have launched a huge amount of new projects, seeking to take advantage of low borrowing costs and strong demand.

Now that the frenzy has all but ended with U.S. home prices falling at the fastest pace since 2006, those same investors and builders are retreating and looking to offload their investments, Kelman explained. in an interview with Fortune published on Monday.

“When the shiitake mushrooms hit the fan, you [investors] want to come out first,” Kelman said. “The way to do it is to find where the lowest sale is and be 2% below. And if it don’t sell the first weekend, turn it down [again].”

According to Kelman, investors, including Redfin’s iBuyer, helped push prices up faster during the boom and are helping push them down faster during the crisis. Kelman said he sees the strategy unfolding in real time as Redfin manages its own portfolio of homes purchased by iBuyer.

“My view is that because builders and iBuyers represent more inventory, it leads to a faster fix,” Kelman told the magazine. “We are one of them – we are an iBuyer.”

“We notice immediately that fewer people are on our website and fewer are signing up for tours,” Kelman added. “We’re sitting on $350 million worth of homes for sale that we bought with our own money, or worse, bought with borrowed money. And what we have always told investors is that we would protect our balance sheet by acting quickly. We don’t have hope as a strategy. We immediately started jotting things down.

Investors using borrowed money are not looking to wait and see if prices will rebound, Kelman explained, and will do anything to compensate for weakening demand, he added.

“As soon as demand faltered, we reduced properties, which drove prices down,” Kelman said. “Every other home for sale in a neighborhood we marked the list now has a comparable sale that every buyer is going to know about and talk about.”

The CEO attributed the rapid pullback by investors to a sort of whiplash effect from the Real estate crash of 2008 which left investors weary of another downturn.

“I think the religion that people had from 1946 to 2008 — that housing prices are still going up — is dead,” Kelman said. “My parents believed it was literally inconceivable that prices would go down.”

This “religion” of housing was shattered by the crash of 2008, according to Kelman.

“So people respond [now] so that [correction] with almost PTSD, and they pull back a lot quicker,” he said.

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