The hot real estate market during the coronavirus pandemic could warm further as more homes come for sale, real estate agent Redfin CEO told CNBC on Monday.
“When we see people make it more comfortable to let others into their home, we will see more inventory in the market and that will increase sales volume,” said Glenn Kelman at Closing Bell. “Today we’re definitely limited to inventory. There aren’t enough houses for people to buy.”
Home sales have been a point of economic strength despite the significant damage caused by the pandemic, partly due to the increased geographic flexibility of remote working.
Redfin’s total sales increased 17.4% for the first nine months of 2020 compared to the same period last year. Since the March low, Redfin stock is up more than 400%. Additionally, the iShares US Home Construction ETF is up more than 125% since its bottom in the pandemic in mid-March.
“I think it can’t get crazier every week, it gets crazier,” Kelman said of the real estate market. Even so, he admitted that the heat cannot be sustained indefinitely. “”[Mortgage] Rates are below 3%. It can’t take forever, but we believe it can last until 2021, “he said.
“We do know, however, that this is a cyclical business. It will go bust if there is a boom,” added Kelman. “It’s just a matter of when. We don’t think it’s going to happen anytime soon.”
Kelman, whose Seattle-based company started its services in 2006, said the strength of the current real estate market was not comparable to the mortgage bubble of the early 2000s. “The credit standards are much stricter than before,” he said.
“What is driving this boom is the real demand that people want to live elsewhere. There is less speculation. There is less predatory credit. This is not just a financial boom,” Kelman said. “It’s coming from a real shift in consumer behavior with people wanting to go to Montana, or at least Sacramento or Tucson, instead of living in the big urban centers.”