In his latest CNBC appearance, Redfin CEO Glenn Kelman talked about mortgage rates, the lock-in effect, and how buyer-broker compensation changes are already impacting market dynamics.
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Redfin CEO Glenn Kelman has read the tea leaves, and they’re pointing to a robust 2025 housing market.
Glenn Kelman | Credit: Redfin
“We saw an improvement at long last. We had seen interest rates fall in August and homebuyers had almost no reaction because they were waiting for the Federal Reserve to cut rates,” he said during his latest appearance on CNBC Money Movers. “That finally happened and now many people who had been on the fence are coming back into the market.”
Kelman said the Federal Reserve’s Sept. 18 decision to cut the federal funds rate by half a percentage point has improved consumer sentiment, despite rates steadily ticking up from the 2024 low of 6.03 percent on Sept. 17. Still, purchase applications have been on the upswing compared to the previous month — a bit of momentum he expects to continue into 2025.
“Well, already we’re seeing more people come off the sideline. So homebuying demand is up about 10 percent. Purchase applications are up about 10 percent,” he said. “There’s been a market increase and every time rates come down further we’ll see more. This rate cut was probably too late in the season to have a major impact on 2024, but I think in 2025 many homebuyers are going to say game on.”
As mortgage rates inch toward more favorable levels, Kelman said the market still has a significant inventory issue. Existing-home inventory will continue to be stifled, he said, as homeowners resist letting go of their mortgage loans with 2 percent to 3 percent interest rates.
“On that front, I don’t expect to see much progress. We’re talking to many people who were rate-locked. They got a mortgage at three percent or three and a half percent a few years ago and they still can’t afford to buy their own home,” he said. “Two-and-a-half percent of American homes changed hands in the past 12 months which is a 30-year low.”
Kelman said existing-home sales might top out at 4.5 million this year, but it’ll be a while before the market reaches 5 or 6 million sales again due to the lock-in effect among homeowners.
“I think it can be medium good, but as I said it can’t be great because there’s still so many homes on the sidelines there’s not going to be a rush to list properties,” he said of the spring 2025 market. “Usually when we go through a housing market correction, we correct the problems that we had.”
“So in 2008 there were too many people underwater on their mortgage and then we saw a wave of foreclosures and short sales, but this time the inventory shortage hasn’t been addressed and I think it’s going to be a long-term problem,” he added.
Beyond mortgage rates and inventory levels, Kelman said the recent changes to buyer-broker compensation and written agreement procedures are beginning to impact the market.
“There are places where there hasn’t been much change at all. If you go to North Carolina or New Jersey, almost all homebuyers’ agents are being paid about 3 percent,” he said. “But in other markets, like San Francisco or Boston, there are significant negotiations taking place.”
“Part of it is that homes are just more expensive there, and, so, people are asking their agent for a better deal,” he added.
He said negotiations on buyer-broker compensation will likely escalate into the spring, as market tailwinds encourage more consumers to enter the market.
“We’re going to see more activity in the spring; that’s when I expect more bidding wars and that’s when I expect more pressure on fees,” he said. “Right now we’re just going through this trial period, and in some places, there’s negotiation; in some places, there isn’t much.”