The Federal Reserve’s handling of rate cuts will play a vital role in the housing market’s affordability this year, but one expert says certain states are seeing "good" signs.
During an appearance on "Cavuto: Coast to Coast," Monday, Redfin CEO Glenn Kelman discussed the state of the housing market and what the potentially "sticky" inflation data could mean for buyers and sellers.
"So, we saw the same phenomenon where rates started low in the first part of 2023, ticked up in the spring and then went higher in the summer," he said.
Economists predict that mortgage rates will remain elevated in 2024 and will only begin to fall once the Fed starts cutting rates. Even then, rates are unlikely to return to the lows seen during the pandemic.
BUYERS ARE TAKING ON RISKIER ADJUSTABLE RATE MORTGAGES AS AFFORDABILITY WORSENS
"People have been putting off their homebuying plans for a long time, and so we are going to probably still have 4 million home sales this year, which is about as low as you can go, but it won't go lower," Kelman expressed.
Despite some hesitancy from potential buyers, Kelman suggested that people purchasing homes now are "going to get a better price than people who buy a year or two from now when rates come back down."
"People buying now are going to refinance later, but they're still going to have a less expensive house than folks who have been on the sidelines. So, I think the cash buyers who can afford to get into the market today, will be glad that they did," he said.
Kelman also noted the shift in markets as potential buyers pull back from states like pandemic-favorites, Texas and Florida.
BIDEN'S PLANS FOR ADDRESSING HOUSING AFFORDABILITY WILL MAKE IT WORSE, PENCE GROUP WARNS
The expert claims that once prices come down in those states, people will "step back in."
"Both Florida and Texas were two of the first states to see price declines, and I wouldn't even say that's unhealthy. Normally, in a correction, prices come down. And that's what drives sales up," he explained.
Kelman added that "the rest of the United States that really has a problem [is] where home prices have been persistently high."
"The fact that we're able to build more houses in states like Florida and Texas, where there's a better regulatory environment for new construction, that's a good sign. It means that homes are going to get more affordable and that people are going to keep moving there," he said.
But as uncertainty engulfs the real estate industry, Kelman noted that sellers and buyers are "always going to be sticky."
"Buyers are looking at the next six months, the sellers are looking at what they could have gotten over the previous six months," Kelman stressed.
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FOX Business’ Megan Henney contributed to this report
