During the past five years, Seattle-based Redfin has become for a growing number of homebuyers in the Washington area a popular alternative to traditional real estate firms. Redfin is devoting much attention to this market, boosting the number of agents to 114 from four during that time.
We asked Glenn Kelman, Redfin’s president and chief executive who is based in the company’s Seattle headquarters, in an e-mail exchange to size up this market and to share what he sees for the coming year.
The market in the D.C. area has been plagued with low inventory, which, along with high demand, has spurred bidding wars that have priced many buyers out of the market. Potential sellers largely are holding on to their properties because maybe they’re underwater or are uncertain about the economy. Do you see any signs that this is changing in the D.C. area?
In Washington, inventory is low because sellers believe they’ll get a better price by waiting. But that may be changing. D.C. investors are putting money into places and flipping them for a profit. And we saw the number of regular folks requesting a listing consultation from Redfin jump 25 percent from August to September, with another rise likely in October. This is unusual for this time of year.
In a rough market, people are wary of selling in the shoulder season, just because you can be left holding the bag once Thanksgiving rolls around. But your odds are pretty good this year. There are plenty of Washington buyers still left over from the summer and almost nothing for them to buy.
Right now in the District and in Fairfax County we have a three-month supply of homes for sale; in Montgomery County it’s four. In a balanced market you have six. Nearly one in three homes here is under contract in less than two weeks. So the laws of supply and demand are beginning to kick in, and sellers are being drawn into the market, but not in great numbers.
When do you think these consultations will translate into more houses in the market? What impact would this have on buyers who are currently squeezed out of the market?
I don’t think there will be any major increase in inventory until after the Super Bowl. There are only so many weeks left before the holidays. As a result, you’ll see a lot of hold-over buyers from this year out in force in early 2013.
Do you think the Fed’s recent “quantitative easing” action, aimed at keeping mortgage rates low, will boost the U.S. housing market or do you think the stringent credit requirements will keep buyers away?
Low rates have been a huge factor in housing’s recovery, and credit is easing, too. Banks that once never loaned money without government backing are now doing their own deals, with buyers who are putting only 5 percent or 10 percent down.
No one expected that to happen any time soon. The only problem is that new loan regulations designed to prevent fraud have put regular home buyers at a disadvantage competing against cash investors, who can snap up properties more quickly, without having to go through an appraisal. Sellers don’t want the risk or the hassle of seeing a good offer go up in smoke, and so just take an all-cash offer even when it’s significantly lower.
What action by the government would be most helpful in spurring the market?
I’m not sure that the government can do much to spur the market beyond what the Fed has done to the money supply. There has been so much political pressure on banks about foreclosures that many now will just let the owner sell the property himself, even if it’s for less than the bank is owed.
That more than any of the federal programs like HAMP [Home Affordable Modification Program] and HARP [Home Affordable Refinance Program] has made the biggest difference. A foreclosure just wrecks the whole neighborhood, sometimes for years. Nobody mows the lawn. The place is boarded up. The value of the home plummets. So banks have become more open to ways that the owner can leave on his own terms, usually through a short sale, which tends to have a better outcome for everybody.
Give us your assessment of the health of the D.C. housing market and how does it compare to other markets around the country?
No market has been healthier than the core D.C. market, but the outlying counties suffered almost as much Florida or Las Vegas. Significant job losses never really happened in D.C., and prices remained fairly steady. Because the core market never dropped as much as other areas did, we may not see the kind of rapid price run-up that we’ve been seeing in say Phoenix, but I’m not sure what’s happening in Phoenix — where Redfin also has an office — is sustainable anyway.
What’s your forecast for the D.C. area housing market in 2013 and what can buyers and sellers do now to prepare for it?
If I say prices will continue to rise, I just sound like a real estate broker don’t I? Other times, I’ve said the market would drop 10 percent, that it was like a “fat man who couldn’t get up.” But the market now seems to show no signs of slowing down, so long as the entire U.S. economy doesn’t fall part because of a Euro debt panic or some other calamity. The reason for our optimism is that the fall has been so strong, with customers touring homes at a 35-week high just this week. Twenty-thirteen may well be the year that more sellers jump into the fray, so selection should be better next year, too.
So how do you get prepared? Well, would-be sellers should check Craigslist for what you can rent the place for, just because rents are really high right now, too. Then if you want to go through with a listing, get the home fixed up early in the season, right after the Super Bowl — all the research shows that it’s good to be the first in your neighborhood with a yard sign. And would-be buyers just need to keep an eye on new inventory. A lot of iPhone apps, including Redfin’s, set your phone abuzz the moment a listing hits the market that matches your criteria. I would sign up for one of those so that when you see something good, you can jump on it.