Episode summary
The Crash That Won’t Come | Redfin Chief Economist Daryl Fairweather on the Great Housing Reset
Excess Returns
· · Hosts: Matt Zeigler · Guests: Daryl Fairweather
Summary
Daryl Fairweather argues the housing market is entering a “Great Housing Reset,” not a crash or correction. Her core view is that the post-pandemic distortions are fading slowly: incomes should grow faster than home prices, mortgage rates should stay near the low 6% range unless the economy weakens materially, and the inventory crunch should ease only gradually as the mortgage-rate lock-in effect unwinds over several years.
She says affordability improves more by time and supply than by dramatic policy or rate cuts. In her forecast, home prices rise only about 1% next year while wages rise 2% to 3%, helping buyers at the margin but not solving affordability for households that are far from qualifying. She also argues that 50-year mortgages, MBS purchases, and other demand-side ideas do not fix the underlying shortage of homes in the places people want to live.
The discussion highlights regional winners and losers. Fairweather is more constructive on affordable Midwest and Northeast markets, more cautious on expensive Sunbelt and “zoom town” markets, and especially alert to climate risk, insurance costs, and the total cost of ownership. She also expects AI to improve real estate search and decision-making, making housing data and local tradeoffs easier for buyers and renters to navigate.
Key takeaways
- Fairweather expects home prices to rise about 1% next year while wages rise 2% to 3%, slowly improving affordability at the margin.
- She says 30-year mortgage rates should stay near the low 6% range unless there is a recession or a major shift in inflation and employment.
- The mortgage-rate lock-in effect remains a major drag on inventory, and she thinks it could take another five years to unwind.
- She is more bullish on affordable Midwest and Northeast markets, where demand is still outpacing supply, than on expensive Sunbelt metros.
- Fairweather argues 50-year mortgages and similar demand-side fixes miss the real problem: a supply shortage in the places people actually want to live.
- She expects climate risk, especially insurance and repair costs, to become a bigger part of housing affordability over time.
Notable quotes
“It's not a correction or a crash. We're really just moving into a new phase of the housing market”
“Moving forward, we think that incomes are going to start outpacing home prices”
“we really shouldn't expect much movement on 30-year mortgage rates”
“it will take you know another five years to unwind all that locked up inventory”
“the Midwest and the former uh you know, industrial cities of the Northeast, think like Baltimore, Pittsburgh, that's where we're seeing home prices go up the fastest”
How the episode opens
It's not a correction or a crash. We're really just moving into a new phase of the housing market. Moving forward, we think that incomes are going to start outpacing home prices.
As long as the economy keeps chugging along where it is, I think that the Fed will keep rates at this close to neutral area. And that means that, you know, we really shouldn't expect much movement on 30-year mortgage rates. We're also expecting um a bit more supply as that mortgage rate lock in effect just becomes u more dampened over time.
But I think it is still a very big part of why inventory is so low and why sales are slow so slow and it will take you know another five years to unwind all that locked up inventory. You're watching excess returns the channel that makes complex investing ideas simple enough to actually use where better questions lead to better decisions. My guest today, Hate the Game author and chief economist at Redfin, Daryl Farweather.
Welcome back to Excess Returns.
Thank you for having me back.
So, last time we got a lot of attention on this, probably because housing is a big topic both for investors and a lot of people own houses, so they care about this stuff. And you have such a unique approach, I think, to this space. You're putting out some of the most cutting edge research in and around how we think about this data.
It helped me out when my wife and I were buying our last house. So, I want to talk about this report. You just put it out.
It's called the Great Housing Reset. I'm starting with that word reset. You didn't say correction.
You didn't say crash. What is a reset?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- housing market reset
- mortgage rates
- housing inventory supply constraints
- regional housing trends
- ai in real estate search
Companies and tickers mentioned
- Redfin
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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