Episode summary
Housing Shock: Biggest Seller/Buyer Gap Since 2013 | Daryl Fairweather
The David Lin Report
· · 35 min · Hosts: David Lin · Guests: Daryl Fairweather
Summary
Daryl Fairweather says the U.S. housing market is stuck in a rare, highly distorted phase: mortgage rates near 7% have frozen turnover, left Redfin with 62% more sellers than buyers, and pushed pending home sales to a new low. She argues the pandemic left many owners sitting on 3% fixed-rate mortgages, so they have little incentive to sell, while would-be buyers face a roughly $20,000 affordability gap on the typical home.
That freeze is hitting builders too. Fairweather says high rates hurt them both on financing costs and on demand, since completed homes must still meet buyers who can no longer afford them. She expects little new construction unless rates or wages improve, and she says the market is correcting slowly rather than collapsing because fixed-rate mortgages and forbearance prevent the distressed sales that would drive sharp price declines.
Regionally, she says the U.S. is splitting between expensive tech hubs and more affordable markets. San Francisco is exceptionally strong because AI wealth is flowing into housing, while Seattle is weaker because legacy tech firms are hiring less. She also points to Florida and Texas as buyers’ markets, and to Midwestern and Northeast metros like Chicago, Milwaukee, Detroit, Pittsburgh, and Cleveland as relatively resilient because they remain affordable on local incomes.
Key takeaways
- Fairweather says the U.S. has 62% more sellers than buyers, but fixed-rate mortgages are preventing a price crash by keeping owners from moving or distress-selling.
- She says the typical buyer faces about a $20,000 affordability gap versus the mortgage payment needed for a median home.
- Builders are reluctant to start new projects because high rates raise their financing costs and reduce the pool of buyers who can qualify for completed homes.
- Fairweather says San Francisco is an outlier on the upside because AI wealth is boosting demand, while Seattle is softer because its legacy tech employers are slowing hiring.
- She says Florida and Texas are buyer-friendly because supply is higher and insurance, taxes, and HOA costs are biting into demand.
- She argues the only realistic path back toward 2018 affordability is either lower mortgage rates or faster income growth over the next five years.
Notable quotes
“I think the AI boom was responsible for why mortgage rates have remained high”
“There is about a $20,000 gap between what people earn and what they would have to spend on a mortgage for the typical home”
“This is very significant and it really comes down to those mortgage rates spiking in September”
“So, we have very few distressed sales, and you really need those distressed sales to have motivated sellers who are willing to lower their prices”
“The average home is selling for 113% of its asking price, which is the highest number on record going back to at least 2019”
How the episode opens
I I think the AI boom was responsible for why mortgage rates have remained high. As investors, instead of putting their money into the US mortgage market, they're chasing these higher returns. When there's less money left over for the mortgage market, then you have higher interest rates.
Builders are up against a lot. Once those buildings are completed, there are fewer buyers out there who can afford to buy those homes. There is about a $20,000 gap between what people earn and what they would have to spend on a mortgage for the typical home.
If you're buying or considering selling your home, well, look no further to Redfin data. They're one of the largest real estate companies in the US with a large database of current trends. We're here to speak with Daryl Fairweather, chief economist at Redfin and the author of her book, "Hate the Game Economic Cheat Codes for Life, Love, and Work.
Currently, data is very much skewed in favor of buyers. Redfin is recording a remarkable stat. There's currently 62% more sellers than buyers.
Of course, it ranges by region. So, we're going to do an overview of some of the most important market trends right now for real estate across the US and perhaps other parts of the world and talk about which regions are hot and which are not. Welcome back to the show, Daryl.
Good to see you.
Good to see you, too. Thank you for having me. — Let me start with something quite remarkable which you brought up to me offline. US pending home sales sink to a new low. The typical monthly payment jumped to the second highest level on record, which may have contributed to this. But, pending home sales fell. Fell is the headline here.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- housing affordability
- mortgage rates
- home sales slowdown
- housing market outlook
- regional housing trends
Companies and tickers mentioned
- Redfin
Watch the episode
Watch “Housing Shock: Biggest Seller/Buyer Gap Since 2013 | Daryl Fairweather” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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