Redfin’s Chief Economist Daryl Fairweather speculates on a future scenario for the housing market as demand softens.
Last Week’s Inman Connect Virtual Event Featured Fairweather in Interview Regarding Her Thoughts on Shifting Housing Market
As the Federal Reserve continues to raise historically interest rates in the fastest pace policy about-face ever in order to fight inflation, Daryl Fairweather, Redfin’s Chief Economist, was asked for her thoughts about the “next” housing market after demand “cools” by Clelia Peters, the Managing Partner of Era Ventures.
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Fairweather, characteristically understated, prefaced her comments by saying she is not a seer into the future of the housing market while offering some of her thoughts and speculations. (Fairweather’s musings about the near future of the housing market are quite consistent with other industry and economic experts.)
- Number of homes sold in 2022 to drop by approximately -10% as demand weakens due to affordability concerns
- Decline in demand nearly inevitable as mortgage rates increase from less than -3% to nearly 5.5%
- Annual home price growth to decline from 20% to approximately 5% annual growth by the end of 2022
- Homebuilders to scale back construction plans due to slowdown in demand
- Two years down the road as housing demand renews, scant inventory to sell…again.
Fairweather’s Comments
Fairweather underlined that the reduction in demand is already happening in the current spring market of 2022. By comparing this current spring market to the red-hot spring market of 2021, you’ll agree that 2022 demand is falling well short year-over-year.
Fairweather said that it’s no mystery as to why potential buyers are getting cold feet in light of mortgage rates and home prices continuing to rise simultaneously. Potential homebuyers are simply stretched too far and too tightly by rising rates, rising prices and rising inflation.
Correlating softening demand with supply challenges, Fairweather said, “I don’t think we’re going to use this pause in demand to build a lot more housing to be ready for that increase in demand a couple years from now. So I feel like unfortunately a couple of years from now we’re going to be having the same conversations about how much home prices are going up, how much demand there is, and how unaffordable housing is.”
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