‘Buyers are responding’ as affordability improves: Redfin CEO 

The housing market has continued to plod slowly through the summer — but that will change before this time next year, predicts Redfin CEO Glenn Kelman.

The key to the anticipated shift is affordability, which Kelman admits is "still an issue" but has "gotten so much better."

Mortgage rates have dropped from above 7% in January to just under 6.6%, "and buyers are responding," Kelman said during an Aug. 21 interview with CNBC.

"We've gotten a little bit of relief, and if you couple that with the fact that prices aren't growing quite as fast, I think buyers are going to come back into the market over the next 6-9 months," he said.

A 'well-balanced market': Home prices are still rising, but the pace of price growth has slowed — a reality Kelman attributes to this summer's inventory "pileup" and weak buyer demand.

"The number of weeks it took to get a home off the market went from five weeks last year to about six weeks this year," which resulted in home prices softening, Kelman explained. "But now, sellers are starting to pull back too. There's general economic uncertainty. We have seen inventory grow more slowly this month than it has in 17 months."

When you put all those pieces together, "it's a pretty well-balanced market," Kelman said.

Home price drops vary by location: "Home prices are holding up in places like Pittsburgh, Milwaukee, Cleveland," Kelman said, while the inventory uptick has significantly softened prices in Dallas, Orlando and Tampa.

But that doesn't mean affordability isn't an issue in Sun Belt states like Texas and Florida. "Part of it is that home insurance is so expensive in Florida right now," Kelman explained, noting that insurance costs outpace mortgage costs for some Redfin customers.

"As more natural disasters hit the state of Florida, the cost of owning a home now has three factors. It's not just the rate and the home price — it's also how much you're paying for insurance," he said. This new reality "is making people there really hesitant about buying a home."

How low rates need to go: The market is already stabilizing as mortgage rates hover in the mid-6s, Kelman said. But for existing home sales to jump from 4 million to 5 or 5.5 million, "we probably do need interest rates to drop below 6," something he noted could happen in 2026, if not later this year.

In the meantime, the gap between the median household income and the income needed to buy a median-priced home remains wide, and "that isn't going to change anytime soon," Kelman said. But the recent drop in mortgage rates does make "a big difference."

"We don't need the affordability problem to get solved overnight to have a significant increase in home sales — and that's what we're seeing," he said. "The market is doing a little bit better, but it's doing better off a really big low. So we'll take it."