REDFIN: Housing Disaster Explained

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1:01I don't know about you folks. When I see real estate statistics, I always come back to Lance Lambert at Rezzy Club. He is housing housing housing. And today I want to talk about the red fin report that says 680,000 more sellers than buyers. A, I want to really know what the heck that means. B, I want to know what it looks like in comparison. And C, I want to know if it simply means this is the best buyers market in the last decade or so. Lance, you're amazing. What you do at Rezzy Club is truly impressive. But what the heck is going on with red fin? And it is scary headline of 680,000 more sellers than buyers. Yeah. So one thing to know about red fin data is that usually they start their data line where their own internal data starts, which is 2013. So whenever they say, you know, the, you know, worst market on record or whatever on record or best on record, it's all back to 2013. Because that's when the intent started according to red fin's data.

2:02Okay. And that's good to know actually. Yes. And so with their analysis, they try to calculate the number of buyers and the number of sellers. Now in the real world, it is, you can essentially calculate the number of sellers in any given time. Right. It's the number of active homes for sale. It's the number of, you know, new homes for sale. Now there does start to become this blurred area of well, during the pandemic, you know, some of the homes that were for sale, there was a slight suppression to new listings more than normal because so many things were selling so quickly, they didn't even go on the market. Right. And then you also have the idea of like open door, just mailing people, you know, like, here's what we would buy your home port. Right. And so it kind of unlocked some homes for sale. Right. So there can be a little bit of a blur and, you know, any given time, there's always some shadow inventory, especially over on new construction. Right. Not everything is listed in the MLS.

3:07So there's a little bit of blur, but at the end of the day, you can calculate how many numbers sellers with some margin of error, right. It's a little easier. The harder one is buyers. They will always be the hardest to calculate because who is a buyer, you know, yes, any, you know, somebody searching for a home looking at Zillow, if they're out there making offers, you know, you could probably say they're a buyer. Right. Yeah. I would think so. Right. You know, there's, there's also this, you know, phenomenon where people can go from not being a buyer to buyer very quickly. And there's also these peripheral buyers that are kind of hard to calculate. So in my opinion, housing demand ran a lot hotter than some of the calculations for housing demand during the pandemic because so many people were out there bidding that weren't actually able to transact. There were so many people trying to get in there and buy, right. And so many bids on each of these properties. That's demand. But if you count demand is just a purchase, right. It doesn't

4:08necessarily fall into that. I want to poke at that a little bit because I think you just said something that's important if I understand it correctly. So as the calculation goes inside Redfin today, let's just say it's 2021 again in the market is crazy. And a house gets eight offers. They accept one of the eight offers. Is it fair to say that under your understanding of Redfin's calculation, they count that demand is one and not eight, or do they do you know? Yes, I believe that what so they do not estimate buyers on Redfin traffic or customer acquisition data. I would have to look deeper, but yeah, they definitely would not be counting all of that, right. And so that's important because again, this is why I have a problem with that chart is because I A.I. agree with you supplies really relatively easy and probably fairly accurate minus some shadow inventory. It's the demand side that I think is always under reported because again,

5:11what as somebody who's been an active buyer and real estate for almost 30 years, I'm always a buyer at the right price. I'm always a buyer of certain inventory. And I often get in situations where I'm one of five buyers or bidders or whatever you want to call it. And to only count one demand because there's one asset that's disingenuous and not accurate because there were actually five people that wanted it, but only one person that got it. So that's an interesting tweak. And so the way that I like to do this when I calculate it is I like to do months to supply on one axis. And I like to do year over year change in existing home sales or prices existing prices. So price and supply. And so we're not equilibrium falls. So currently around four months of supply, but you're around like one percent appreciation, right. That takes you into the quadrant that's very that's the softest since 2012. Yeah, but not like the GFC level. Now if you just

6:15went off the months to supply, you would not see that we are as soft as we are because you're not also accounting for the price. So I like to take in that. So we're a little weaker than suggested just purely based on months to supply when you also take in to account price. So I love that. That that axis makes complete sense to me because again, it allows you to understand is the market have a lot of supply because of growth or shrinking or prices or it just tells you when you look at both axes, it really does tell you a much better picture. So that's well done. I like those two. And and the other thing is you can also kind of watch it as it kind of pulls back to. So as it shoots out and then it kind of like right now what's happened, the you know, my narrative of the housing market the past nine months has been a market that went from a burst to softening. That burst to softening is kind of stabilized and we've stabilized into a place that is just a

7:17soft market. So we were softening, softening, softening. And then where the softening burst stock, it just put us at that equilibrium that's soft. So appreciation kind of kept decelerating, decelerating down to 1% close to zero. And then months to supply, yeah, you know, inventory's taken up a tad, but it's not moving much on my equilibrium chart, right? We just kept moving out, moving out, and then it just landed. And it's it's really interesting to me because when I think about demand, again, there's so many metrics in real estate and housing as you know, but instead of just looking at transactions, which it appears Redfin is doing, I'm not sure why you wouldn't maybe look at mortgage applications or or some other leading indicator. I think there's a far better leading indicator of demand than a housing transaction, right? A housing transaction is kind of like the end of it as opposed to a leading indicator, which might be a mortgage application or how you know, it might be open house tours or some other indicator of demand. There's got to be something

8:18earlier in the cycle. No. Now I do like the analysis. The problem is people are having trouble reading it. And the way they have formatted it, they've kind of really formatted this for marketing purposes, right? Yeah. The stories headline possible. Yes. Yeah, it's, you know, and people like to kind of read it as buyers sellers like that total number. They don't like to think of things as like equilibrium, right? But if you took their data and replicated their analysis using the same methodology and you also did it back to the 2000s and then you took that data and you created a scatter plot where it spires on one side sellers on other, right? And it would it would place it at a similar level that I'm getting on my chart. Now, the reason I say that another thing to keep in mind here is that when they say the most on record and there's 600,000 sellers outnumbering buyers, right? If you replicated their methodology, it would at least be a two million delta and set

9:19a 600,000 delta back in 2008, because they take active inventory as their supply, right? The inventory then was around four million. I'm so glad you brought this up because again, a lot of people reading this chart, lots of rumors out there pushing doom. They're trying to say, see, this is worse than the GFC. A, it's not their data only goes back to 2013 and B, if you took that and you extended it back to 08, it would be two million. It's like kind of like little brother, big brother, like not even in the same world 600 versus two million. You know, that's three X, that's crazy. And so then if you replicated it for the 2000s and then you did a scatter plot of both, you would end up getting a story that's very close to price versus months to supply. It would tell a very similar story. And if you look at the data closely, what you will see is there was a burst of softening that was occurring 24 into 25 and especially last year, really, right? That inventory bill. And then since it's kind of the softening burst is, the burst is done, right?

10:22Now where we've landed is this very soft place. And so that actual delta, that number has not changed too much more. It's inched up a little bit, but it's still around the same place, which is a soft place, a place where, you know, especially in many of these sunbelt markets, they are buyer's markets, right? Now, they're not necessarily most of them GFC style buyers markets where that was an extreme buyer's market, but there were buyers markets along the past of certain of these windows, 90s, yeah, for example, yeah, early 90s and some of these areas, where we are as of today. Now, I think, Mon, is there still a tremendous amount of variation across the country? You go through these markets, you'll see very different stories. And then within those softer weaker patches, some areas have firmed up a little bit better than others. So if you look at like what Tobrothers has said on their earnings, a lot of Florida is looking a little better for them

11:23of late. The prices have fallen some. That inventory bill though is not building like it was. Now, if you're looking at my data, some of these markets are actually falling a little bit your inventory. So they're seeing a little bit better, but Tobrothers is saying Tampa is still challenged. And then yesterday, they're actually March 24th, 2026, KB Homes reported. Yeah. And they said that they're seeing a little bit of demand improvement in Jacksonville and Orlando, but that Tampa's still challenged. Or when you pull back the young in, you'll see nuance. Now, another thing that KB said is that when you take any of their markets across the country, they're going to be some patches where there's a little bit of challenge and then there's others that aren't. They have some snowy areas in every market and they have some weak ones in every market. So there is a lot of nuance out there. And so where the housing market has been has been in this very squeezed equilibrium where both demand is suppressed. But also,

12:26if you, even if you're looking at that redfin chart, right? Yeah. You know, it's not necessarily high. And so you can very easily, also depending on the seasonality element, swing from, you know, something that's kind of a buyer's market to very briefly being a little bit on the seller side. And then it could swing back. We're just in this very, you know, very affordability constrained market. But where there isn't a ton of distress on the homeowners at large and they are still at the table with a little bit of the stronger hands, this cycle. And so that's what we are right now. We're still kind of going through that recalibration period. Love it. Love it. The end of the day when I look at that chart and I kind of step back as a real estate investor. What it tells me and I think you validated for me is we are just in the best buyer's market, collect, you know, in mass in over a decade. And again, buyers markets, okay, right? Right? This is what we should be doing.

13:32I would much rather be in a buyer's market than a seller's market. I don't want to repeat 2021. 2021 was crazy. It was not a great time to find deals. Everybody was selling everything in seven seconds. So the fact that Redfin is putting out this negative headline is great news to me. It scares people and it just makes the buyer's market better. Yeah. And you need to go through some of that period to get to more favorable yields, right? You got it. You got to go. You got to have a bit of a period, especially after that endemic housing boom run up. Anything else you want to get into? I guess the last thing to wrap this up with you is obviously we have a lot going on. Interest rates are up half a point. We've got new homes costing less than existing homes. We got a lot of other stuff coming. Maybe you can tease us with articles you're working on for next week. What do we got working on for next week at Rezzy Club? You know, well, one of the things I'm looking into is oil prices. And one thing that's interesting in housing is that there are a couple

14:33markets in the country where home prices are very correlated to oil. Oh, it's a few of these areas in the Texas perma basis or basin or basin. Yeah. I think. Yeah. And a few of those areas like Midland, Texas where when I run the numbers, you know, even in 2000 or 2020 when the pandemic housing boom was starting, right? And you know, you had a lot of these markets starting to rip in particular in Texas, right? Austin's roaring. You go out into Midland area, right? Because briefly during the pandemic, they had they couldn't they couldn't give away oil. There was a time it was a negative number. Exactly. And it created a bit of a mini oil bust. And so the prices did not move up with everybody else's at that time. And you go back through history and you can see that correlation there. So I'm looking at that trying to see, you know, take a look because if you go through a scenario where we go through a prolonged period of much higher oil

15:40prices than are currently expecting. Sure. And those markets could actually have, you know, just opportunity return. Yeah. Yeah. They could actually go through a mini housing boom while everybody else's, you know, look at you. I love this time's economics and housing together. Great, great job. We kind of interesting to look into. Another thing kind of just continuing to look into is, you know, how does AI end up impacting the labor market? You know, the thing with housing is you have the cyclical element and housing where, you know, demand is much more elastic than supply. So you can go through these booms, right? And we're in that period where we went through that cyclical window and it kind of pulls ahead some of the prices from the future and are kind of going through that recalibration right and smoothing it out. But you also have that that's one part of housing that cyclical element. But you also have this secular part which is just the incomes in your area, right? And those, you know, are usually on very, you know, prolonged trajectories

16:44that are going or are moving and pushing up the, you know, the intrinsic value, the real value of housing, even if it's not like the nominal that people are paying from the incomes, right? And so you have a place like San Francisco where today in house prices are 2,400 percent higher than they were in 1975. And we have US house prices that are up about 1,000 percent versus 1975. And then you have Youngstown, Ohio that's up 400 percent. And so the story there is that, you know, San Francisco, the Bay Area, was one of the biggest winners of where the economies went to the past 40 years, right? Tech, finance, globalization benefited from it, right? And then Youngstown has been on kind of the losing end of some of these really big secular swings, right? Steel, right? Manufacturing. And so if AI is going to create shifts in income and hit certain

17:48groups more than others, right? And maybe, maybe AI raises incomes for certain groups and then it also lowers it for others. If you're working off of the pure like Doomsday, you know, everybody thinks that AI is just going to, you know, eat up everything. But I think it's more likely that AI will work like other technological advances, at least in the short term. And boost incomes in some areas and push down. And so if you can predict where that's going to occur, and which groups are going to benefit the most and which might be the losers, that feeds down to long-term real estate. Absolutely. And so that's a part of it. And then the other thing is even if you have a scenario where let's say AI is way more advanced than we think. And it will, and it would actually suppress, you know, the labor market and create this downward pressure on overall incomes. Well, in that scenario, you would have some type of UBI that would be created,

18:52right, for sure. Or if that were to be created, the ones who would be the least likely to lose, in my view, just thinking of this intuitively, might be the real estate investors. Because you know, in that scenario that AI is way more advanced than we think, and it's going to have a much bigger impact, there's going to be a lot of companies that just go bust, right? And so some of this stock investing could be very risky, whereas on the real estate side, even in the scenario where AI, you know, really blows out the labor market and puts downward pressure on wages, you would have the government stepping in with some type of UBI. Just like COVID, probably creates some type of floor. So that's kind of the some of the, you know, the fun things that I'm working on at the moment and just kind of thinking through. Those are really hard things to predict. Yeah. But just, you know, doing a little bit of research and seeing what data we can find. Well, I'm good. The glad that you're doing it. You're far smarter and more accurate, all this stuff. So I'm glad that you're doing it. If somebody wanted to get these articles,

19:54they go to rezzyclubanalytics.com right there on the screen. Thank you so much. We'll talk in a week. Thank you, Zimmer. President Barack Obama. Virginia, we are counting on you. Republicans want to steal enough seats in Congress to raid the next election and wield unchecked power for two more years. But you can stop them by voting yes by April 21st. Help put our elections back on a level playing field and let voters decide not politicians. Vote yes by April 21st. Cisco duo. Fishing season is over. Learn more at duo.com.