‘Unfiltered’: The ‘path to normal’ (and 5% rates) does exist
Watch the conversation with Zillow’s chief economist as she shares interest rate predictions and how we can get back to “the stable promise” of homeownership.
NextHome CEO James Dwiggins has emerged as a significant voice on the topics that are shaping the real estate industry: lawsuits, innovation, leadership. But Dwiggins doesn't just answer questions, he asks them of guests on Real Estate Insiders Unfiltered, his podcast with Keith Robinson, NextHome's chief strategic officer.
On this week's episode of Real Estate Insiders Unfiltered, Skylar Olsen — chief economist at Zillow and self-proclaimed "Bill Nye the Science Guy of housing economics" — shares her thoughts on the state of the market and where interest rates are headed. The bottom line? Things are improving … slowly.
See what can propel the market in the short term, and the long term: The housing market has felt stuck for the past couple of years, but Olsen is betting on some momentum following July's weak jobs report. "When we get that kind of general economic shock within the housing market, you know, just take a breath — because it might not spell such a bad thing for our industry."
That's because a cooling economy could convince the Fed to cut rates in September. "If we had talked before this jobs release, I would still be 50/50 whether or not we'd get one this year." And now? Olsen thinks rates could be in the 6-6.4% range by the end of the year.
A market turnaround will take some time, however. "Owners are slowly unlocking, you know, slowly coming back. But the process is so slow." Still, there is a "path to normal," but that depends on more substantial rate drops.
"I think it'll take a couple of years to get down to 5%. But if mortgage rates were at 5%, then at today's typical U.S. home value, that mortgage payment, property taxes and insurance comes within 30% for the middle-income household. That's an affordable payment. That means you can save for retirement. That makes homeownership the stable promise that it's supposed to be."
Lower rates aren't the only solution, however — we also need more homes, Olsen says.
"What I want to see are policies that tackle additional supply, that make it easier to build. … Probably the gateway drug is the ADU, right? The granny flat. Let homeowners build a unit in their backyard. But, you know, over time, more and more gentle density. … Supply is the long run solution to affordability."
The views, thoughts and opinions expressed in the Real Estate Insiders podcast belong solely to the podcast creators and guests, and not Real Estate News.