Existing home sales increased 9.4% in September, surpassing expectations, and the median purchase price rose nearly 15% year over year, according to data released earlier Thursday by the National Association of Realtors.
“There’s no way it can last forever. This level of demand is absolutely insane. I would expect it to last into 2021, at least,” Glenn Kelman of Redfin said on “Power Lunch.” “There are so many people now who have decided they’re not going to be able to buy a home by year-end, who expect to do so going into 2021, especially as their kids shift school districts. I do think we’re going to see this for some time.”
The demand for housing is primarily being driven by affluent professionals who are able to work remotely, Kelman said. That has given them the option of moving out of major metropolitan areas into more distant suburbs or, he said, buying vacation homes “and then taking a permanent vacation where they’re working from those homes.”
Low interest rates are also motivating homebuyers, Kelman said. However, he pointed out that interest rates will not always be low.
“Part of what is fueling this boom is that the economy has just split into two and rich people are able to access capital almost for free, so, of course, they’re going to use that money to buy homes,” he said. “There’s just another group of Americans who are still struggling, who can’t access the credit because we’ve raised credit standards, and you have high unemployment. I just think those two trends, at some point, have to collide.”
Shares of Redfin, which has a market cap of $4.5 billion, were higher by more than 1% Thursday to around $45.60 apiece. The stock has soared more than 115% in 2020.
Tight inventory of for-sale homes has helped lead to the higher purchase prices. According to the National Association of Realtors data, there was just a 2.7-month supply available at the end of September, based on the current sales pace. It represents the lowest level since 1982, when the Realtors began tracking the metric.
Kelman said he believes supply is likely to increase in November after the presidential election, when uncertainty decreases somewhat. Since the process of listing and selling a home can take months, sellers typically have a lower risk tolerance than interested buyers, he said.
“Buyers, when they see a house they love, they pounce,” he said. “I think the sellers are just looking long term at the economy and still feeling some anxiety. Many of them are going to put their homes on the market in January and February.”
— CNBC’s Diana Olick contributed to this report.