Redfin's chief economist expects slow recovery for housing market

Daryl Fairweather, chief economist at Seattle-based Redfin Corp. (Nasdaq: RDFN), expects the residential real estate market to recover slowly.

With mortgage rates at their highest levels in years, many homebuyers locked into lower rates are reluctant to sell their homes, leading to less supply. Fairweather said the real estate tech company feels that even if rates decrease and buyers return to the market, it will take longer for supply to increase.

"Existing homeowners don't want to sell because they were locked into 3% mortgage rates," she said. "Buyers who want to buy, they are increasingly having to turn to new construction because it's what is available."

A recent report from Redfin noted that new construction made up over 31% of single-family homes on the market in the U.S. during the second quarter. Earlier this month, Redfin partnered with Seattle-based competitor Zillow Group Inc. (Nasdaq: ZG) to syndicate new builds from Zillow directly to Redfin starting in the fourth quarter.

Fairweather, who has been with Redfin since 2018, said new construction will make more of an impact for Redfin years down the road when these homes recycle into the market. She called new construction the "silver lining" to the current housing market.

In November, Redfin laid off about 13% of its employees and announced it was shuttering its home-flipping service RedfinNow, in which the company bought homes directly from consumers, fixed them up and sold them for a profit.

Fairweather said RedfinNow was targeted at people who wanted to sell their homes as conveniently as possible. With fewer homeowners looking to sell, these direct-homebuying companies were left fighting for scraps.

"It just became less profitable," Fairweather said. "We're always interested in finding ways to make home selling more convenient. I don't know if it would be RedfinNow exactly, but we may come up with some other kind of solution for people who want to sell really quickly."

Redfin launched in 2006. The company offers brokered listings, a home search tool, mortgages and a service for high-end homes called Redfin Premier. Redfin acquired Atlanta-based RentPath in 2021 for $608 million and began listing rentals in March 2022.

High mortgage rates and decreased homebuying demand have caused challenges for the housing market. Since June 2022, Redfin has gone through multiple rounds of layoffs. The company generated $275.6 million in revenue during the second quarter, down from $349.0 million during the same period last year.