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Facing Fear in the Housing Market · What's Your Problem?

0:15
Speaker 1: Pushkin. I always love talking about real estate. It's this
0:25
Speaker 1: nexus where all these huge macro factors like interest rates
0:29
Speaker 1: and demographics and technological change converge with the most personal
0:35
Speaker 1: micro thing in the world, your house, your home, the
0:39
Speaker 1: place where you live. And right now we are in
0:42
Speaker 1: a particularly interesting moment to talk about real estate. We've
0:46
Speaker 1: had a couple of years of wild price rises. Now
0:50
Speaker 1: mortgage rates are starting to go up really fast, and
0:52
Speaker 1: everybody is starting to get spooked. At the same time,
0:55
Speaker 1: you've got companies buying and selling houses on the internet,
0:58
Speaker 1: and huge sums of money slashing around, and an incredible
1:02
Speaker 1: amount of uncertainty and change and innovation. I'm Jacob Goldstein
1:10
Speaker 1: and this is What's Your Problem, the show where entrepreneurs
1:13
Speaker 1: and engineers talk about how they're going to change the
1:15
Speaker 1: world once they solve a few problems. My guest today
1:20
Speaker 1: is Glenn Kellman, CEO of the real estate company Redfinn.
1:24
Speaker 1: Redfinn has a website where you can look at houses
1:27
Speaker 1: for sale, just like Zillo, but Redfin also employs real
1:31
Speaker 1: estate agents all over the country to help people buy
1:34
Speaker 1: and sell houses. Glenn Kelman is my favorite person to
1:37
Speaker 1: talk about real estate with, and just one of the
1:40
Speaker 1: most candid, thoughtful CEOs. I know his problem is this,
1:44
Speaker 1: how do you sell a house online? You should get
1:47
Speaker 1: a better deal, you should pay a lower fee, We
1:49
Speaker 1: should use technology to make the whole process better. There
1:51
Speaker 1: should be someone who's totally on your side. And I
1:53
Speaker 1: know that sounds like a whole bunch of hocom but
1:56
Speaker 1: it's the whole reason I got out of bed this morning,
1:58
Speaker 1: and it's the truth. Glenn joined Redfinn in two thousand
2:03
Speaker 1: and five. Earlier in his life he almost went to
2:05
Speaker 1: medical school, not once, but twice, tried and failed to
2:09
Speaker 1: write a novel, and started and sold a software company.
2:12
Speaker 1: When he joined Redfinn, the company was a few guys
2:14
Speaker 1: in an apartment who had just come up with the
2:17
Speaker 1: idea of putting real estate listings on a map on
2:20
Speaker 1: the web, which obviously was a good idea. Wildly popular
2:25
Speaker 1: Zillo would soon follow, and before long looking at houses
2:28
Speaker 1: online became a national pastime. But Glenn wanted to go further.
2:32
Speaker 1: He figured, if we can put the listings online, why
2:35
Speaker 1: can't we do everything online? Why can't people look at listings,
2:39
Speaker 1: compare prices, make an offer, and buy a house online?
2:43
Speaker 1: And he actually started trying to make it happen back
2:46
Speaker 1: in the Auts, trying to get people to buy houses
2:49
Speaker 1: on a website rather than through a real estate agent.
2:52
Speaker 1: As he told me in our interview, it did not
2:54
Speaker 1: go well at first. There was almost no agent. There
2:59
Speaker 1: was someone who was willing to sign all the paperwork,
3:01
Speaker 1: but he was actually building a winery in eastern Washington,
3:05
Speaker 1: and he and I had a deal that, under no
3:08
Speaker 1: circumstance would he ever actually have to talk to anyone.
3:11
Speaker 1: He just wanted to sign the documents and be paid
3:13
Speaker 1: a small fee for doing so every month, And whenever
3:16
Speaker 1: I did have to call him because a customer had
3:18
Speaker 1: some gnarly question, he would say, what was our deal?
3:21
Speaker 1: I'm sorry he had his license or something. You needed
3:24
Speaker 1: him because he had the license. He had a license,
3:27
Speaker 1: and he was willing to sign all of these offers
3:31
Speaker 1: because you need a real estate agent to authorize the offer,
3:35
Speaker 1: if you will. But he didn't want to get into
3:38
Speaker 1: the messy business of actually giving people advice. And so
3:42
Speaker 1: the real issue was, first of all, people need guidance,
3:45
Speaker 1: and second of all, their real estate agents on the
3:48
Speaker 1: other side of the transaction. The seller's agent, the agent
3:52
Speaker 1: who was listing the house. Yeah. And so if you
3:55
Speaker 1: want to do something disruptive and cool and get into
3:58
Speaker 1: wired or fast company, you have to make sure that
4:01
Speaker 1: the the listing agent is cool with it. And we
4:04
Speaker 1: had not done that. So we had this revolt in
4:08
Speaker 1: Seattle all the real estate agents because suddenly thousands of
4:11
Speaker 1: people were on our website clicking a button to see
4:14
Speaker 1: a property, and the listing agent was being told that
4:16
Speaker 1: he had to show it and then later we would
4:18
Speaker 1: send him an electronic offer that was forty thousand dollars
4:21
Speaker 1: under the asking price, with no rationale and expect him
4:25
Speaker 1: to accept it, and that would tick him off. So
4:29
Speaker 1: for a bunch of reasons, it wasn't working. So what
4:33
Speaker 1: did you do? I just decided that whatever people want
4:38
Speaker 1: is what we will give them. And it doesn't matter
4:41
Speaker 1: whether the company's categorized as a technology company. What matters
4:45
Speaker 1: is that you got into real estate to make it
4:47
Speaker 1: better for people, and if what you're delivering isn't better,
4:52
Speaker 1: then you need to change it. And is what you
4:54
Speaker 1: realize that people want a real estate agent. I realized
4:58
Speaker 1: that some of what a real estate agent does people
5:02
Speaker 1: really love. They like it when somebody picks up the phone,
5:05
Speaker 1: they like it when somebody's really committed to selling their house.
5:07
Speaker 1: But there are parts of it that they absolutely hate.
5:09
Speaker 1: They hate the fee, They think it's a total rip off.
5:12
Speaker 1: They worry that the agent is trying to get an
5:14
Speaker 1: easy sale instead of doing what's in their best centrists
5:17
Speaker 1: And even now I am an unreconstructed hippie about that.
5:21
Speaker 1: It may be that there's a different way to serve customers,
5:24
Speaker 1: but I've never lost sight of the idea that you
5:27
Speaker 1: should get a better deal, you should pay a lower fee,
5:29
Speaker 1: we should use technology to make the whole process better.
5:31
Speaker 1: There should be someone who's totally on your side. And
5:33
Speaker 1: I know that sounds like a whole bunch of hocum,
5:36
Speaker 1: but it's the whole reason I got out of bed
5:37
Speaker 1: this morning, and it's the truth. So Glenn decides that
5:40
Speaker 1: Redfinn should do what technology companies try very hard not
5:44
Speaker 1: to do. Hire lots of people, not just programmers to
5:48
Speaker 1: make Redfin's website better, but thousands of real estate agents
5:52
Speaker 1: to put up lawn signs and drive actual human beings
5:54
Speaker 1: around in actual cars to tour actual homes for sale
5:58
Speaker 1: where you know they can whatever, turn on the faucets
6:01
Speaker 1: and talk about the water pressure, Glenn figures Redfin can
6:05
Speaker 1: use technology to help agents be more efficient, and that'll
6:08
Speaker 1: allow Redfinn to charge customers a fee that's about half
6:12
Speaker 1: what traditional agents charge, and very slowly it starts to work.
6:17
Speaker 1: Redfinn hires thousands of employees, revenue rises to hundreds of
6:21
Speaker 1: millions of dollars per year. The company goes public in
6:24
Speaker 1: twenty seventeen, and the whole time, Glenn is waiting for
6:27
Speaker 1: some cinematic moment when he'll know that he and Redfinn
6:31
Speaker 1: have finally made it. And by cinematic, I mean, in particular,
6:35
Speaker 1: he thought it would be like a Bruce Willis movie
6:37
Speaker 1: from the nineties. I used to have a model in
6:39
Speaker 1: my head, inspired by Diehard, that these guys are drilling
6:45
Speaker 1: through seven layers of security and a vault in Nakatomi Plaza,
6:50
Speaker 1: and the final layer is destroyed by the FBI because
6:56
Speaker 1: they knock out the power grid, and these guys are
6:58
Speaker 1: dancing around throwing money everywhere. And I just thought that
7:02
Speaker 1: someday Redfinn would feel like that, that I would have
7:05
Speaker 1: this one moment where it went from feeling like an
7:07
Speaker 1: embarrassing failure to a total success us. But instead we've
7:10
Speaker 1: just kept drilling. The seventh seal is broken the way
7:14
Speaker 1: the other seals are broken by just continued drilling. And
7:19
Speaker 1: as a result, I couldn't say when Redfinn went from
7:23
Speaker 1: being a failure to a success, and I'm not sure
7:25
Speaker 1: it's a complete success now because we're still drilling. Redfinn
7:30
Speaker 1: still drilling, still doing new things, trying to figure it out.
7:34
Speaker 1: One of those new things is a business called I buying.
7:38
Speaker 1: Redfinn got into I buying a few years ago. It's
7:41
Speaker 1: this business where a few big companies will basically buy
7:45
Speaker 1: your house for cash over the Internet, then turn around
7:49
Speaker 1: and try and sell it for a profit. I buying
7:52
Speaker 1: was in the news last fall when Zillo said they
7:54
Speaker 1: had lost hundreds of millions of dollars in just a
7:57
Speaker 1: few months in the iBuying business, and we're getting out
8:00
Speaker 1: of it. Later in the conversation, Glenn and I talk
8:03
Speaker 1: about what happened with Zillo and the risks Redfinn is facing,
8:07
Speaker 1: But before we got to that, we start out with
8:09
Speaker 1: some eyebuying basics. First off, who sells their houses to
8:13
Speaker 1: eyebuyers Like Redfin. There are people who want to sell
8:16
Speaker 1: a house while having to clean it up every day
8:18
Speaker 1: so that someone could tour it. They just want the
8:20
Speaker 1: money right away, and some of that is about convenience.
8:25
Speaker 1: You just want someone to buy at lockstock and barrel
8:27
Speaker 1: on the spot. Another reason that people do this is
8:30
Speaker 1: because they see the home of their dreams. They're bidding
8:34
Speaker 1: against cash investors, which has become increasingly prevalent, and they
8:38
Speaker 1: get the money out of their old place in three
8:40
Speaker 1: hours on a Sunday afternoon. And these eyebuyers provide that liquidity.
8:46
Speaker 1: We are the ones who say, listen, your house is
8:49
Speaker 1: worth about seven hundred thousand dollars. I think if we
8:52
Speaker 1: fix it up, we could probably sell it for seven
8:54
Speaker 1: hundred thirty seven hundred and forty. But we'll give you
8:56
Speaker 1: the seven hundred right now. And that has been wonderful
9:03
Speaker 1: for some people. But it's a trade off. You get
9:06
Speaker 1: a little less money for same day sale or a
9:11
Speaker 1: near same day sale. So when an eyebuyer buys a house, well,
9:14
Speaker 1: when Redfinn buys a house, is an eyebuyer, what do
9:16
Speaker 1: you do with it? We fix it up, get it
9:17
Speaker 1: back on the market, and sell it to another home buyer.
9:21
Speaker 1: So being an eyebuyer, you don't affect inventory you don't
9:24
Speaker 1: affect the amount of homes net that are for sale
9:28
Speaker 1: for people who want to buy houses and live in them,
9:30
Speaker 1: not at all. We're not going to sell the homes
9:32
Speaker 1: that we own to institutional investors. We're only going to
9:35
Speaker 1: sell them to families, so we're going to live in
9:37
Speaker 1: those homes. So I want to just kind of step
9:40
Speaker 1: back for a minute and recognize that I buying, this
9:43
Speaker 1: thing that you're doing is something that just suddenly appeared
9:46
Speaker 1: in the world a few years ago, and I want
9:49
Speaker 1: to ask you, like, why why did this come into existence?
9:52
Speaker 1: You know when it did. There's two or three things
9:55
Speaker 1: that kind of had to happen for IE buying to
9:57
Speaker 1: come into existence. Number one, all the pictures of houses
10:01
Speaker 1: had to be available on a website, because if you're
10:03
Speaker 1: going to price a property without ever setting food on it,
10:06
Speaker 1: you at least need to be able to preview all
10:08
Speaker 1: the photos. So step one is sort of the first
10:11
Speaker 1: wave of like what ordinary people I think think of
10:14
Speaker 1: when they think of real estate online. They think of
10:16
Speaker 1: redfin and Zillo and truly and just being able to
10:18
Speaker 1: go online, look at a map and click and see
10:21
Speaker 1: the house and click through the pictures. So that's the
10:23
Speaker 1: first thing, Yeah, okay, then step two and so the
10:26
Speaker 1: second step was just machine learning to process all this
10:30
Speaker 1: information and spit out a price. So redfin Zillo many
10:34
Speaker 1: other parties have these automated valuations that they publish on
10:38
Speaker 1: a website. And if you're able to do that for
10:41
Speaker 1: almost every address in America, sooner or later the question
10:44
Speaker 1: comes out, would you pay for it? Would you put
10:46
Speaker 1: your money? And then the third big change is that
10:51
Speaker 1: the cost of capital just radically changed, meaning it got
10:55
Speaker 1: cheaper for big tech companies to get money from investors. Right, yes,
11:01
Speaker 1: you told me a few years ago a story that
11:05
Speaker 1: I still think about all the time, not just in
11:09
Speaker 1: the context of I buying, but in the context of
11:13
Speaker 1: the economic world that exists. Now, do you know the
11:17
Speaker 1: story I'm talking about. I was talking to somebody I
11:20
Speaker 1: think representing money on the Middle East, and he said, well,
11:26
Speaker 1: we'd have you do some paperwork and then we'd give
11:28
Speaker 1: you this money, and we wouldn't really need an interest rate,
11:32
Speaker 1: we wouldn't really need an ownership stake in the company.
11:36
Speaker 1: And I said, well, why are you giving us this money?
11:39
Speaker 1: And he sort of said, I don't know, And I said, well,
11:42
Speaker 1: it's probably not even worth the paper cuts, all the
11:44
Speaker 1: diligence you'd have to do, we kind of don't need it.
11:48
Speaker 1: And then he said we really wouldn't need to do
11:51
Speaker 1: any diligence either, And then I said, Okay, this is
11:54
Speaker 1: getting seriously weird, and now, regardless of whether I'm going
11:59
Speaker 1: to take the money, I just want to understand what
12:02
Speaker 1: the heck is going on. Can you please just level
12:05
Speaker 1: with me? And that's when he said, I've got a problem.
12:08
Speaker 1: I'm getting on this pile of money. I have to
12:11
Speaker 1: deploy it. That was the word that he used. There
12:15
Speaker 1: are many sovereign states who have the same issue. They
12:18
Speaker 1: want to put the money into the US because that's
12:20
Speaker 1: considered a safe market. They want to put it into
12:22
Speaker 1: tech because that's sexy. And I am just trying to
12:24
Speaker 1: give you money. And it was like he wanted to
12:27
Speaker 1: be relieved of a burden, and then I needed to
12:30
Speaker 1: relieve him of that burden. And the reason it's important
12:33
Speaker 1: for I buying is that for the longest time, you
12:35
Speaker 1: never could get into the business of being a principal
12:38
Speaker 1: where you actually own the car or own the house
12:40
Speaker 1: that you were selling, because it's so capital intensive. And
12:44
Speaker 1: maybe five or ten years ago, tech just surmounted that
12:48
Speaker 1: huge obstacle. I want to own five or ten percent
12:52
Speaker 1: of all the houses in America. There's no way you
12:56
Speaker 1: could get the money for that, except there is. Like
12:59
Speaker 1: that would have been inconceivable in two ten, but in
13:03
Speaker 1: two seventeen there were people lined up to pay for it.
13:07
Speaker 1: And it means that we're really on the market. That
13:10
Speaker 1: suddenly we own a ton of houses, and it's very risky,
13:15
Speaker 1: and it's very capital intensive, and it means that we
13:19
Speaker 1: have to be right on top of the market because
13:21
Speaker 1: we'll trade up in good times and it's going to
13:24
Speaker 1: be a roller coaster ride to hell when the market collapses,
13:29
Speaker 1: and it does every once in a while. Is Redfinn
13:34
Speaker 1: about to go on a roller coaster ride to hell?
13:38
Speaker 1: In a minute, Glenn and I talk about where the
13:40
Speaker 1: real estate market is headed. That's the end of the ads.
13:50
Speaker 1: Now we're going back to the show. Redfinn currently owns
13:53
Speaker 1: hundreds of millions of dollars of houses scattered around the US.
13:58
Speaker 1: This seems scary given both the state of financial markets
14:01
Speaker 1: and the fact that Zillo recently lost a ton of
14:04
Speaker 1: money in the eye buying business. So I asked Glenn,
14:07
Speaker 1: could what happened to Zillo, happened redfin Well. The first
14:10
Speaker 1: moral of the story is that you have to acknowledge
14:12
Speaker 1: that it could happen to you, or it will absolutely
14:15
Speaker 1: definitely happen to you. So if you think somehow that
14:19
Speaker 1: your poof doesn't smell, or that you have a brain
14:22
Speaker 1: the size of a planet, it could never happen to you.
14:25
Speaker 1: That's the ubris that will cause you to fly two
14:28
Speaker 1: coast to the sun and end up holding billions of
14:30
Speaker 1: dollars in homes that you can't sell. So it can
14:34
Speaker 1: happen to us. But our thesis for why we can
14:37
Speaker 1: be different, it's just our ground game. So Zillo and
14:41
Speaker 1: redfin both focus on building websites. We've both been doing
14:45
Speaker 1: that for fifteen years. But in those fifteen years, Redfinn
14:49
Speaker 1: has also done all the hard work to sell houses,
14:53
Speaker 1: host inspections, attend to open houses, work with clients, and
14:58
Speaker 1: we've been through these terrible ups and downs that just
15:01
Speaker 1: being a website operator insulates you from. So, just to
15:06
Speaker 1: be clear, the distinction you're drawing here is Redfinn has
15:09
Speaker 1: real estate agents on staff all around the country and
15:13
Speaker 1: Zelo does not. Yeah, part of the reason that I
15:15
Speaker 1: got into eye buying. Is when I said I'm worried
15:18
Speaker 1: that it's too risky that we could get long on
15:20
Speaker 1: the market and own all of these houses right when
15:22
Speaker 1: there was a downturn. It's because Adam Wine, or the
15:26
Speaker 1: proponent of that business here at Redfinn, said, you're already
15:28
Speaker 1: long on the market. You've got thousands of people you
15:31
Speaker 1: have to pay, and if the market goes south, we're
15:35
Speaker 1: going to have to deal with that anyway. I tell
15:38
Speaker 1: the people running our eyebuying business that you are running
15:41
Speaker 1: on a knife's edge, that you have to have your
15:44
Speaker 1: finger on the pulse. I know I'm mixing all sorts
15:47
Speaker 1: of metaphors, but that's what business people do. The knife
15:50
Speaker 1: edges on the pulse of your finger sounds like a
15:53
Speaker 1: bloody outcome. You just have to be all over the
15:57
Speaker 1: market every single day, and you have to price in
16:02
Speaker 1: the risk appropriately. So in some markets we've priced ourselves
16:08
Speaker 1: out of the market where people have come to us
16:10
Speaker 1: wanting us to buy their house and we've said no
16:13
Speaker 1: because the price they wanted was too high. Yes, we're
16:17
Speaker 1: not sure where that house will trade three to six
16:20
Speaker 1: months from now. By the time those people pack up,
16:23
Speaker 1: we get the place fixed up, we get a sign
16:25
Speaker 1: in the yard, and we get it on the market,
16:28
Speaker 1: it'll be a very different housing market. So housing twenty
16:34
Speaker 1: thirty years ago was the safest investment my parents could
16:38
Speaker 1: think of. They were unwilling to invest in the stock
16:40
Speaker 1: market because they did want to compete against Wall Street sharps.
16:43
Speaker 1: And they told me that housing just goes up one
16:46
Speaker 1: or two percent every single year. It's where you should
16:49
Speaker 1: put your money. And now I think the housing market
16:52
Speaker 1: has more characteristics in common with the stock market. And
16:57
Speaker 1: part of that is because there's so much institutional activity
17:01
Speaker 1: in the housing market, and part of it is because
17:05
Speaker 1: there are also these platforms that provide much faster liquidity,
17:12
Speaker 1: much faster price discovery. So when we have a problem
17:16
Speaker 1: selling a house, we don't wait two months to come
17:18
Speaker 1: to grips with it. We mark it down right away,
17:20
Speaker 1: and everyone else on that block is disappointed that we
17:24
Speaker 1: move so quickly, but apart we're trying to stay ahead
17:27
Speaker 1: of them. And that makes the housing market more volvatible.
17:30
Speaker 1: So you have lots of real estate agents on the payroll,
17:34
Speaker 1: and you own a lot of houses, and we're at
17:37
Speaker 1: this moment in the housing market that seems I don't know.
17:41
Speaker 1: Pres you tell me precarious. So how do you navigate
17:45
Speaker 1: that potential problem with great humility if we have to
17:49
Speaker 1: choose between losing out on tens of millions of dollars
17:54
Speaker 1: in profits because we could have bought some houses and
17:58
Speaker 1: sold them for a profit, but there's also this risk
18:03
Speaker 1: that the whole market could disappear. We just decided to
18:09
Speaker 1: be more conservative as an eye buyer. Are you buying specifically?
18:15
Speaker 1: We're still buying. We're still buying properties. Are you buying fewer?
18:19
Speaker 1: We're more selective? I mean the first change in the
18:23
Speaker 1: housing market that you always see, and sometimes this confuses journalists.
18:28
Speaker 1: Beautiful houses, corner lots of light, still gets three offers,
18:33
Speaker 1: and you'll have a real estate agent say, I don't
18:35
Speaker 1: know why anyone's saying a housing market is softened. I
18:38
Speaker 1: just sold this house and had multiple bidders. It's the
18:44
Speaker 1: properties that aren't so pretty that suddenly have a problem.
18:47
Speaker 1: When you're really in a boom. The market isn't selective.
18:51
Speaker 1: Even the dogs sell for a song. But the first
18:56
Speaker 1: sign that the market has shifted is that middle tranche
19:01
Speaker 1: of houses that have a few problems, where the layout
19:04
Speaker 1: isn't perfect, where the price isn't quite right suddenly sit
19:07
Speaker 1: on the market, and those are the houses you have
19:10
Speaker 1: to be more careful about owning. And to be clear,
19:14
Speaker 1: is that happening now? Are this that middle trunch of
19:17
Speaker 1: houses sitting on the market longer? Now? Are we in
19:19
Speaker 1: that turn now? Absolutely? Does that give you information about
19:22
Speaker 1: what is likely to happen next? Yes? And no. So
19:29
Speaker 1: what I'm used to is a fifty basis point increase
19:33
Speaker 1: in mortgage interest rates. When that happened in twenty eighteen,
19:36
Speaker 1: there was half half a percentage point. When mortgage interest
19:40
Speaker 1: rates go up half a percent, the housing market has
19:44
Speaker 1: a major problem. That happened in twenty eighteen. It would
19:48
Speaker 1: have led to a housing downturn if the Federal Reserve
19:52
Speaker 1: hadn't backed off and mortgage rates hadn't come back down.
19:56
Speaker 1: This time, we're looking at not half a percent, but
20:01
Speaker 1: three whole percentage points increase in mortgage rates. Huge in
20:05
Speaker 1: relative terms, Yes, and so that is a massive shock
20:11
Speaker 1: to the system. There's so many buyers out there who
20:13
Speaker 1: thought they were going to be able to buy a
20:15
Speaker 1: home and can't. And I think what many observers don't
20:19
Speaker 1: appreciate about the housing market is how much it has
20:22
Speaker 1: depended over the past five years. On the stock market.
20:25
Speaker 1: We still talk about the ratio of income to home price,
20:29
Speaker 1: but people aren't using their wages to buy house. They're
20:34
Speaker 1: using their stock market portfolio. Some of them are paid
20:38
Speaker 1: in stock if they work at Google or Facebook. Others
20:41
Speaker 1: just have portfolios that are doing really well, and if
20:44
Speaker 1: that gets wiped out, you can't afford the down payment
20:48
Speaker 1: for a house. So we've just had a bunch of
20:50
Speaker 1: people who are in the market no longer be in
20:54
Speaker 1: the market. And I had always felt that even if
20:56
Speaker 1: the market cooled down, it would be healthy because there
20:59
Speaker 1: were so many more buyers than sellers. The price increases
21:02
Speaker 1: were fifteen twenty percent year on year, which is obviously unsustainable.
21:09
Speaker 1: Now there's some houses where there are no buyers, and
21:12
Speaker 1: those houses first are the ones that, as I said,
21:16
Speaker 1: do have problems. The perfect houses are still selling just fine,
21:21
Speaker 1: but there aren't that many perfect houses in the market.
21:23
Speaker 1: So you're going to just keep buying houses? As redfinn
21:27
Speaker 1: through this, how do we land this? Are you going
21:29
Speaker 1: to just take a pause and say, you know what,
21:31
Speaker 1: this is a bad time to buy houses. We're going
21:32
Speaker 1: to stop buying houses now or now we're going to
21:34
Speaker 1: buy houses, but with all the risk priced into the offer,
21:38
Speaker 1: and we're going to tell the people who are approaching
21:40
Speaker 1: us this is how we see the market. We might
21:44
Speaker 1: be wrong about it, and if you want to try
21:47
Speaker 1: to do better, we're here to help you with that too.
21:50
Speaker 1: We'll list the house and we'll test the market. And
21:53
Speaker 1: what surprised me is how many people say, actually, no,
21:56
Speaker 1: I'll take the money. Do you think house prices are
21:59
Speaker 1: going to fall? It depends on where, but in some
22:03
Speaker 1: places yes. So if you look at Idaho or Austin, Texas,
22:09
Speaker 1: sort of these secondary markets, where people leaving Seattle went
22:13
Speaker 1: to Idaho, people leaving La went to Austin, Texas. The
22:19
Speaker 1: home price appreciation there was twenty five thirty percent and
22:24
Speaker 1: that is going probably to come down. There are other
22:28
Speaker 1: places where I think it'll be more stable. There's still
22:32
Speaker 1: these powerful demographic trends. Millennials are moving, people are now
22:37
Speaker 1: free to work from wherever, and rents are still high.
22:41
Speaker 1: So rents are up fifteen percent year on year, and
22:45
Speaker 1: it doesn't give people many choices. Some folks say I'm
22:49
Speaker 1: going to step back from the housing market. I don't
22:51
Speaker 1: want to buy a place right now. And then they
22:54
Speaker 1: get another notice of a rent increase, and then they
22:57
Speaker 1: call us again. And so it's just a really tough
23:00
Speaker 1: situation for people looking to find a place to live. Yes,
23:05
Speaker 1: And so does that suggest that in that prices won't
23:10
Speaker 1: fall across the boarder won't fall that much? I mean,
23:12
Speaker 1: is that what that means? That's possible? That's not the
23:15
Speaker 1: market we're in right now. We're still selling houses. Yeah, yeah,
23:23
Speaker 1: I mean, is something like two seven, two thousand and
23:26
Speaker 1: eight unlikely, Like I'm just trying to Oh, I think
23:28
Speaker 1: that's very unlikely. Okay, So I'm proud that in two
23:33
Speaker 1: thousand and eight, I will give you the receipts, find
23:36
Speaker 1: the tapes. I was saying, there is a huge bubble,
23:39
Speaker 1: it is going to crash. Yeah, this time. I don't
23:42
Speaker 1: believe that's the case, because the people buying houses are
23:47
Speaker 1: living in them for the most part, and they're paying cash.
23:51
Speaker 1: It used to be that folks are getting liar loans.
23:54
Speaker 1: You had the story of the strawberry picker buying an
23:58
Speaker 1: eight hundred thousand dollars home in Central California that she
24:01
Speaker 1: couldn't possibly afford unless the price kept going up. And
24:05
Speaker 1: here it isn't a bubble in the most strict death
24:09
Speaker 1: nition of the term, which is that someone is buying
24:12
Speaker 1: the home only on the expectation that it will go
24:15
Speaker 1: up purely as a matter of speculation. People are buying
24:18
Speaker 1: homes because there's this unbridled lust for more space. People
24:25
Speaker 1: are investing more in their houses. They want to live there,
24:27
Speaker 1: and they are paying cash for it, so they are
24:30
Speaker 1: just not over their skis. When we talk to sellers
24:33
Speaker 1: about discounting their house so it can sell, that conversation
24:38
Speaker 1: is so different now than it was in two thousand
24:40
Speaker 1: and eight and two thousand and eight. They would say, listen,
24:43
Speaker 1: I'm right up against my mortgage. I cannot discount more
24:46
Speaker 1: than this because it'll be a short sale. I owe
24:48
Speaker 1: the bank that amount of money, right right. They didn't
24:52
Speaker 1: have anybody in the house. Yeah, now they've got three
24:54
Speaker 1: hundred thousand dollars of equity. I'm going to make a
24:56
Speaker 1: lot of money on this. Turns out it'll be two fifty.
24:59
Speaker 1: It'd set a three hundred. I don't like it, but
25:02
Speaker 1: it's still upside to me. So I do think it's
25:04
Speaker 1: different in that sense. But I'm worried about the economy.
25:07
Speaker 1: I'm worried about the war and train, worried about the
25:10
Speaker 1: stock market, worried about consumer confidence and mortgage interest rates.
25:14
Speaker 1: So lions and tigers and bears, it might be a
25:16
Speaker 1: scary summer. And all of that means worried about home prices. Yes,
25:22
Speaker 1: And I just think that if you're going to be
25:24
Speaker 1: in this business of running on a knife's edge, you
25:27
Speaker 1: can't get much sleep. Like other people have given us
25:30
Speaker 1: money to buy houses and to hire real estate agents.
25:34
Speaker 1: And if you were to say, oh, I was at
25:36
Speaker 1: the Bahamas this weekend, I wasn't paying attention to the
25:38
Speaker 1: housing market. You shouldn't have my job. So it's what
25:42
Speaker 1: I've signed up for. And you keep asking me about
25:47
Speaker 1: my comfort level. I haven't been comfortable in fifteen years.
25:52
Speaker 1: In a minute, the Lightning Round, including a few simple
25:55
Speaker 1: tips for when you're buying or selling a house. Okay,
26:09
Speaker 1: get back to the show. We're going to close with
26:11
Speaker 1: the Lightning Room. If I'm about to sell my house,
26:13
Speaker 1: should I redo my kitchen or my bathroom? Kitchen? What
26:17
Speaker 1: is the one red flag I should look for when
26:20
Speaker 1: I'm shopping for a house that you don't want to
26:21
Speaker 1: own it for at least five years what's your favorite
26:24
Speaker 1: trait in a coworker. I'm trying to put it into
26:26
Speaker 1: words in a concise way, but it's being persuadable. Like
26:32
Speaker 1: when somebody says that's an interesting idea. I'd never thought
26:35
Speaker 1: of it before, and I actually see them change their mind.
26:39
Speaker 1: I realize I should be that way, because the way
26:41
Speaker 1: that I got to my position is by being very opinionated,
26:45
Speaker 1: and that makes me hell to work with. Sometimes, in
26:48
Speaker 1: what year will the last human real estate agent retire? Never?
26:53
Speaker 1: If everything goes well, what's a problem you'll be trying
26:56
Speaker 1: to solve in five years. It's so easy to imagine
26:59
Speaker 1: hell and so hard to imagine heaven, isn't it, Jacob,
27:03
Speaker 1: I'm sorry. What's one piece of advice you'd give to
27:08
Speaker 1: someone trying to solve a hard problem? Make sure it's
27:11
Speaker 1: a problem you love more than anyone else, because then
27:14
Speaker 1: you can work on it harder than anyone else. How
27:16
Speaker 1: do you think you'll know when it's time to retire?
27:18
Speaker 1: So the only thing that I worry about isn't that
27:22
Speaker 1: you know the job will get boring or anything like that.
27:26
Speaker 1: It's that I worried I won't get to do it
27:27
Speaker 1: anymore because there's somebody else who can do it better.
27:30
Speaker 1: How do you think you'll know when the head of
27:34
Speaker 1: HR shows up with the general council and they walk
27:38
Speaker 1: in and close the door. I feel like you think
27:41
Speaker 1: about that. Well. I have told her that you shouldn't
27:45
Speaker 1: worry about me firing you. You're going to be the
27:47
Speaker 1: one who fires me. But it's also you know, even
27:51
Speaker 1: if I love the job, like if I own the company,
27:53
Speaker 1: if it were like a hot dog stand where I
27:54
Speaker 1: owned it, even if somebody else could run the hot
27:56
Speaker 1: dog stand better, I would say, well, I like running it,
27:59
Speaker 1: Kiss my Fannie, but I don't own it, and I
28:02
Speaker 1: shouldn't own it. It's a public trust at this point.
28:05
Speaker 1: And so not only do I worry out being fired.
28:11
Speaker 1: I know this is weird, but I'm worried that our
28:17
Speaker 1: board won't realize when I need to be fired because
28:21
Speaker 1: we're also worried about not being fired. I worry about everything.
28:29
Speaker 1: Glenn Kellman is the CEO of Redfinn. We spoke two
28:33
Speaker 1: weeks ago. Then last week, as mortgage rates continued to
28:36
Speaker 1: rise and home sales continued to slow, Redfinn laid off
28:40
Speaker 1: eight percent of its employees. In an email to the
28:43
Speaker 1: company's staff. Glenn said the company needs to prepare for
28:46
Speaker 1: a slowdown in the housing market that could last for years.
28:52
Speaker 1: Today's show was produced by Edith Russolo and edited by
28:55
Speaker 1: Robert Smith. Amanda ka Wong is the engineer special thanks
29:00
Speaker 1: to Justine Lange and Mola Board. I'm Jacob Goldstein and
29:03
Speaker 1: I'll be back next week with another episode of What's
29:06
Speaker 1: Your Problem five