The Current State and Future of the US Housing Market with Redfin CEO Glenn Kelman on This Week In Start-Ups with Jason Calacanis

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Key Takeaways

  • For every person leaving a low tax state, four are moving in
  • Housing prices have shot up in smaller cities driving locals out of the market
  • This migration has roiled the social fabric and may destroy the leverage big cities have had to raise revenues and solve social problems
  • If you build more houses, the prices will come down but nobody wants new housing developments in their backyard
  • People are moving to more conservative parts of the country because:
    • The cost of living is lower
    • Those areas are building more houses
    • Taxes are lower there
  • Remote Work is going to cause a massive deflation for commercial real estate values
  • Companies that are the most militant about having their employees come back into the office are often one’s who have made massive investments in their work campus – Taj Mahal Syndrome
  • Work has become less important for some Americans as the pandemic has caused them to re-examine priorities

Intro

Glenn Kelman (@glennkelman) is the CEO of Redfin. Before joining Redfin, he was a co-founder of Plumtree Software, a Sequoia-backed, publicly-traded company.

The Current U.S. Housing Market and The Great Migration

  • Remote work has created mini-Silicon Valleys everywhere
  • Housing prices have shot up in smaller cities like Boise Idaho, driving locals out of the market and denying them the American dream
  • For every person leaving a low tax state, four are moving in
    • It’s a 1:7 ratio in Florida
    • It’s a 1:5 ratio in Texas
  • The political upheaval the migration has caused includes:
    • It has roiled the social fabric and may destroy the leverage big cities have had to raise revenues and solve social problems
    • This created more pressure on the Federal government to solve the problems

How to Solve the Housing Crunch

  • Build more housing – if you have more houses, the prices will come down
  • The problem is nobody wants new housing developments in their backyard
  • Glenn says there’s more than enough room in this country to build

The San Francisco NIMBY (Not In My Backyard)

  • San Francisco is one of the most progressive cities but many home associations block development to maintain housing values
  • “That means you sacrifice what’s good for society for your own gain – we need to make room for everyone” – Glenn Kelman
  • A plentiful supply of houses limits house price appreciation
  • Glenn says he’s been able to switch people’s minds on this topic by noting that their objections to more housing don’t square with their other progressive ideologies
    • Example: Nashville is growing because the city is not afraid to build homes
  • People are moving to more conservative parts of the country because:
    • The cost of living is lower
    • Those areas are building more houses
    • Taxes are lower there

How Remote Work is Changing Everything

  • Remote Work is going to cause a massive deflation for commercial real estate values
  • Companies that are the most militant about having their employees come back into the office, are often one’s with the longest lease or who have made massive investments in buildings on the work campus – Taj Mahal syndrome
  • A slow migration out of urban centers was accelerated by the pandemic
  • The balance of power has shifted as employees are willing to “walk” if they can’t work remotely
  • Generally, remote work is not ideal for new hires

Generational Work-Life Balance Differences

  • Some believe that part of the labor shortage problem is that younger generations are not as driven and feel less connected to work
  • There will always be a portion of the workforce which doesn’t seek a lot of meaning from their work but would rather have more free time
  • Others want to change the world and are driven by a sense of purpose
  • Debt and disillusionment of the American Dream – not being able to afford a home – has some people opting out of the work-til-you-drop lifestyle
  • Work has become less important for some Americans as the pandemic has caused them to re-examine priorities

Redfin’s Approach to Real Estate

  • Redfin’s goal is to have all info related to a property converge in one place – property technology
  • “It shouldn’t take six months to move… people wonder how can I compete with a cash buyer?” – Glenn Kelman
  • Tech is becoming a prime provider of liquidity because of its access to capital
  • For every listing, Redfin wants to show what a person would have to pay a buyer’s agent and publish commission

DOJ & MLS

  • Real estate agents are withholding listings to build their own business
  • The Multiple Listing Service is not the villain
  • DOJ is aiming at the idea that people shouldn’t have to pay two real estate agents
  • The DOJ and national real estate agents are at odds over this
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Notes By EWerbitsky

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