The U.S. is on track to finish the year with an annual decline in home sales for the first time since 2014.
Home sales have plunged over the past 12 months and many economists forecast sales will weaken further in 2019.
The housing market is slowing as would-be buyers struggle with rising borrowing costs and a persistently low number of properties on the market.
Glenn Kelman, CEO of Seattle-based real estate brokerage Redfin, recently spoke to The Associated Press about the state of the housing market and why he expects first-time buyers will continue to struggle next year. The interview has been edited for length and clarity.
Q: How do you see the housing market's trajectory next year?
A: The housing market is probably the weakest sector of the U.S. economy and the $64,000 question is just whether housing is going to bring down the U.S. economy or the U.S. economy is going to bring housing back up. People have good jobs and corporations are making money. If the stock market rebounds, you're going to see a reasonable housing market next year. It will still be soft, but it won't be catastrophic. If, on the other hand, housing undermines consumer confidence generally; people start feeling poor because their home has declined in value; and a huge sector of the economy for building and selling housing enters a recession, then you can see the start of a much larger cycle.
Q: Do you see first-time buyers having an easier time?
A: They're going to have a harder time. There's so much inventory that's rate-locked. The spread between 3.5 percent and the current mortgage rate, as that widens, it will just be a stronger and stronger incentive for people to hold on to their homes forever. When they want to move, they're going to rent them out, rather than sell them.
Q: What's it going to take to fix this shortage in affordable housing?
A: I view much of our economic policy as a way to defend the wealth of baby boomers. People get up in arms about protecting the value of their home and making sure that it increases. When the city wants to increase density, everybody living in a single-family home, who is usually between the ages of 40 and 65, absolutely freaks out and prevents that construction. And in some ways that's just acting as a cartel where the people who hold the good prevent more supply of that good from reaching the market and maintain artificially high prices. What I'm hopeful about is just this idea that Americans aren't trapped in a single city. If you go to almost any city hall, the only pocketbook issue that the middle class is up in arms about is the cost of housing. And every mayor is trying to solve that problem. And the cities that are solving it best are in the middle of the country, so that's why you're seeing this migration from coastal cities into the center of the country. I think it's going to depolarize us politically.
Q: Any major trends that you see accelerating next year?
A: Tech companies are going to increasingly be called to account for how we deal with the prosperity created by technology. We should want high-paying jobs, but when housing prices blow up in Boise or Salt Lake or Denver, a mob forms and they want answers and the people they ask the answers from are Twitter and Amazon and Redfin. The idea that we can say that's not our problem isn't working very well right now. There just has to be a better alliance between tech and government on this. It boils down to higher taxes for tech.