R
edfin CEO Glenn Kelman predicts a shift in the housing market by next year, driven by improved affordability. Although home prices are still rising, the pace of growth has slowed due to this summer's inventory "pileup" and weak buyer demand. Mortgage rates have dropped from above 7% in January to just under 6.6%, prompting buyers to return to the market.

    The number of weeks it takes to sell a home has increased from five weeks last year to six weeks this year, resulting in softer prices. However, sellers are now pulling back due to general economic uncertainty and slower inventory growth. This has created a "well-balanced market," according to Kelman.

    Home price drops vary by location, with cities like Pittsburgh and Cleveland seeing stable prices while areas like Dallas and Orlando experience significant softening. In Sun Belt states like Texas and Florida, affordability remains an issue due to high home insurance costs. Kelman notes that the cost of owning a home in Florida now includes not only mortgage rates and home prices but also expensive insurance.

    The market is stabilizing with mortgage rates hovering around 6%, but for existing home sales to increase from 4 million to 5 or 5.5 million, interest rates may need to drop below 6%. Kelman suggests this could happen in 2026 or later this year. Despite the affordability gap remaining wide, the recent drop in mortgage rates has made a significant difference and is driving an increase in home sales.