‘I’m concerned for all the first-time buyers’
Anywhere Real Estate CEO Ryan Schneider joins Yahoo Finance Live to discuss the mortgage demand, rising rates, supply constraints, and the outlook for the housing market.
BRAD SMITH: Welcome back to Yahoo Finance Live, everyone. This week, mortgage demand fell 21% year over year, hitting the lowest level since 2000. This is the latest sign of a cooling housing market. And here to talk more about the state of real estate and his newly renamed company is Anywhere Real Estate CEO and president, Ryan Schneider.
Ryan, great to have you here with us today. From what you’re seeing kind of across the board here, what does this signal to you about the consumer and where they are starting to push back on some of the prices, as well as the financing options that they have available to them?
RYAN SCHNEIDER: Well, first of all, thank you for having me. It’s great to be here under our new Anywhere brand name as a company. It’s a really strange time in the housing market because you’ve got this combination of rising rates, but you still have very substantial supply constraints. And we just don’t have enough houses. And there is demand for more houses. And so what we’re seeing is definitely some real slowdown, especially in the first-time homebuyer and the mass market part of the market, in large part driven by the higher mortgage rates.
But we haven’t yet seen as much slowdown in, say, the luxury part of the market, where there’s a lot more all cash offers and transactions happening. And there’s still some certain geographies like a Florida, like a Texas, like a Southern California, where the market seems to have more momentum than kind of some of the places that are struggling a little bit more with the rising rates. So this combination of rising rates and a supply constrained environment is a little different than some past housing challenges we’ve seen. And it’s leading to some different outcomes by both customer segment and geography.
JULIE HYMAN: Hey, Ryan, it’s Julie here. Can you give us a little color or quantification around what kind of pullback– where you are seeing the pullback in demand, how big it is, how severe it is?
RYAN SCHNEIDER: Yeah, look, the biggest pullback, as I talked about, is really in the middle part of the market in the first-time home buyers. We’ve seen the kind of 20% drop in mortgage applications, like you talked about. Hard data through kind of the end of April that we publicly disclosed talked about how listings were down and kind of how units were down in, like, the 10% kind of range. And that’s what we’ve been seeing. And that’s where we’ve seen the biggest impact.
We also saw luxury listings actually go up, 500,000 and up. They were up and have still been up. And so it’s really varied. That gives you a bit of the magnitude, both on the mortgage side, but also on in that kind of mass market first-time homebuyer, where the impact has really been the [INAUDIBLE].
BRIAN SOZZI: Ryan, a couple more rate increases from the Federal Reserve. What does that mean for your business?
RYAN SCHNEIDER: Well, obviously, it’s a headwind, you know. But it’s a different kind of headwind with that supply constraint that I talked about. We’ve seen a huge shift in people into adjustable rate mortgages, right? And that’s been one of the biggest things that’s happened here, as people are still trying to buy houses and find the place to live that they want to live, but dealing with higher rates.
And so, in the parts of the market where mortgages are the biggest, we totally expect that to continue to be a headwind. On the flip side, as the Anywhere Company, we go to market with some great brands, including Sotheby’s International Realty, Corcoran, Coldwell Banker, that tend to skew luxury. And so, we’ve seen a little more momentum still in our business because the luxury part of the market, where there’s a lot more cash offers, has been a bit less affected than what we’re seeing in the mass market in the first-time homebuyer.
BRAD SMITH: OK, and so for that first-time homebuyer, where we’re also marrying this with some of the CPI data that’s coming out, really showing us a sense of where those shelter costs, quite frankly, for consumers are becoming far more expensive now, when is that going to finally show up in the data, that it’s coming down and that it is affordable for the first-time homebuyer who is then getting pushed back into perhaps the rental market?
RYAN SCHNEIDER: Yeah, I’m concerned that it’s not going to show up in the data, and it’s not going to come down, because as a country, we just don’t have enough houses. We’re, depending on the number you look at, one, two, three million units underbuilt, unlike 15 years ago when there was a housing crisis and we were, like, two or three million units overbuilt. And again, it’s not just the price of purchasing houses. You can see the same increases in pricing on the rental market, right?
And so, I’m concerned for all the first-time buyers that there’s not going to be a pullback in the pricing, in part because there’s just not enough supply. And we see it showing up in both the purchase price of home, but also the rental prices. And so, I worry for that consumer segment a lot. And we, as an industry leader, do everything we can at the state and federal level able to advocate for more homes being built and brought to market.