Redfin Tries To Talk Investors Out of the Real Estate Market, But Its Not Working!

Redfin exaggerates the real estate market correction for investors while documenting the healthy demand for real estate by homeowners, why? Well, as I regularly say, these companies that put out real estate industry "news" are not sharing information but promoting their business.

Before we get into that, let's, as always, start with the data.

Mortgage rates continue their steady 6-7% bandwidth, closing this week at 6.66%, about the same as it has trended most of this year.

Inventory: nationally, housing stock continues at record lows for periods other than during the Pandemic, and has declined to match the rates of 2021. As I have repeatedly said, as long as inventory is low prices cannot go down much.

Locally, in Los Angeles, the market grew slightly in the direction of a seller's market, holding at a market action index of 43, higher than the last few months' rating of 41.

Over the past few months, I have taken the California state government to task for its policies designed to get more headlines than help homeownership. This week the award goes to the federal government, where the Biden administration is going to penalize shoppers with better credit scores to subsidize people with worse credit and marginal income-to-debt ratios.

What will this do? Well, setting aside the politics, the goal here is to help people who cannot qualify for a home to qualify by both lowering their fees and charging more for better qualifying buyers. Again, not discussing whether or not the political goal is worthy or not, the real problem here is that now you will just have borrowers who otherwise cannot afford to buy a home to barely qualify, outbidding others who are more qualified, but no more homes are created. The limiting factor in real estate has been inventory for the last few years, and this will not build a single home. So, a lot like California's recent mortgage program, lots of headlines, no help for buyers looking to buy homes.

The award this week for most misleading news goes to Redfin. Their "research" this week reported:

So, what does this mean?

First, note the "nearly." That is a clue this is a piece of data stretched to make a headline. But if you break down the headline, it is telling you investors made money on 6 of 7 homes and lost money on 1 in 7. Is that bad? Don't all businesses have some products or services that they lose money on?

But it gets worse.

When you look at the average investor sale, the average capital gain is "only" $146k, down from about $190k. That is a record for any time other than the pandemic.

The average profit margin was 45.9%, about the historical norm.

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It gets worse when you break down their data, as even in the absolute worst markets, Las Vegas and Phoenix, the average profits still were $75k and $65k respectively. Not bad?

I mean, this seems like a pretty healthy business.

So healthy, just last month, Redfin was reporting that "Early-Stage Homebuying Demand Hits Highest Level Since May."

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Bill Gross, The LAProbate Expert
I am a real estate broker in Los Angeles, CA focused on probate real estate and the leader of a team of over 1,100 agents nationally probate experts.

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