There’s optimism in a demand resurgence for city living: Zillow

Chris Glynn, senior economist at Zillow, joins Yahoo Finance to discuss trends and challenges in the real estate market.

Video transcript

MYLES UDLAND: All right, welcome back to Yahoo Finance Live. Hottest part of the market these days has been US single family homes. We've seen all the charts, inventory fallen off a cliff. But we still are looking for, really, the fastest pace of sales since the housing crisis, the housing bubble back in the mid 2000s.

Joining us now to discuss is Chris Glynn. He's a senior economist over at Zillow. And Chris, you guys are looking for 6.6 million existing home sales in 2021. That would be the most since 2005. I'm curious how this squares with some of that inventory data I was referencing. Go on your site today, look at a desirable neighborhood. There are homes that are coming on and coming off in three, four days. And I can only imagine how many bids are on some of those properties.

CHRIS GLYNN: I think you just touched on a very key part. Markets are moving so quickly. And so one of the challenges, as we think about inventory, is not just to think about the available supply of homes for sale, but also to think about the pace and velocity of the market and how quickly those homes, as you mentioned, three or four days in many metros, are being sold. And so really, markets are moving quite quickly right now.

BRIAN SOZZI: Chris, are you seeing any indications of people moving back into the cities after getting vaccinated?

CHRIS GLYNN: I think that we are seeing rents stabilize in many places in the last few months, whereas we saw softening demand for rents throughout the pandemic. In recent months, as there's optimism that bars, restaurants, theaters, and the real draws in amenities of services that bring renters and buyers to the urban core are going to reopen, I think there's optimism that there will be a resurgence in demand for city living.

MYLES UDLAND: And, Chris, we talked about that inventory situation earlier. You kind of brought through some of the positive impacts, at least in terms of the top line data, you know, how pending home sales can still hold up with low inventory. But, you know, that's been framed as a kind of crisis in the market for several years. This is going back before COVID, that there just were not enough homes available. As you see it and you look at things like housing starts, building permits, is there a path towards that situation getting rectified? Or are we looking at a couple of years here of there just being demand far outpacing what the housing market can supply?

CHRIS GLYNN: There's two things to keep in mind on the inventory side right now. The first is that new construction starts are increasing and have really come up since the pandemic came on a year ago. So builders are building, and that's great news. And the second thing around inventory is that potential sellers have indicated more optimism and willingness to list their homes as vaccines become more widely distributed. And so, as we turn the page from spring to summer here and the vaccine continues to be rolled out, we expect that will bring new inventory into the market. In fact, 53% of economists and experts that Zillow recently surveyed expected that inventory would increase in the remainder of 2021.

BRIAN SOZZI: Chris, does anything derail the housing market this year?

CHRIS GLYNN: I think the big thing to keep in mind on the housing market and potential challenges looking forward is affordability. There's mixed news on affordability. On the one hand, interest rates are very low. And that has kept monthly payments quite reasonable for most homeowners. And people have taken advantage of that in refinancing. But the challenges for new homeowners who are making down payments that are a percentage of purchase price, as the housing market heats up and home values continue to increase, that puts additional pressure on down payments or potential new home buyers.

MYLES UDLAND: And Chris, finally, before we let you go, I just want to talk about some geographic trends that you guys have seen, what metros have been hot, what metros haven't, and if these are sort of the same areas that were buzzy in the pre-COVID era, if those are still some of the leading areas that you guys are seeing.

CHRIS GLYNN: A great driver of demand and migration in the last year has been what we call a great reshuffling in American housing, where office workers have become untethered from physical locations and are now choosing new locations and homes based on housing that meets their needs. One in 10 Americans have indicated in surveys that they've moved in the last year. And we believe that this is a trend that will continue throughout the remainder of 2020. And they're moving to places like Atlanta, Charlotte, North Carolina, Austin, Texas, Phoenix, places that sit at the intersection of two trends we've seen throughout the pandemic in affordable housing and great year-round weather and outdoor living.

MYLES UDLAND: All right, Chris Glynn, senior economist over at Zillow. Chris, I really appreciate you jumping on this morning. Great to chat.