Episode Summary
Executive Summary: In this podcast, Redfin CEO Glenn Kelman discusses the 2023 housing market standoff, where low inventory and high rates created a stalemate. He highlights the affordability crisis, millennial wealth gap, and the need for more housing construction. Kelman shares Redfin's recovery from COVID, emphasizing focus and lean operations. He also debates remote work vs. in-office culture, advocating for hybrid models to foster mentorship and culture.
Main Topics: Housing Market Standoff (Priority: 5/5): Sellers with low-rate mortgages refuse to list, while buyers are priced out due to high rates and low affordability. The standoff persists because employment is strong, unlike 2008. Affordability Crisis and Millennial Wealth Gap (Priority: 5/5): Millennials own less than 20% of national wealth vs. 30% for boomers at the same age. Housing unaffordability delays family formation and causes social discontent. Building More Homes: Challenges and Solutions (Priority: 4/5): Regulatory hurdles, high construction costs, and volatile builder loans hinder new home construction. Proposals include tax on unused land, federal industrial policy for housing, and ADUs. Second Homes and Airbnb Impact (Priority: 3/5): Second homes and Airbnb empires reduce inventory for locals, especially in ski towns and Hawaii. Canada's draconian taxes on vacant properties are cited as a potential model. Creative Housing Solutions (Priority: 3/5): ADUs, startup houses, and shared living arrangements are emerging as hacks. However, most people still desire traditional single-family homes with yards. Redfin's Business Recovery (Priority: 4/5): After COVID and market correction, Redfin cut side projects, focused on core product, and saw stock rise 132%. The company is leaner and more optimistic for 2024. Remote Work vs. In-Office Culture (Priority: 4/5): Kelman argues that in-office time (even 2 days/week) boosts culture, mentoring, and innovation. He believes remote work limits culture to a '5 or 6' out of 10.
Key Arguments: The housing standoff is unique because sellers are not forced to sell due to low unemployment and strong economy, unlike 2008 when foreclosures drove inventory. Millennials are disadvantaged: they own less wealth than boomers at the same age, and housing unaffordability is a root cause of social discontent among younger generations. Building more homes is politically easy but blocked by homeowners who benefit from high property values. Solutions like land taxes and federal policy are needed. Redfin's recovery came from cutting non-core projects and focusing on customer pain points, inspired by Airbnb's post-COVID strategy. In-office work is essential for culture and mentoring; hybrid models with 2 days in office strike a balance between flexibility and collaboration.
Data Points: Housing shortage: 5 million - The US is short about 5 million homes, contributing to the affordability crisis. Millennial wealth ownership: less than 20% - Millennials own less than 20% of US national wealth, compared to 30% for baby boomers at the same age. Mortgage rate: 7% - Current mortgage rates are around 7%, making homeownership expensive. Redfin market cap increase: 132% - Redfin's market cap increased 132% in the past year, recovering from lows. Redfin Q3 revenue: $269 million - Redfin reported $269 million in revenue for Q3 2023 despite a down market. Stock price recovery: $3 to $9 - Redfin's stock went from $3 to $9, with hopes of doubling or tripling again. Affordability low: four-decade low - Housing affordability is at a four-decade low, making it hard for first-time buyers.
Pivotal Quotes: "Housing is dead as a doornail, that it's a whale-turd at the bottom of the ocean. But now, with rates lowering, there is hope." — Glenn Kelman: Describing the housing market in 2023 and the shift in sentiment as interest rates began to drop. "America's forgotten how to build houses." — Glenn Kelman: Explaining the root cause of the housing shortage: regulatory and political barriers to construction. "It's a freaking miracle that all of you are here, that you actually stood with us..." — Glenn Kelman: Expressing gratitude to Redfin employees who stayed during the stock downturn, highlighting team loyalty.
Implications: The housing market may see increased activity if rates continue to fall, but structural issues like zoning and builder financing need policy intervention. Redfin's focus on core business and hybrid work model could serve as a blueprint for other companies. The generational wealth gap in housing will likely fuel ongoing social and political tensions.
About This Week in Startups
Jason Calacanis covers startups, tech, markets, media, and all the hottest topics in business and technology. He also interviews the world’s greatest founders, operators, investors, and innovators.