Housing: Buyers are ‘on the sidelines’ amid low inventory, Douglas Elliman CEO says

Douglas Elliman CEO Scott Durkin joins Yahoo Finance Live to talk about fluctuating housing prices amid low inventories, how various housing markets are adapting and selling, emerging housing markets, and the New York City housing landscape.

Video transcript

SEANA SMITH: The housing market looks to be cooling off a bit. New home sales slipping in April amid supply shortages and rising rates, falling 17% to the lowest level that we've seen since April of 2020. So for more on the trends in the industry, we want to bring in Scott Durkin. He's the CEO of Douglas Elliman. Scott, it's great to see you. Thanks so much for joining us.

SCOTT DURKIN: Same here. Thanks for having me.

SEANA SMITH: So, Scott, from your perspective, what are you seeing play out in housing right now? Because we're seeing rates rising. Obviously, supply remains very low. What does that tell us about what we could expect to see over the coming months?

SCOTT DURKIN: Well, I think what you're seeing out front right now is the fact that we have a severe inventory shortage. And people may think that the market is quieting and it's lost its blush. But what we have here is an inventory issue that's making the deals-- making less deals than we're used to. So we're out there right now trying to find more listings to bring to the market because we have such an incredible number of buyers that are right on the sidelines.

DAVE BRIGGS: Yeah, Scott, a lot of talk about a cooling off, but then you look at the average prices people are paying. The median price, a record $450,000. The average price also a record, $570,000 north. What does that indicate about this cooling off?

SCOTT DURKIN: Yeah, I mean, at Douglas Elliman, our average sale price nationwide is over $1.6 million. And we're in most of the luxury markets in the country. So it's not cooling at all. There's just a hiccup at the moment. And we're just waiting for the next round of inventory to come to the market.

And let's not forget, we don't even have the international buyer in our market yet because they've been waylaid with the virus and many things that are keeping them at home because they've had different strains and outbreaks. So we haven't even had them here yet to experience that piece of market that usually represents 18% of our market. And right now, it's about 1%.

SEANA SMITH: Scott, you mentioned the fact that you're trying to do everything you can to increase that inventory. When you say that, I guess, what exactly are you doing? And the shortage that we're seeing, we've been talking about the fact that there are simply no homes out there on the market. When do you see that easing a bit?

SCOTT DURKIN: Well, we actually did it. We've just-- Stephanie Garbarini, our CMO, just did a full ad campaign that will hopefully tickle potential sellers to sell their asset and get something else across the country or around the world. So we've actually implemented and launched a new campaign for potential sellers because there are such listing shortages. But you really have-- I mean, you really have to go out there and shake the trees, in many ways, to get people to sell. And many times, they don't know where to go now. And with this live-- work at home lifestyle and more mobile, people want three homes that mirror each home from their primary. So we're seeing a lot of people that are collecting and investing in three to four properties around the world.

DAVE BRIGGS: Some of these cities-- Phoenix, Tampa, Austin come to mind-- had grown 25% to 30% annually in terms of prices. Is there a silver lining here if prices are normalizing in some of these hot markets?

SCOTT DURKIN: The silver lining, I think, would be if you're ready to cash out and move on. I think many times, if you've seen your property values jump like that, you wouldn't sell high and buy high. You'd sell high and find somewhere else that's up and coming that may have piqued your interest, but you haven't really moved there. And the world is so mobile now and so digital. I think people are moving into places we haven't even heard of yet that will eventually be on the map of cities to invest in and have second and third, fourth homes in.

DAVE BRIGGS: You've intrigued us. What are those markets? Give me a couple.

SCOTT DURKIN: Well I think the Hudson Valley is huge right now. Let's not forget about that. And you can really get the most bang for your buck up there. I think also north of LA, going past Carmel and up there, you have lots to choose from and lots of bigger pieces of land. We're seeing a lot of activity in our new Houston market, Dallas, and as well, of course, Austin is really having a severe shortage.

But you just have to look at where you want to be and then just go maybe an hour away from that or two hours, and you should be able to find something great. And don't worry, the market will come to you there. It always has. And I've been in the business for a long time, and it always does move out to where you've gone. So just be adventurous.

SEANA SMITH: Scott, what about the renter's market? Because I was looking at some of the rents that are up right now, and it almost looks like more expensive, at least here in New York City, than it was pre-pandemic. Is that consistent with what you're seeing?

SCOTT DURKIN: Yes, what's happened is-- and normally, when you have a great sales market, the rental markets tumbled. Both of these markets are on a trajectory north like we've never seen. The rental market now is as tight as we can imagine. You're not getting any incentives now from landlords. You're actually having to sort of outbid other tenants and prospective tenants. So we're seeing a lot of bidding wars, especially north of $20,000 a month. We're seeing some things go for 10%, 15%, and 20% more than the asking rent.

So there's a real shortage. And that gives you a sign of people wanting to be here in New York. They think New York is back. And it really never left. It was just in a coma. But we're seeing people sell and also move into a luxury rental to decide what they want to do. And at the same time, with the COVID restrictions lessening, everyone's back and re-renting again. So the inventory is really almost gone.

DAVE BRIGGS: For the first time ever, there's more Airbnb and VRBO listings than there are actual open apartments in New York City, creating what you just referenced. Scott Durkin--

SCOTT DURKIN: I can see that.

DAVE BRIGGS: --Douglas Elliman CEO, good to see you. Thank you.