the real estate

Psychoanalyzing the Housing Frenzy With Redfin’s CEO

The emotional and financial stakes of buying a home have never been higher.

Photo-Illustration: Curbed; Photos: Getty Images
Photo-Illustration: Curbed; Photos: Getty Images

In the first week of April 2020, Glenn Kelman made a bad decision that was still on his mind 15 months later, because, he told me, “I get paid a lot of money to make good decisions.” Like so many bad decisions, this one seemed at first like a good decision — perhaps even the only decision. COVID-19 was surging, home sales appeared to be plummeting, and Kelman, the CEO of the online real-estate brokerage Redfin, decided to gut his staff, laying off hundreds of workers and furloughing 41 percent of his agents. He figured: Who buys a house during a pandemic?

Before the month was out, new housing data showed how badly he’d misread the market. “I remember the analysts saying, ‘I’m not sure you want to hear this …’ — because once you’ve prepared the paperwork for a thousand people to go on furlough and set aside the severance money, you can’t really turn back,” Kelman said. His layoffs left Redfin in a weaker position to capitalize on the feverish demand for houses across America, and for the first time since its 2002 founding, the company started losing market share.

Despite that early misstep, the pandemic has been good for Redfin — its stock has quintupled since the middle of March, 2020. (The company says 86 percent of furloughed employees have returned.) And Kelman, who oversees an army of more than 4,000 real-estate agents across the country and a team of data scientists and economists, has emerged as one of the housing market’s best-informed observers. In May 2021, he took to Twitter to catalogue his industry’s pandemic distortions, leading with an anecdote about a Maryland woman bidding on a home who offered to name her firstborn child after the seller — and lost. “There are now more Realtors than listings,” Kelman continued. Lumber prices have tripled. Nearly two homebuyers in three report bidding on homes they have never seen in person. Couples relocating from expensive cities to cheap ones are saving so much that one spouse can stop working. Few people are better than Kelman at describing American real estate as simultaneously an economic, social, and psychological frenzy.

When I visited Kelman at his home in Seattle one hot afternoon in July, he met me at the front porch dressed in chinos and a black polo with a full head of silver hair pushed back over furrowed eyebrows. His wide, toothy grin and soft monotone lent an air of calm reassurance to everything he said, but that was the extent of his mollifying. When I complimented his home — a handsome two-story American Foursquare in the Capitol Hill neighborhood — his first instinct was to confess that he’d got it cheap after the 2008 financial crisis.

It was, of course, an exceptionally fraught time to buy a house. When Kelman collected the keys, he noticed the bathroom mirrors had been ripped off the walls. They’d been there during the walkthrough and held no real value. The negotiations had not been at all contentious. And yet the seller had chosen to deprive him of this one small piece of his home. “He was angry that he didn’t make a million dollars on this house and that he actually ran out of money and had to sell it at a loss given all the construction he put into it,” Kelman said. “In business, we always love to talk about win-win, but it felt more like a zero-sum game between me and him.”

Walking through the house, which was built in 1906, we passed through the entryway, living room, and kitchen without ever encountering a door. The open floor plan gives the house a vibe Kelman calls “urban but leafy,” which suits the charming patina that peeks out from beneath its modern appointments. We continued to a picnic table on the back porch, where Kelman had much more to say about the financial crisis — in particular, about how the regulatory response to the predatory loans that exacerbated the crash had all but shut the poor out of the housing market for good. “Some well-meaning reforms eliminated the subprime market, and the government never really replaced it with something else,” Kelman told me. “Now half of America can’t qualify for credit.”

In the years after those reforms were enacted, construction of new housing slowed to a crawl and inventory continues to drop. By this time in 2019, Redfin had 1.1 million active listings; now it has little more than half that. This shortage is what primed the real-estate market for its current boom, but what touched things off was the Federal Reserve’s decision to stimulate the U.S. economy with near-zero interest rates last spring. “The beneficiaries of that were exclusively wealthy people,” Kelman told me. “When you’re shoveling several hundred billion dollars into mortgage-backed securities, you have to keep interest rates below 3 percent, and at the same time only wealthy people can access a mortgage, which is a true bonanza for the financial class.”

Rampant speculation and skyrocketing property values have left Kelman feeling almost nostalgic for those years leading up to 2008, which, in retrospect, were the last time the working poor could reasonably aspire to home ownership in America. “I used to read stories about strawberry pickers buying McMansions in central California, and everybody viewed that as just the absolute apex of insanity,” Kelman told me. “But reading Piketty five years later, is it so bad that the strawberry picker had a nice house?”

Conceding that the picker probably could not afford his McMansion, and that the loans that put him in it were untenable, Kelman nevertheless liked this gaudy permutation of the American Dream. More than that, he disliked the level of “elitist judgment” surrounding these types of homes, which he views as nothing more sinister than the market’s attempt to grapple with problems politicians are content to ignore. In Kelman’s view, the left is eager to help the poor rent homes but not own them, while the right tends to ignore their plight altogether. Meanwhile, rampant NIMBYism prevents the kind of building that might help bring home prices back down to earth.

It had put him in a mood to reflect somewhat darkly on the future of housing in America. “The original premise of my stint at Redfin was that we’re selling the American Dream and the idea that everyone can afford a house sooner or later if they work hard and play by the rules,” he said. “Recently, I’ve had this feeling that there are so many people who are never going to become Redfin customers — that maybe the product we’ve been selling just isn’t a middle-class product anymore but an affluent product.” In February, anticipating a future in which homeownership is out of reach for more and more people, Redfin spent $608 million to acquire RentPath and its portfolio of apartment-leasing sites.

When Kelman bought his house a decade ago, his mother thought it was ostentatious. “It’s too much,” she told him. “People like us don’t get houses like this.” She had worked as a nurse, and Kelman’s father had been an engineer — “but not in the highfalutin sense that Amazon has engineers,” Kelman told me. “He worked at Boeing, and we lived in a house that was falling apart most of the time.”

Kelman, however, was an engineer in the highfalutin sense. In 1996, after earning an English degree at Berkeley, he gave up on being a novelist and co-founded Plumtree Software, which got acquired for $200 million in 2005. Newly wealthy, Kelman quit and turned to caring for his older brother, who was an alcoholic. “He couldn’t stop drinking and eventually died, but before he did, we took him to the hospital every week,” Kelman said. “As a businessperson and a software person, I worried that doctors would calculate there was no percentage in taking care of Mark — that they’d see him as a lost cause.”

They treated his brother well, though, and Kelman, inspired, decided to become a doctor himself. He took the MCAT and was accepted at the University of Washington School of Medicine. At his wife’s urging, however, he began shadowing doctors, which soon gave him reservations. “I realized I admired the idea of being a doctor but wouldn’t be very good at the work itself,” he said. “The alternative was to go back into the craven world of business, where the situation was reversed: The idea of business didn’t always speak to me, but the work itself did.”

The identity crisis was exacerbated when a venture-capital firm backing Redfin asked Kelman if he would want to be its CEO. “Deciding between business or medicine nearly shut me down as a human,” Kelman said. “I stopped sleeping. I remember being amazed that my brain could tell my right arm to lift and then wondering how I made any decisions at all.” In the end, his wife convinced him he could go back into the business world without necessarily making the world a worse place.

When Kelman joined Redfin, it was a small start-up best known for its pioneering use of online maps for home listings. Like so many other tech CEOs, he spent his first few years imagining himself as the next Steve Jobs; then, like far too few of them, he realized that this was not going to happen. It took him years to unlearn the kind of Silicon Valley dogma that confounds seeing the future with ignoring the realities of the present. For example, Kelman was obsessed with the idea of making Redfin the world’s first fully automated online brokerage, so he begrudgingly hired real-estate agents as a stopgap until its engineers could replace their jobs with code. When he realized that these agents were “everything” to the company, he stopped trying to engineer their jobs away. It had the effect of making Kelman an outsider in some of his old social circles.

“In San Francisco, I’d go back and see my tech friends, and they’d say, ‘Oh, look, it’s Glen, he’s a real-estate agent now,’” Kelman said. Despite being proud of his workers and of himself for taking a detour from “the road that leads to being a douche,” he couldn’t help being wounded by such comments. “Deep down, I’m still an arrogant software person,” he told me.

Real estate is a market in which people do not always (maybe even rarely) act rationally. Recently, instead of fleeing from record drought and high temperatures, a growing number of Americans have instead moved to heat-plagued cities like Phoenix, Austin, Palm Springs, and Miami. In August, I returned to Kelman’s home for a conversation about climate change, which is the one issue on which he does not consider himself politically moderate. He said he has been surprised lately by how few people ask him about hurricanes and wildfires and their effect on where to buy a home. “In Florida and Houston, it’s just hurricane after hurricane,” he said. “And in California, your house is going to burn down or be drenched in smoke for months out of the year. But I haven’t seen consumer behavior change that much, and while some of it is economic necessity, I can’t help but feel that there’s also some human stubbornness.”

Redfin’s chief economist, Daryl Fairweather, and her colleague Christian Taubman told me that the company’s surveys find two in five consumers think climate change will affect the value of their home within five years. (Fairweather herself recently moved from Seattle, where smoke routinely blackens the sky, to Wisconsin.) But that implies three in five think otherwise. “We found that more than a third of homes in Utah are at risk of burning in a wildfire,” Fairweather told me. “And yet there has been a big increase in migration into Salt Lake City and Provo, so it doesn’t seem like we’re really heading in the right direction in terms of where people should be moving. People are moving south; they’re going to Florida, they’re going to Utah, and none of these places are climate resilient. I mean, few places are climate resilient, but it’s hard to pick a place that’s more at risk than Florida or Utah.”

Kelman readily acknowledges there’s more to the phenomenon than climate-change denialism or ignorance. In his backyard, under a scorching midday sun, he recalled a work trip years ago to Houston and a condescending comment he made to one of his local managers about why anyone would move to a floodplain. Her response, Kelman said, was, “Do you think they don’t know? They know.” The people moving to the place in question were, of course, mostly people of color and mostly poor. “The future is here,” Kelman said, paraphrasing the cyberpunk author William Gibson. “It’s just very unevenly distributed.”

Back at my hotel that evening, as I thought of Kelman’s many dire predictions, I remembered something he’d told me during my first visit to his house. On the back porch, he’d set out a tray of cookies from a shop owned by his neighbor. Biting into one, he told me, in Proustian fashion, how he’d tried to talk her out of opening the store, which he saw as a risky bet. “Now it’s the most popular cookie store in Seattle,” he said. “I was totally wrong.”

Psychoanalyzing the Housing Frenzy With Redfin’s CEO