When the coronavirus reached our shores in mid-March 2020, Americans were largely unprepared, as the virus had simply been a headline on our phones and televisions — not a real threat that could kill nearly a million of our family, friends, coworkers and neighbors.
Redfin CEO Glenn Kelman was one of the first real estate leaders to experience the impact of COVID first-hand, as the virus rapidly ravaged several King County nursing homes and moved its way into Seattle, Redfin’s home turf. Kelman had to make some quick decisions about his operations and staff, which included laying off hundreds of workers and furloughing 41 percent of Redfin agents.
Although it seemed Kelman had made the right decision, the housing market took an interesting turn. By May, the market exploded into a frenzy of activity as homebuyers took advantage of rock-bottom mortgage rates, and the freedom to move away from cramped coastal markets as employers embraced remote work.
“I get paid a lot of money to make good decisions,” Kelman told Curbed of his misstep. “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.”
Now that Redfin has bounced back — the company’s revenue increased a whopping 121 percent annually from the height of the pandemic — Kelman has been placing a magnifying glass on his other decisions and what he might have gotten wrong about Redfin, real estate, and the concept of The American Dream.
The first moment Kelman re-examined was the purchase of his 115-year-old house during the 2008 housing crash. The seller, who’d placed thousands into remodeling the home before being forced to abandon his plans, ripped out the bathroom mirrors before closing.
“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 of the seller’s anger. “In business, we always love to talk about win-win, but it felt more like a zero-sum game between me and him.”
Although it was frustrating, the CEO said he recognized others had it much worse, as the economic downturn and the ensuing financial policies essentially erased everyday Americans’ chances of homeownership.
“Some well-meaning reforms eliminated the subprime market, and the government never really replaced it with something else. Now half of America can’t qualify for credit,” Kelman said. “I used to read stories about strawberry pickers buying McMansions in central California, and everybody viewed that as just the absolute apex of insanity. But reading Piketty five years later, is it so bad that the strawberry picker had a nice house?”
That realization has spilled over into Kelman’s work at Redfin. As home prices reach fever-pitch and Americans’ wages remain unable to keep up, the CEO said he’s been thinking about Redfin’s accidental leap into the luxury sphere.
“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.”
Kelman said he also worries about living in a world marred by climate change where ravenous hurricanes, wildfires and tornadoes aren’t a once-in-a-lifetime occurrence, but something that can happen back-to-back, multiple times a year.
“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.”
Kelman said his outlook on climate change was transformed during a conversation with a Houston-based Redfin manager. When he asked why anyone would move to a floodplain, the manager said, “Do you think they don’t know? They know.”
The “they” were lower-income minority homebuyers who’d do anything to get their piece of the American Dream, even if it meant having their home potentially washed away every few years. “The future is here,” Kelman said. “It’s just very unevenly distributed.”