Podcast Summary: Excess Returns

Episode: The Crash That Won’t Come | Redfin Chief Economist Daryl Fairweather on the Great Housing Reset
Date: January 24, 2026

Overview

In this episode, the Excess Returns team sits down with Daryl Fairweather, Chief Economist at Redfin and author of "Hate the Game," to discuss the "Great Housing Reset." Fairweather offers a nuanced, data-rich take, explaining why the U.S. housing market is not heading for a crash or correction, but instead is entering a lengthy period of normalization. The discussion dives deep into everything from mortgage rates, wage growth, policy, generational shifts, climate risk, and the growing role of technology and AI in real estate.

Fairweather's optimistic yet realistic approach emphasizes that the core issue remains insufficient supply, not speculation or bubbles. She underscores the slow, multi-year journey toward improved affordability, where incremental changes in income, construction, and policy reshape the housing market.

Key Discussion Points & Insights

1. Defining the "Great Housing Reset"

[02:07]

• The term "reset" is used intentionally: “Because it’s not a correction or a crash, we’re really just moving into a new phase of the housing market. … We think incomes are going to start outpacing home prices and that, slowly, things will start to improve.” — Daryl Fairweather [02:07]
• The post-pandemic era is shaped by locked-in homeowners with ultra-low mortgage rates, lingering low inventory, and sluggish demand in hot markets.

2. Path to Normalization

[03:01]

• Normalizing means housing affordability stops eroding and sees small, steady year-over-year improvements.
• Reforms popping up nationwide—relaxed building regulations, faster permitting—are enabling more supply.
• “Every year farther we get away from the pandemic, it is time for people to sell those homes that they got during the pandemic and leave record low mortgage rates behind." — Fairweather [03:15]

3. Incomes Outpacing Home Prices

[03:52]

• Redfin forecasts: next year, home prices up 1%, while wages increase 2-3%.
• This "income stretch," compounded yearly, restores affordability over several years unless disrupted by severe shocks (recession, inflation, etc).
• “Even if it’s just wages growing 1% faster than home values … over the years, that’s going to become a bigger and bigger difference. You get, you know, exponential returns.” — Fairweather [09:13]

4. Mortgage Rates: Stuck in the Sixes

[06:03]

• 30-year mortgage rates are expected to hover in the low 6% range absent an economic shock.
• Unlikely to drop significantly without a recession.
• Mortgage rates react more to bond market expectations than direct Fed action.
• “The Fed has some control, but really it’s markets that have the final say.” — Fairweather [07:55]
• Volatility in rates is harmful, causing uncertainty and slowing market activity.

5. Inventory & the Lock-In Effect

[11:13]

• The “mortgage rate lock-in” effect remains a big drag on supply.
• Will take up to five more years to unwind, as more homeowners relinquish low-rate loans.
• Inventory challenges are highly regional—Midwest and Northeast cities less affected (lower prices, lower debt, easier down payments).

6. Geographic Differentiation & Affordability

[11:59]

• Fastest appreciation now in affordable Midwest and former industrial Northeast cities.
• Pandemic “boom towns” like Austin, Miami, and the Sunbelt face price stagnation or reversal.
• “If you’re looking for a place where you can afford a home on a middle-class income, then those places [Midwest, Northeast] are still attractive.” — Fairweather [12:35]

7. Generational & Demographic Trends

[16:46]

• Gen Z and young families face challenges:
  • Stable rents have provided some relief but gap between renting and owning remains wide.
  • As household formation and first-time buying slow, creative solutions like multi-generational co-buying and ADUs (accessory dwelling units) grow in popularity.
• “The American dream of that single-family home with the yard is just so far out of reach for them unless they have some big windfall … or move somewhere significantly more affordable.” — Fairweather [17:39]

8. Policy: What Matters and What Doesn’t

[25:17]

• Focus on supply—densifying cities, transit-oriented development, and removing single-family-only zoning is key.
• Policies that just stoke demand (subsidized rates, 50-year mortgages) are counterproductive in underbuilt markets.
• "Fueling demand in a supply restricted market just makes housing prices go up. So it doesn’t achieve the goal of making housing more affordable." — Fairweather [28:14]
• Some promising ideas: down payment assistance, faster permitting, targeted capital gains tax reductions for sales to first-time buyers.

9. Climate Risk & the True Cost of Housing

[41:10]

• Climate change is driving up insurance, maintenance, and even eliminating some housing stock via disasters (fire, flood, storms).
• Costs are “hyperlocal”—different states subsidize or deregulate insurance in very different ways, sometimes worsening risk.
• “We’re going to have to solve the scarcity of homes problem at the same time that we need to start investing in more resilient homes.” — Fairweather [42:00]
• Energy use and emissions: Denser, smaller homes are key to reducing the sector’s climate footprint; electrification and insulation matter.

10. AI & Real Estate Transformation

[52:19]

• Redfin is piloting conversational AI tools for home search, which shift from rigid filters to open-ended, personalized chat.
• “People can more quickly hone in on the homes that fit their specific needs.” — Fairweather [53:16]
• AI will also improve insurance, pricing, and consumer guidance as tools get smarter with more user interactions.

11. Advice for the Next Five Years (“The Waiting Game”)

[56:46]

• Personal circumstances trump market timing, but if you plan to stay put for five years or more, buying can make sense as rates and affordability improve incrementally.
• Rents expected to rise as supply of new apartments slows.
• Watch for wild cards: spikes in insurance costs or major policy/regulatory shifts.

Notable Quotes & Memorable Moments

• On the “reset” vs. crash/correction
  “It’s not a correction or a crash, we’re really just moving into a new phase of the housing market.” — Daryl Fairweather [02:07]

• On wage growth and affordability
  “Even if it’s just … 1% faster [wage growth] than home values … you get exponential returns.” — Fairweather [09:13]

• On supply-side policy
  "The big ones are getting rid of single-family zoning and replacing it with dense zoning. Transit is really important ... if you increase transit, you naturally increase the availability of land for where people will want to live.” — Fairweather [25:17]

• On the 50-year mortgage
  “You’re going to be paying about double the amount of interest over the life of the loan ... I think people like the idea of owning their home outright at some point and they would prefer the mortgage that gets them there faster.” — Fairweather [30:40]

• On climate risk
  “Climate impacts housing in multiple ways ... insurance costs are going to go up, which is going to add to housing costs. … It’s going to become a much messier problem solving housing affordability with the added variability of climate.” — Fairweather [41:10]

• On AI & home search
  “People can have much more open-ended conversations … we can process the photos, you can have a conversation, and people can more quickly hone in on the homes that fit their specific needs.” — Fairweather [53:16]

Timestamps of Key Segments

• Market Reset, Not Crash/Correction: [02:07]
• Affordability Normalization Explained: [03:01]
• Wage Growth vs. Home Prices: [03:52], [09:13]
• Mortgage Rates Outlook & Policy: [06:03], [07:55]
• Lock-In Effect & Inventory: [11:13]
• Regional Variations and Midwest Boom: [11:59], [12:35]
• Young Buyers / Gen Z Challenges: [16:46], [17:39]
• Rental Market & Investor Activity: [18:06], [19:46]
• Immigration & Local Policy Effects: [20:31]
• ADUs & Creative Living Solutions: [22:01]
• Policy Recommendations: [25:17], [28:14], [32:38]
• Climate Change & Insurance Shocks: [41:10], [42:00]
• AI Transformation in Real Estate: [52:19], [53:16]
• Advice for Buyers/Sellers in 2026: [56:46]
• Indicators to Watch: [58:09], [60:14]

Flow & Tone

The conversation is pragmatic and data-driven, but consistently down-to-earth and accessible. Fairweather’s tone is empathetic—she recognizes the frustration of generations locked out of ownership, the anxieties of older owners facing climate risk, and the limitations of “easy fix” policymaking.

The interview features a blend of optimism (“incremental gains will stack up”) and realism (“it will take another five years to unwind locked inventory,” “I’ll believe policy progress when I see it”). There’s a distinct focus on individual strategy: think about your life stage, prioritize earnings early, and buy only if you plan to stay put.

Conclusion

Daryl Fairweather’s take on the U.S. housing market is deeply informed and refreshingly devoid of hype. The market is not set to crash, but to slowly rebalance, driven by wage growth, increased supply, smarter policy, and new technology. However, affordability returns gradually and unevenly, with climate risk and insurance costs as wild cards. Buyers, sellers, policymakers, and investors are all encouraged to take the long view, prioritize flexibility, and keep an eye not just on prices and rates, but on evolving local risks and opportunities.