Robert Reffkin, co-founder and CEO of Compass, joins CNBC's 'Squawk on the Street' to discuss why pending home sales were weaker in April, expectations for buyer sentiment in the coming months, and more.

Washington

Pending home sales in the US fell significantly in April, dropping 6.3% from the previous month, according to Compass CEO Robert Reffkin. Despite this decline, new home sales showed improvement, and Reffkin expects a reversal of the downward trend in pending sales in the near term. 
Reffkin highlighted that inventory levels are at five-year highs, particularly in southern states like Georgia, Texas, and Florida, where prices have remained flat or declined year-over-year. Affordability has improved due to rising wages and slightly lower mortgage rates compared to the previous year. While prices are likely to remain flat or decline slightly in real terms, Reffkin anticipates more buyers coming off the sidelines as consumer sentiment improves and mortgage rates stabilize just under 7%. The Bay Area remains one of the hottest housing markets, supported by strong tech sector performance.

Compass CEO: I would expect more home buyers to come off sidelines

Well we got word at the top of the hour pending home sales dropping much larger than expected falling 6.3 percent in April from March. Joining us here at Post 9 is Compass co-founder and CEO Robert Refkin. What are you seeing in activity? Does it jibe with some of the numbers we're getting in April? Really weak on pending home sales but better on new home sales. So pendings are down 6% year-over-year but that's really because the noise was up in April. I expect in May that we'll see a reversal of that trend. It's actually a great time to be a buyer. You have inventory at five-year highs. The inventories over the year has been flat year-over-year in terms of price while wages growth has gone up 4%. Mortgage rates are 50 base points less than they were this time last year. So affordability is actually high. They are still just under 7%. We would like them to be in the low sixes. I would love for it to be in the high fives. I think and when you get to high fives you'll be back at mid cycle transaction levels. But overall it's a better time to be a buyer than it was last year. You can't buy what's not for sale and there's a lot more for sale. Why? What's driving that inventory surge? What's driving the inventory it's really the southern states and so you have nine states with more inventory than there was in the pre-pandemic period. All those states have prices that actually flatted down year-over-year. Those states include Georgia, they include Texas, they include Florida. These are states where they used to get a lot of migration from the north and the northeast where the migration is not moving down as much as it used to in the past. You said April was full of noise. I mean the tariffs, the market falling and you expect May to rebound. You're seeing the sentiment swing? Yeah we can see in the data, we can see it in the company, that the pendings in May will be up year-over-year. And the idea there is what? Does it track the stock market? Does it track the headlines? Consumer sentiment's up currently versus in April and that's because tariffs. The less noise in the stock market, the less noise in tariffs, the more people feel comfortable making the most important big purchase they make in their lives. There's some good data out of Redfin today about the spread between the number of sellers and the number of buyers. You got to go back 12 years or so to get that kind of difference. Does that mean prices are going down? It's more likely that they go down than up in the second half of the year but I would expect them to continue to be flat but recognize flat is actually down in real terms because if inflation is up 3% and you're flat then you're actually down. Right. Why aren't you expecting prices to fall more? I still think that I would expect a lot more buyers to come off the sidelines. It's really been a must-move market for the last four years now where the only people that moved had to move. We call it the 5Ds. Diapers, diplomas, diamonds, divorce, death. But now we're seeing that pent-up demand speaking with our agents more and getting ready to purchase. Except qualifying income for a starter home just keeps soaring. It's over $101, $102,000. I mean don't prices need to come down for more people to simply be able to afford it? The more prices come down the better but again if it's flat it is down when you have inflation at 3% and wages going up 4% and so we're starting to see some relief and mortgage rates are down 50 base points. The mortgage payment is lower than it was a year ago. Mortgage rates are the key. We always come back to the same basic premise. Mortgage rates are the key. And they haven't budged much on the downside. No. As expected. They haven't budged much but remember they were as high as 8% about a year and a half ago just for a little bit and they were 7.5% a year ago and so now they're just under 7% even by just a few base points. Like 6.93, 6.98. Yeah you'll take it under. What hottest market right now is? Say the the hottest market right now is I would say the Bay Area. The Bay Area still is there's a lot of momentum there with a lot of the tech stocks a lot of the equity markets for the Nasdaq are still strong year over year. I'd say the Bay Area. Hmm okay Robert thank you very much. Always good to get color from you. Robert Rufkin of Compass. Still to come this morning.

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