Mortgage

Housing bubble exists today, consumers say. Redfin economist disagrees

Housing bubble exists today, consumers say. Redfin economist disagrees
Written by Publishing Team

Not only do the vast majority of potential home purchasers and sellers believe a housing bubble exists in their market, just under half of real estate professionals think that is the case as well, a Redfin survey found.

But Daryl Fairweather, the company’s chief economist, described the current situation as a ripple, not a bubble.

“If this rate of price growth were to continue for another year, I would be worried about a bubble, too, but I predict home-price growth will significantly slow in 2022,” Fairweather said in a press release. Mortgage rates are already going up, which will likely stabilize demand and reduce the risk of a bubble that could burst.”

Even though similarities exist between the price rises in the mid-2000s that led to the financial crisis and those in the market right now, the fundamental drivers of those increases are much different, and that is why the market is not facing a bubble that will burst, a recent Standard & Poor’s report said.

But the perception of 77% of those planning to buy or sell a home in the next 12 months, as well as 44% of real estate agents is that their local market is so overpriced that a bubble exists. The consumer survey covered 1,500 US residents who are planning to buy or sell a home in the next 12 months conducted for Redfin by Lucid from Dec. 10 to Dec. 13. Separately, Redfin surveyed 360 real estate agents in October 2021.

Rising inflation also reduces the risk of a housing bubble, as people have less disposable income to spend on a home as the prices of goods and services continue to move higher, Fairweather said.

However, a separate report from Redfin said 2022 started hot for the housing market as the median sales price was up 14% year-over-year for the four-week period ended Jan. 16. At the same time, new listings fell 12%, reducing the total number of homes for sale by 29%.

But those rising mortgage rates should put a damper on the situation.

“In the next few weeks we may start to see signs that some buyers are backing off,” Fairweather said. “This is the silver lining for the most committed homebuyers who may benefit from less intense competition in this supply-constrained market.”

The share of properties with multiple offers reached a 12-month low point in December, Redfin previously reported.

Active listings ended the four-week period at an all-time low of 445,000. At the same time, the median home sale price increased to $358,500, while the median asking price of newly listed homes rose 12% year-over-year to $349,950.

Homes lasted on the market an average of 28 days after listing, down from 35% from the same period in 2021. Within two weeks of listing 41% had an accepted offer, up from 35% the year prior, with 32% of sellers taking an offer in one week, up from 27%.

The share of homes that sold over their list price increased to 41% from 33%. And the average sale-to-list ratio was 100.3%, meaning buyers are paying only slightly more than what the seller asked. However that is not common; the first time this metric was over 100% was for the four week period ended March 7, 2021, Redfin previously said. In the summer of 2021, that ratio was over 102%.

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