Right this moment there’s a housing bubble, shoppers say. Redfin's economist disagrees

Not only do the vast majority of potential home buyers and sellers believe a housing bubble exists in their market, just under half of real estate professionals believe that there is, according to a Redfin survey.

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

"If this rate of price growth were to continue for another year, I would also be concerned about a bubble, but I expect home price growth to slow significantly in 2022," Fairweather said in a press release. "Mortgage rates are already rising, which is likely to stabilize demand and reduce the risk of a bursting bubble."

Although there are similarities between the mid-2000s price increases that led to the financial crisis and those that are currently on the market, the underlying drivers of these increases are very different and therefore the market is not about to burst such a bubble, they say in a recent Standard & Poor's report.

But 77% of those planning to buy or sell a home in the next 12 months and 44% of real estate agents believe their local market is so overpriced that a bubble exists. The consumer survey included 1,500 US residents planning to buy or sell a home in the next 12 months, conducted by Lucid for Redfin on December 10-13. Redfin surveyed 360 real estate agents in October 2021.

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

However, a separate report from Redfin says 2022 has got off to a hot start for the housing market, with median selling prices up 14% year-on-year in the four weeks ended Jan. 16. At the same time, new offers fell by 12%. , reducing the total number of homes for sale by 29%.

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

"Over the next few weeks, we may see signs that some buyers are pulling away," Fairweather said. "This is the silver lining for the most committed homebuyers who could benefit from less intense competition in this supply-constrained market."

The share of properties with multiple listings hit a 12-month low in December, Redfin previously reported.

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

Homes stayed on the market an average of 28 days after listing, compared to 35% for the same period in 2021. Within two weeks of listing, 41% had an accepted offer, up from 35% a year earlier, with 32% of sellers accepting one offer in a week, from 27%.

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

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