By Ted Knutson
January 24, 2022, at 06:40 AM
View source version HERE
“What we’re going through right now is closer to a ripple in the water than a bubble.”
The nation is not in a housing bubble, according to Redfin Chief Economist Daryl Fairweather.
Fairweather’s assertion came following recent Redfin surveys that found more than three-quarters (77%) of homebuyers and sellers believe there’s a housing price bubble in the area where they live while 44% of real estate agents believe there’s a housing bubble in the market where they work.
In the past year, median home prices grew by double digits.
“Homebuyers and sellers are rightfully concerned about how fast prices are rising, especially those who remember the housing market crash during the Great Recession,” said the economist. “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 slow significantly in 2022. What we’re going through right now is closer to a ripple in the water than a bubble. Mortgage rates are already going up, which will likely stabilize demand and reduce the risk of a bubble that could burst.”
Fairweather predicted average 30-year mortgage rates will continue to increase in the wake of a rise of roughly 0.5 percentage points since the beginning of the year, landing at 3.56% in the week ending January 20.
Another factor dampening the chances of a bubble, said the Redfin expert, is with inflation, at its highest level in 40 years, people have less disposable income to put into housing.
Fairweather has said he expects 30-year mortgage rates to hit about 3.6% by the end of 2022.
“Mortgage rates increasing will make home-buying less affordable. Over time, that will put the brakes on demand and put an end to double-digit annual price growth,” Fairweather said in prepared remarks. “But in the short term, this increase will light a fire under home buyers and make for an extremely competitive January.”
Almost half (47%) of house hunters say they would feel more urgency to buy a home if mortgage rates rose above 3.5%, according to a report released in early January from real estate brokerage Redfin.
A lower share (29%) would look for homes in different areas or consider smaller houses, while 14% would slow their search in hopes of rates coming down again, Redfin said in its report.
Meanwhile, 7% of respondents wouldn’t change their plans at all. Just 2% said they would cancel their plans to purchase a home if mortgage rates surpassed 3.5%.
Click here to return to the homepage
View source version on globest.com HERE
https://www.globest.com/2022/01/24/we-are-not-in-a-housing-bubble-says-economist/?kw=We%20Are%20Not%20In%20A%20Housing%20Bubble,%20Says%20Economist