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Are We in a Housing Bubble? Homebuyers Say Yes, Redfin Expert Says No

Historically fast home-price growth has homebuyers and sellers worried the market has become detached from reality. But Redfin’s chief economist says rising mortgage rates and buyers who can afford their homes are preventing a bubble.

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Rental Market Tracker: Rents Rise 14% in December—Biggest Jump in Over Two Years

Average monthly listed rents in the U.S. increased 14.1% year over year to $1,877 in December, the largest annual jump since at least February 2019—the earliest month in Redfin’s rental data. Meanwhile, the national monthly mortgage payment for homebuyers climbed 21.6% year over year, also the biggest increase in Redfin’s records.

“The growth in mortgage payments has been driven by both climbing prices and climbing mortgage rates,” said Redfin Chief Economist Daryl Fairweather. “And those rising mortgage costs push more potential homebuyers into renting instead, which pushes up demand and prices for rentals. Mortgage rate increases are accelerating, which will cause both mortgage payments and rent to grow throughout 2022.”

Rental Market Summary
December 2021
Month-Over-Month
Year-Over-Year
Average Monthly Rent
$1,877
0.3%
14.1%
Median Monthly Mortgage Payment for Homebuyers w/ 5% down payment
$1,553
0.3%
21.6%

Year–over-year rent-price increases outpaced year-over-year mortgage payment increases for new homebuyers in just 16 of the 50 largest U.S. metro areas in December.

Rents are Up Over 30% In Many Major Metro Areas

The 10 metro areas with the biggest increases in rent prices—up 29% year over year or more—were almost exclusively on the East Coast. The only exceptions were Austin, TX and Portland, OR.

Top 10 Metro Areas With Fastest-Rising Rents Year Over Year

Austin, TX (40%)
Nassau County, NY (35%)
New York, NY (35%)
Newark, NJ (35%)
New Brunswick, NJ (35%)
Miami, FL (34%)
West Palm Beach, FL (34%)
Fort Lauderdale, FL (34%)
Jacksonville, FL (31%)
Portland, OR (29%)

Only Kansas City saw rent decline year over year

Kansas City, MO (-0.8%)

Just one metro area saw rents fall in December from the same month a year earlier. Rents declined 0.8% in Kansas City, MO.

Year-Over-Year Change in Rents and Median Monthly Mortgage Payments for Homebuyers, December 2021

Region
Average Rent
Year-Over-Year Change in Average Rent
Monthly Mortgage (5% down)
Year-Over-Year Change in Monthly Mortgage (5% down)
Difference Between Year-Over-Year Change in 5% Down Mortgage Payment & Rent
Anaheim, CA
$3,394
9.6%
$3,813
24.0%
14 pts
Atlanta, GA
$2,016
12.1%
$1,420
29.6%
18 pts
Austin, TX
$2,290
39.9%
$1,956
37.5%
-2 pts
Baltimore, MD
$2,018
10.7%
$1,318
11.0%
0 pts
Boston, MA
$3,637
22.3%
$2,511
18.8%
-3 pts
Charlotte, NC
$1,730
11.5%
$1,448
27.1%
16 pts
Chicago, IL
$2,351
9.0%
$1,168
14.3%
5 pts
Cincinnati, OH
$1,473
24.2%
$957
15.1%
-9 pts
Cleveland, OH
$1,378
11.6%
$730
9.8%
-2 pts
Columbus, OH
$1,458
7.5%
$1,095
16.3%
9 pts
Dallas, TX
$2,081
28.5%
$1,562
27.0%
-1 pts
Denver, CO
$2,661
19.0%
$2,191
26.1%
7 pts
Detroit, MI
$1,552
11.4%
$710
19.1%
8 pts
Fort Lauderdale, FL
$3,020
34.0%
$1,481
23.5%
-11 pts
Fort Worth, TX
$2,081
28.5%
$1,367
30.8%
2 pts
Houston, TX
$1,807
10.4%
$1,294
23.8%
13 pts
Indianapolis, IN
$1,280
9.1%
$1,014
19.9%
11 pts
Jacksonville, FL
$1,625
31.5%
$1,298
25.3%
-6 pts
Kansas City, MO
$1,391
-0.8%
$1,116
18.5%
19 pts
Las Vegas, NV
$1,820
25.2%
$1,620
31.7%
7 pts
Los Angeles, CA
$3,394
9.6%
$3,387
20.7%
11 pts
Miami, FL
$3,020
34.0%
$1,785
29.0%
-5 pts
Milwaukee, WI
$1,731
9.7%
$1,005
14.5%
5 pts
Minneapolis, MN
$1,860
9.0%
$1,359
14.1%
5 pts
Montgomery County, PA
$2,233
13.2%
$1,562
16.1%
3 pts
Nashville, TN
$1,872
13.9%
$1,663
31.1%
17 pts
Nassau County, NY
$3,718
34.5%
$2,333
13.4%
-21 pts
New Brunswick, NJ
$3,718
34.5%
$1,724
16.5%
-18 pts
New York, NY
$3,718
34.5%
$2,596
14.5%
-20 pts
Newark, NJ
$3,718
34.5%
$1,866
14.2%
-20 pts
Oakland, CA
$3,520
15.0%
$3,554
14.2%
-1 pts
Orlando, FL
$2,050
28.8%
$1,444
29.6%
1 pts
Philadelphia, PA
$2,233
13.2%
$1,051
13.9%
1 pts
Phoenix, AZ
$2,107
26.0%
$1,766
35.1%
9 pts
Pittsburgh, PA
$1,707
8.9%
$820
11.0%
2 pts
Portland, OR
$2,392
29.4%
$2,069
19.6%
-10 pts
Providence, RI
$2,176
13.1%
$1,542
20.5%
7 pts
Riverside, CA
$2,666
18.5%
$2,150
24.9%
6 pts
Sacramento, CA
$2,582
20.7%
$2,224
21.8%
1 pts
San Antonio, TX
$1,386
11.5%
$1,252
25.3%
14 pts
San Diego, CA
$3,077
10.8%
$3,142
23.9%
13 pts
San Francisco, CA
$3,520
15.0%
$6,038
16.4%
1 pts
San Jose, CA
$3,300
6.7%
$5,550
21.3%
15 pts
Seattle, WA
$2,724
20.9%
$2,949
23.4%
3 pts
St. Louis, MO
$1,448
1.3%
$901
13.8%
13 pts
Tampa, FL
$2,076
28.1%
$1,371
31.2%
3 pts
Virginia Beach, VA
$1,681
20.4%
$1,156
12.1%
-8 pts
Warren, MI
$1,552
11.4%
$1,043
13.0%
2 pts
Washington, D.C.
$2,538
12.0%
$1,978
14.4%
2 pts
West Palm Beach, FL
$3,020
34.0%
$1,582
20.4%
-14 pts
National
$1,877
14.1%
$1,553
21.6%
7 pts

Methodology

Redfin’s rent-versus-own analysis uses data from more than 20,000 apartment buildings across the US. The report combines rental data on all sizes of apartments for rent with home sales data on all residential home sales (single-family, townhouse and condos) from public records and the multiple listing service (MLS). When this report refers to the median mortgage payment for new homebuyers, it is based on a 5% down payment, the median sale price during the month and the average mortgage interest rate for the month. The report uses a 5% down payment in order to be comparable to what an average renter may be able to reasonably achieve in savings.

Redfin analyzed home sales data from the MLS, and public records and rent prices from RentPath, across the 50 largest metro areas in the US. Monthly rental prices in this report are not directly comparable to monthly homebuyer mortgage payments, since the mix of homes available to rent and the mix of homes being purchased differ in location, size and quality of home within each metro area. For example, most of the homes being purchased may be in the less expensive suburbs of the metropolitan area, while the apartments being rented may be closer to the more expensive city core.

It is also important to note that the prices in this report reflect the current costs of new leases and new mortgages during each time period. In other words, the amount shown as the average rent is not the average of what all renters are paying, but the average cost of apartments that were available for new renters during the report month. Likewise, the median monthly mortgage payment shown is only for homes that sold during the report month, not for all homeowners.

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Housing Market Update: 2022 Kicks Off Hotter Than Last Year

Rising mortgage rates are giving homebuyers a greater sense of urgency, but fewer homes than ever are available for sale, creating a prime opportunity for new home builders.

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3 in 5 Home Offers Faced Bidding Wars in December, Even Amid Holiday Slowdown

Many homebuyers are writing upwards of five offers before finding success as remote work, an ongoing housing shortage and low mortgage rates fuel bidding wars.

Nationwide, 59.6% of home offers written by Redfin agents faced bidding wars in December 2021, the lowest share in 12 months. That’s down from a revised rate of 61.3% in November, but up from 54% in December 2020.

An offer is considered part of a bidding war if a Redfin agent reported that it received at least one competing bid. This data is subject to revision. Redfin’s bidding-war data goes back to April 2020. 

Competition has dipped in recent months partly because the housing market typically slows in the winter, with many buyers and sellers taking a break during the holidays. But while the bidding-war rate has fallen from its pandemic peak of 74.6% in April 2021, the housing market remains quite competitive as house hunters grapple with a record shortage of homes for sale. 

“Buyers should anticipate that they may not win a house until their sixth or seventh bid. If you’re the type of person who falls in love with a house, this is not your market,” said Candace Evans, a Redfin team manager in New York. “If you show a house to 10 buyers, you’ll probably get eight offers. An agent on my team just put a home in the Bronx on the market and started receiving offers even though there hadn’t been a single open house or tour yet. The house ultimately received over 10 offers and went for well above the asking price.”

The housing market has been remarkably hot during the pandemic as low mortgage rates and remote work have encouraged Americans to move and buy homes. More than half of Redfin offers have faced bidding wars since May 2020. But with rising mortgage rates now making the homebuying process more expensive, some buyers may no longer be able to stretch their budgets in order to write offers competitive enough to win.

Pricey Homes Are Most Likely to Face Bidding Wars

Nearly two-thirds (64.6%) of offers for homes priced between $800,000 and $1 million faced bidding wars in December, the highest share of any price bucket. Next came homes in the $1 million to $1.5 million range (62%), followed by homes priced over $1.5 million (61.7%). Vacation homes, which are often pricey, have become increasingly popular during the pandemic—one possible explanation for elevated competition in the high-end market.

The lower price buckets were competitive as well, with more than 55% of offers for homes priced between $200,000 and $800,000 facing bidding wars.

Townhouses were the most competitive property type, with 62% of offers facing competition, followed by single-family homes, at 61.3%. Next came multi-family (54.7%) and condos (53.3%). Many house hunters are likely eyeing townhouses after being priced out of the market for single-family homes.

Salt Lake City and Tucson Have the Highest Bidding-War Rates

Salt Lake City had the highest bidding-war rate of the 37 U.S. metropolitan areas in this analysis, with 74% of offers written by Redfin agents facing competition in December. Next came Tucson, AZ at 73.1% and San Diego at 71.1%. Virginia Beach, VA and Seattle rounded out the top five, with bidding-war rates of 70.6% and 70%, respectively.

Metros must have had at least 20 offers recorded by Redfin agents in both December 2021 and November 2021 to be included in this analysis.

“I’ve been working with two clients since October and finally got them under contract after they lost out on seven other homes.” said Jennifer Ciacci, a Redfin agent in Portland, OR, where the bidding-war rate was 65.1% last month. “I haven’t seen inventory this low since I started in real estate. Buying a home today is emotionally exhausting, but house hunters aren’t giving up. I’m seeing buyers jump in and write a few offers, lose bidding wars and then retreat for a bit. But they usually end up coming back once they’ve had a chance to lick their wounds.”

Ciacci continued: “I tell my buyers not to compromise everything by giving up all the contingencies and safe-guards that are in place to protect them. They need to be aggressive in order to win, but shouldn’t put their family’s financial health in jeopardy by doing things like blindly waiving inspections altogether.”

Bidding-War Rates by Metro Area

The table below is sorted by highest to lowest bidding-war rates in December 2021. Blank spaces in the December 2020 column represent metros for which there were fewer than 20 offers submitted by Redfin agents that month.

U.S. Metro Area
Share of Redfin offers that faced bidding wars in December 2021
Share of Redfin offers that faced bidding wars in November 2021
Share of Redfin offers that faced bidding wars in December 2020
Salt Lake City, UT
74.0%
76.9%
78.3%
Tucson, AZ
73.1%
59.1%
50.0%
San Diego, CA
71.1%
74.6%
78.3%
Virginia Beach, VA
70.6%
59.1%
50.0%
Seattle, WA
70.0%
65.9%
66.5%
Tampa, FL
68.3%
58.3%
43.8%
San Francisco / San Jose, CA
67.5%
70.6%
71.5%
Denver, CO
66.7%
60.1%
58.3%
Sacramento, CA
66.7%
74.2%
61.9%
Honolulu, HI
65.9%
62.2%
46.7%
Colorado Springs, CO
65.5%
64.4%
80.0%
Portland, OR
65.1%
62.4%
51.3%
Boston, MA
64.9%
65.0%
49.3%
Dallas, TX
64.4%
73.8%
25.2%
Washington, D.C.
61.5%
60.4%
60.6%
Los Angeles, CA
59.7%
62.3%
67.9%
Atlanta, GA
57.0%
58.3%
35.3%
Raleigh, NC
56.9%
65.6%
61.8%
San Antonio, TX
56.7%
55.7%
23.3%
Austin, TX
56.5%
60.1%
56.3%
Charlotte, NC
56.3%
64.7%
68.8%
St. Louis, MO
54.8%
41.4%

New York, NY
54.6%
53.3%
46.7%
Oklahoma City, OK
54.2%
65.4%

Philadelphia, PA
53.6%
59.0%
48.8%
Nashville, TN
51.5%
69.7%
33.3%
Orlando, FL
50.0%
58.5%
43.3%
Sarasota, FL
50.0%
43.5%

Phoenix, AZ
49.1%
52.3%
60.0%
Las Vegas, NV
48.9%
57.8%
49.3%
Detroit, MI
48.8%
53.1%
56.3%
Miami, FL
48.6%
51.2%
37.5%
Houston, TX
47.1%
55.2%
23.4%
Chicago, IL
46.7%
47.6%
27.6%
Cleveland, OH
45.5%
59.3%

Cape Coral, FL
45.0%
56.0%

Indianapolis, IN
39.3%
38.5%
50.0%

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Stifled By Supply Shortage, Home Sales Post Largest Monthly Decline Since Pandemic Onset

Housing supply fell to a new low in December, fueling a 3.6% month-over-month drop in home sales.

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Housing Market Update: Home Prices Start New Year at New High

January 13, 2022 January 13, 2022 by

The median home sale price surged 16% year over year during the week ending January 9 to an all-time high of $365,000. Prices keep climbing because the supply drought keeps deepening while demand increases. The number of homes for sale fell to a new low as listings hit the market at a slower rate than they did early last year. Yet homebuyer activity–as measured by the Redfin Homebuyer Demand Index–jumped 9%. Mortgage rates rose to 3.45% during the seven days ending January 13, making homebuying more expensive as overall inflation hit a 40-year high.

“The stage is now set for the most competitive January housing market in recorded history,” said Redfin Chief Economist Daryl Fairweather. “Buyers are pouring into the market to claim a home before mortgage rates rise further as new listings slow to a trickle. The conditions are becoming increasingly challenging for first-time homebuyers, who will have to compete against more experienced buyers who are willing to do whatever it takes to win. But I expect that by the time mortgage rates increase to 3.6%, competition will settle down quickly to levels similar to late-2018.”

 “Homebuyers are touring nearly every home that comes on the market, waiving every contingency, offering $100,000 over asking price, and still losing out to 9+ other offers,” said Portland Redfin real estate agent Jennifer Ciacci. “As competitive as the market is right now, I advise buyers not to write an offer on a home they don’t really like. The home needs to work for what they want and need, and if it checks off those boxes, that’s when you go all-in and take your best shot. But protect your heart; this isn’t an easy market.”

Key housing market takeaways for 400+ U.S. metro areas:

Unless otherwise noted, the data in this report covers the four-week period ending January 9. Redfin’s housing market data goes back through 2012.

Data based on homes listed and/or sold during the period:

The median home-sale price increased 14% year over year to $358,801. For the seven-day period ending January 9, the median price hit $365,000, up 16% from a year earlier and an all-time high.
The median asking price of newly listed homes increased 12% year over year to $344,190.
Pending home sales were up 2.5% year over year.
New listings of homes for sale were down 11% from a year earlier.
Active listings (the number of homes listed for sale at any point during the period) fell 28% year over year, dropping to an all-time low of 461,000.
The share of homes that went under contract that had an accepted offer within the first two weeks on the market was 39%, above the 34% rate of a year earlier.
29% of homes that went under contract had an accepted offer within one week of hitting the market, up from 25% during the same period a year earlier.
Homes that sold were on the market for a median of 27 days, down from 35 days a year earlier.
41% of homes sold above list price, up from 33% a year earlier.
On average, 2.4% of homes for sale each week had a price drop, up 0.4 percentage points from the same time in 2021.
The average sale-to-list price ratio, which measures how close homes are selling to their asking prices, was 100.3%. In other words, the average home sold for 0.3% above its asking price.

Other leading indicators of homebuying activity:

Mortgage purchase applications increased 2% week over week (seasonally adjusted) during the week ending December 31. For the week ending January 13, 30-year mortgage rates rose to 3.45%, the highest level since March 2020.
The Redfin Homebuyer Demand Index rose 9% during the week ending January 9 and was up 22% from a year earlier. The seasonally adjusted Redfin Homebuyer Demand Index is a measure of requests for home tours and other home-buying services from Redfin agents.

Refer to our metrics definition page for explanations of all the metrics used in this report.

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12% of First-Time Homebuyers Say Selling Crypto Helped Save for Down Payment, Up From 5% in 2019

Digital currencies are becoming an increasingly common payment method as millennials rush the housing market.

One in nine first-time homebuyers (11.6%) surveyed in the fourth quarter said selling cryptocurrency helped them save for a down payment. That’s up from 8.8% in the third quarter of 2020 and 4.6% in the third quarter of 2019.

This is according to a Redfin-commissioned survey of 1,500 U.S. residents planning to buy or sell a home in the next 12 months. The survey, which was fielded to a representative sample of the American population, was conducted by research technology company Lucid from Dec. 10 to Dec. 13, 2021. Respondents were not made aware that Redfin was the sponsor of the research.

This report focuses on the 215 of those 1,500 respondents who answered the question “How did you accumulate the money you need for a down payment?”—a question we only posed to participants who indicated they were planning to buy their first home in the next year. The most common response was “saved directly from paychecks” (52%), while less common answers included “cash gift from family” (12%) and “pulled money out of a retirement fund early” (10%).

“With extra time and a lack of exciting ways to spend money, many people began trading cryptocurrencies during the pandemic,” said Redfin Chief Economist Daryl Fairweather. “Some of those investments went up in smoke, but others went ‘to the moon,’ or at least rose enough to help fund a down payment on a home.”

Bitcoin, the world’s largest digital currency, hit a record high of nearly $69,000 in November. Ether, the second most valuable cryptocurrency, also reached an all-time high, though both coins have since lost some of those gains. With surging home prices leading to larger down payments, some buyers are finding non-traditional ways to cover the cost and compete with other bidders. 

“Crypto is one way for people without generational wealth to win a lottery ticket to the middle class,” Fairweather said. 

Digital currencies are also likely on the rise as a payment method among homebuyers because millennials and Generation Z are taking up an increasing share of the U.S. housing market. Millennials, who own more cryptocurrency than other generations, now account for more than half of new mortgages.

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Nearly Half of House Hunters Would Feel More Urgency to Buy If Mortgage Rates Passed 3.5%: Survey

Mortgage rates just jumped to 3.22%—the highest since May 2020—which will likely light a fire under buyers and drive up housing-market competition.

Almost half (47%) of house hunters say they would feel more urgency to buy a home if mortgage rates rose above 3.5%. 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.

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%.

That’s according to a Redfin-commissioned survey of 1,500 U.S. residents planning to buy or sell a home in the next 12 months. This report focuses on the 1,092 of those respondents who indicated they were planning to buy a home in the next year. The survey was fielded by research technology company Lucid from Dec. 10 to Dec. 13, 2021. 

The interest rate on a 30-year fixed mortgage rose to 3.22% during the first week of 2022 from 3.11% the prior week, Freddie Mac said Thursday. That’s the highest level since May 2020, when the pandemic was just beginning. Redfin Chief Economist Daryl Fairweather expects rates to hit about 3.6% by the end of 2022.

“Mortgage rates increasing will make homebuying less affordable. Over time, that will put the brakes on demand and put an end to double digit annual price growth,” Fairweather said. “But in the short term, this increase will light a fire under homebuyers and make for an extremely competitive January.”

Rising rates are the main driver for homebuyers in Houston right now, according to local Redfin real estate agent Faith Floyd

“Buyers are worried mortgage rates will go up and they’ll no longer be able to afford a home,” Floyd said. “They also feel a sense of urgency because they don’t want to have to compete with spring and summer buyers and end up overpaying five months down the road.”

The potential for higher mortgage rates is motivating sellers to act quickly as well, according to Seattle Redfin agent Shoshana Godwin

“Sellers want to get their homes on the market ASAP,” Godwin said. “They’re concerned that if rates rise too much, it could impact their chances of getting good offers since buyers may be worried about overall costs increasing.”

The interactive mortgage rates chart below shows how much you could afford to spend on a home at different mortgage interest rates, with each line representing a different monthly payment. You can view or download a static version of this chart here.

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Housing Market Update: Homebuyers Face Record Supply Shortage Heading into 2022

Home prices were up 14% and pending sales rose 4% from a year earlier despite a record low number of homes for sale.

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Housing Market Update: Home Prices Rise to New Record High

A dip in new listings contributed to the ongoing supply shortage as home prices hit another all-time high. The median home sale price rose 14.6% year over year to a new all-time high of $361,171 during the four-week period ending December 26 as the number of homes for sale fell to a record low. New … Housing Market Update: Home Prices Rise to New Record High

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