A new survey shows that real estate agents are more confident about the state of the market than many consumers. Seventy-seven percent of home buyers and sellers say they believe there’s a housing price bubble where they live, according to a Redfin consumer survey of 1,500 respondents who plan to buy or sell in the next year. 

On the other hand, less than half—44%—of real estate agents say they believe there’s a housing bubble in their market, with the rest feeling far more confident about the state of the market.

Over the last year, many leading housing economists have said that while housing prices are indeed rising quickly, this isn’t a housing bubble, bearing little resemblance to the booming market conditions that led to a financial crisis in the mid-2000s.

Housing bubbles occur when home prices reach unsustainable growth. They eventually burst when demand can no longer justify the rapidly rising home prices. Sharp price declines can result.

NAR Chief Economist: ‘This Isn’t a Bubble’

But this isn’t 2006. Housing inventories are low, credit remains tight, and lenders aren’t issuing risky loans as they did then.

“Home buyers and sellers are rightfully concerned about how fast prices are rising, especially those who remember the housing market crash during the Great Recession,” says Daryl Fairweather, Redfin’s chief economist. “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.”

Home prices are expected to slow in 2022. The National Association of REALTORS® predicts price growth to moderate to 3% to 5% in 2022, much lower than the nearly 16% annual growth existing-home sale prices posted in December 2021. Source: “Are We in a Housing Bubble? Homebuyers Say Yes, Redfin Experts Say No,” Redfin (Jan. 21, 2022)

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Greens may dominate paint firms’ lists of the hottest color of the year, but neutral colors still reign for the largest buyer pool. Eighty-one percent of interior design experts recently surveyed say whites and creams are the best colors to use when selling a house in 2022, according to the Paint & Color Trends 2022 Report conducted by Fixr, a home improvement resource.

“Whites and creams make a neutral, clean, fresh backdrop for many rooms,” according to the report. “You can still include color in your textiles if you want to add personality to the space, but it can make it easier for prospective buyers to see their own furnishings in a space when looking at a white or light-colored wall.”

On the exterior of homes for sale, white is the most frequently recommended color for the second consecutive year, according to Fixr. White received 58% of the vote from designers this year. Off-white also has increased in popularity, nabbing 41% in this year’s survey.

“White and off-white can both make a home look fresh, clean, and new regardless of age,” the study says. “These colors have nearly universal appeal, helping improve the curb appeal of a home and making it more likely to sell in a timely way.”

Source: “Paint & Color Trends 2022,” Fixr.com (2022)

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The housing market remains competitive, but not to the point where home shoppers will overlook some kinds of flaws in a home. Exterior issues, like bad siding or loose bricks, and weatherproofing issues are among the biggest issues that home buyers said would make them pass on a home, according to a survey from HomeAdvisor of more than 1,700 homeowners about their biggest deal breakers.

But home buyers will still pursue homes that simply need some TLC or may have other, smaller flaws that could be flagged on a home inspection report.

Buyers say they are still likely to pursue a home if the home is in a fire zone or has lead paint, radon, or yard or landscaping issues, the study says.

Home buyers are showing a willingness to remodel when needed. The most important factors to them when they buy: price, home size, and an updated kitchen, the study finds.

Source: “Study Reveals Americans’ Homebuying Deal-Breakers,” HomeAdvisor (Jan. 10, 2022)

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Classic white remains the most popular color choice in kitchens, but homeowners continue to experiment with wider palettes for that room and other areas of the home.

“With white kitchens, there’s never a risk of looking dated in a few years, while the sleek minimalistic feel is effortlessly complemented by dark counters or contrasting kitchen accessories,” says Living Cozy, a home design resource, which analyzed global search data about design over the last 12 months.

White also ranked in the three most popular for several rooms in the house that might “benefit from the illusion of more space,” such as pantries, home offices, and laundry rooms, according to the study.

Green is becoming a more common choice in kitchens, ranking second. It has emerged as one of the trendiest colors of 2022 and also ranks within the top three for all interior areas to redecorate in. Shades of sage, olive, and jade are trending, the study shows.

Blue is the third most popular kitchen color of 2022, including shades of teal, turquoise, and light blue

An unexpected color is making more headway in bedroom design: black, according to the Living Cozy study that tracked Google searches. 2022 is seeing a rise in popularity in black-painted bedrooms, including shades of charcoal and dark gray.

In the bathroom, black colors reigned again. In more than 2.2 million worldwide Google searches for bathroom colors in 2021, black was the clear winner, according to Living Cozy.

“Black bathroom ideas are stylish, modern, and chic, and are taking over the traditional chrome and gold colors that have dominated bathroom design for years,” the researchers note. “Bathrooms in 2022 incorporate dark black design elements through fixtures, feature walls, and flooring.”

In the living room, green is trending, according to the study. “Using green in your living room design can be the perfect way to bring an essence of nature indoors without the need for plants,” the designers note. “Layering different shades of green works best, from incorporating dark hues to featuring light pistachio shades.”

Source: “Colors of 2022,” Living Cozy (Jan. 24, 2022)

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Mortgage rates held steady overall this week, a welcome relief to home shoppers who may have been watching them rise week after week since the beginning of the year.

The 30-year fixed-rate mortgage averaged 3.55% this week, Freddie Mac reports.

“Following a month-long rise, mortgage rates effectively stayed flat this week,” says Sam Khater, Freddie Mac’s chief economist. “Recent rate increases have yet to significantly impact purchase demand, as history demonstrates that potential home buyers who are on the fence will often enter the market at the state of rate increase cycles.”

Economists are predicting that mortgage rates will continue to gradually increase over this year. The National Association of REALTORS® predicts rates to average 3.9% by the end of this year.

Freddie Mac reports the following national averages with mortgage rates for the week ending Jan. 27:

• 30-year fixed-rate mortgages: averaged 3.55%, with an average 0.7 point, dropping slightly from last week’s 3.56% average. Last year at this time, 30-year rates averaged 2.73%.
• 15-year fixed-rate mortgages: averaged 2.80%, with an average 0.6 point, rising slightly from last week’s 2.79% average. A year ago, 15-year rates averaged 2.20%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.70%, with an average 0.2 point, rising from last week’s 2.60% average. A year ago, 5-year ARMs averaged 2.80%.

Freddie Mac reports average commitment rates along with points to better reflect the total upfront cost of obtaining the mortgage. Source: Freddie Mac and “Instant Reaction: Mortgage Rates, January 27, 2022,” National Association of REALTORS® Economists’ Outlook Blog

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As the pandemic caused by COVID-19 has continued, more young adults have chosen to move back home with their parents. In 2020, the share of young adults aged 25 to 34 living at home rose to the highest share recorded since 1960: 17.8%, the National Association of REALTORS® reports. That percentage remained high in 2021 at 17%—the second-highest share on record.

“Some young adults may have recently moved back home due to the flexibility of remote work trends and to avoid paying high rents,” writes Jessica Lautz, NAR’s vice president of demographics and behavioral insights, on the association’s blog. “Others may be at a family member’s home due to job losses or while virtually attaining higher education goals. Regardless of the reason, living with family may provide a benefit to potential first-time home buyers.”

About half of young adults surveyed who became first-time home buyers say they were making rent payments to family as they stayed at home.

However, other young adults have been able to live rent-free while they save for homeownership. Living at home could allow them to pay off their debts, improve their debt-to-income ratio, and save for a down payment.

“While living at home may not be an ideal or even a long-term scenario for many families, if prospective first-time buyers can move home before purchasing, this might financially help them save to purchase a home,” Lautz says. “The added flexibility of living with family allows a buyer to better navigate the tight housing market.” Source: “Young Adults Are Returning to Their Family’s Homes, But for How Long?” National Association of REALTORS® Economists’ Outlook blog (Jan. 26, 2022)

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In an effort to tame inflation, the Federal Reserve announced it soon will need to raise its benchmark interest rate—the first time in more than three years. That likely will put pressure on mortgage rates, and even though the Fed’s benchmark rate doesn’t directly affect home borrowing rates, they do often have an impact.

The Fed hinted on Wednesday that a quarter-percentage-point increase is soon coming to its benchmark short-term borrowing rate. This would be the first increase since December 2018.

“With inflation well above 2% and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” the Federal Open Markets Committee said in a statement on Wednesday. The FOMC also is to end its bond-buying program in March. The central bank outlined ways to start “significantly reducing” bond holdings on its balance sheet on Wednesday.

“I think there’s quite a bit of room to raise interest rates without threatening the labor market,” Fed Chairman Jerome Powell said in a news conference.

The federal funds rate is the interest rate that banks borrow and lend to one another. The Fed’s action will likely affect borrowing and saving rates.

Already, long-term fixed-rate mortgage rates have been rising. The average 30-year fixed-rate mortgage has climbed by about 50 basis points in the first weeks of the year. Last week, rates averaged 3.56%, up from 2.77% a year ago, Freddie Mac reports.

Economists have increased their forecasts recently for the mortgages, and the National Association of REALTORS® predicts rates to climb to 3.9% by the fourth quarter. Similarly, the Mortgage Bankers Association now predicts mortgage rates to increase to 4% by the end of the year.

While those forecasts are substantially higher than last year’s below-3% rates, economists note that rates are still low by historical standards. Source: “Federal Reserve Points to Interest Rate Hike Coming in March,” CNBC (Jan. 26, 2022) and “‘The Fed Got the Memo.’ Here’s What You Can do to Prepare for the Coming Rate Hike,” CNBC (Jan. 26, 2022)

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Home sellers in 2021 may have been a little shocked at the profit they made selling their homes. A report shows that home sellers nationwide realized a profit of $94,092 on a typical sale in 2021, up 71% from two years ago, according to ATTOM Data Solutions, a real estate data firm.

Home seller profits rose in more than 90% of the housing markets tracked based on median purchase and resale prices, marking the highest level since 2008.

The $94,092 profit on a median-priced home sale in 2021 accounted for a 45.3% return on investment compared to the original purchase price, according to ATTOM Data Solutions’ “Year-End 2021 U.S. Home Sales Report.”

Median home prices saw double-digit gains last year as buyers flooded the market. They’ve been driven by historically low interest rates and a desire to change their living circumstances sparked by the coronavirus pandemic.

“What a year 2021 was for home sellers and the housing market all around the U.S.,” says Todd Teta, chief product officer at ATTOM. “Prices went through the roof, kicking profits and profit margins up at a pace not seen for at least a decade. All that happened as the virus pandemic raged on, which actually helped drive the increases instead of stifle them.”

Households that have managed to escape job losses during the pandemic have rushed to the housing market, which has led to a market boom, Teta says. “No doubt, there are warning signs that the surge could slow down this year,” he adds. “But 2021 will go down as one of the greatest years for sellers and one of the toughest for buyers.”

Many western states saw some of the highest returns from typical home sales last year, led by Boise, Idaho (121.8% return on investment); Spokane, Wash. (86.5%); Bremerton, Wash. (82.7%); Prescott, Ariz. (81.2%); and Salem, Ore. (81.2%), according to the report. Source: ATTOM Data Solutions

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