Searching questions on US home prices

Local | 22 Apr 2021

There is increasing concern among people in the United States that the housing market is experiencing a price bubble and may be ready to burst.

Google reported that the search "When is the housing market going to crash?" had risen 2,450 percent in the past month. Searches on the question "Why is the market so hot?" had doubled in a week.

But the most telling indication of a bubble, CNBC noted, was the question "How much over an asking price should I offer on a home?"

That rose 350 percent in the same week.

Data from CoreLogic showed home prices rose 10.4 percent year on year in February. That was the largest annual increase since 2006.

"We've got an acute shortage of for-sale supply at the same time that record low mortgage rates are driving the appetite to buy by millennials and Gen-Xers," said Frank Nothaft, chief economist at CoreLogic.

But the Google question about overpaying doesn't sit well with Nothaft. "That's the mindset that comes in because it means it's an auction market," he said.

At the start of April, 42 percent of homes were selling for more than their list prices, according to real estate brokerage Redfin, 16 percentage points higher than 12 months earlier - to the point where buyers are more likely to find themselves in bidding wars.

"The housing market is more competitive than we've ever seen it, but a couple of indicators are causing us to ask whether we're nearing a peak in terms of how fast demand and prices can grow," said Daryl Fairweather, Redfin's chief economist. "Sellers' asking prices may be starting to flatten in what so far appears to follow a typical seasonal pattern."

As mortgage rates rise, which they are slowly doing now, and buyers hit an affordability wall, Nothaft expects to see annual home price gains in the United States cool to the 3-percent range.

But real estate is local. If prices chill or even drop slightly in some markets, it will not lead to a US foreclosure crisis. For investors are quite heavy in the market as well given the high demand for rentals that should serve as a backstop for major price declines, an analysis by CNBC shows.



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