Bidding Wars Hit Highest Level Since April 2020
Bidding wars hit their highest level since at least April 2020, with 70% of home offers from Redfin agents facing competition in January, a new Redfin report found.
This is up from 67.7% in December and 61% in January 2021.
The report chalks up the increased bidding to a combination of rising interest rates, high demand, and low inventory. January marked the first time rates hit 3.5% since the beginning of the pandemic, and have jumped to nearly 4% in the first weeks of February. New listings continue dropping, hitting record lows.
“Rising mortgage rates are intensifying an already-severe shortage of homes for sale because buyers are feeling more urgency to buy while homeowners are feeling less urgency to sell—an imbalance that’s fueling an increase in competition,” said Redfin Chief Economist Daryl Fairweather.
“Buyers are battling it out for the few homes on the market in an effort to lock in relatively low payments before rates move even higher, but homeowners who bought or refinanced in the last year are staying put because they don’t want to lose their rock-bottom mortgage rate.”
Townhouses saw the most competition of any property type, with 72.6% experiencing bidding wars. This is likely due to many homebuyers being priced out of the single-family home market and turning their attention to other, more affordable options.
Single-family homes followed in second place at 70.6%, while condos/co-ops had a rate of 62.9% and multi-family had a rate of 62.7%.
Spokane, WA had the highest rate of bidding wars at 83.3%. The New York Times recently reported that Spokane, which was billed as the “Next Affordable City,” has already become too expensive for many as demand skyrocketed. The typical Spokane home is worth $411,000.
Sacramento (80.4%) and Seattle (79.7%) are next on the list, followed by Dallas (78.1%) and San Jose (76.5%).
“Housing trends over the past year have created challenges. The quick house price gains may be counterbalanced as mortgage rates increase. However, more expensive housing has elevated affordability to become a broader concern as available supply remains limited,” said William Doerner, Ph.D., Supervisory Economist at the Federal Housing Finance Agency.
The U.S. housing opportunity index has fallen to 54%, down from 79% in Q1 2012. That means just over half of all homes sold last quarter are affordable for families earning the median income of $54,200.
“A number of families, especially would-be first-time buyers, are increasingly being forced out of the market, and this is why supply is critical to expanding homeownership opportunity,” Lawrence Yun, chief economist for the National Association of Realtors, said of housing affordability.
“The good news is that home prices should begin to normalize later in 2022 as more homes come on the market.”