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The frequency of home bidding wars has fallen to its lowest level this year – the latest sign that the housing market may cool down and return to its usual seasonal patterns.
A new report from Redfin RDFN,
found that 58.8% of listings on homes written by the company’s real estate agents faced competition in August. This is down from 62.1% the previous month and a peak of 74.3% reached in April. Redfin defines a bidding war as any situation where there are two or more competing bids on a house.
It represents the lowest level of competition for homes since December, when the auction war rate was just 53.7%. Notably, the August 2021 figure is slightly lower than the level posted a year earlier, a sign that the market could return to its standard seasonality.
The peak home buying season typically occurs in the spring and summer, as families look to buy and move into a home before the start of the school year. But in 2020, that typical seasonal pattern was disrupted by the COVID-19 pandemic. Real estate activity has come to a halt in the generally busy months of April and May amid stay-at-home orders to curb the transmission of the coronavirus that causes COVID-19.
Soon after, the country’s housing market came back to life – and more. The pandemic has prompted many families to consider moving to larger homes as many Americans have suddenly been able to work remotely.
At the same time, millennials were entering their early years of home buying a lot, and the pandemic has made homeownership a higher priority for those who have not been affected by the downturn in the labor market. On top of all this, record mortgage rates created even more demand, as people considering buying a home suddenly felt the pressure to secure affordable financing before the opportunity wore off.
““Sellers still price their homes very high, but many buyers are fed up and are no longer willing to pay the huge premiums they were six months ago.”“
This sudden surge in demand was met with an extremely limited supply of homes for sale. Years of under-construction have seen the United States face a housing shortage – plus the pandemic has prompted many sellers not to list their homes for sale. As a result, the rate of bidding wars rose rapidly last summer and intensified until this spring.
All of this competition has pushed home prices to record highs in many parts of the country, as double-digit percentage price appreciation has become the norm. But now the number of bidding wars is dropping, according to Redfin’s analysis. And these high house prices could be a major factor in why.
“Sellers still price their homes very high, but many buyers are fed up and are no longer willing to pay the huge premiums they were six months ago. Instead of 25 to 30 offers on turnkey homes, we are now seeing five to seven, ”Nicole Dege, Redfin real estate agent in Orlando, Fla., Said in the report. In Orlando, the bidding rate fell from 78.9% in July to 57.5% in August.
Redfin’s analysis noted that only 50% of homes sold above their list prices in the four weeks ending September 5, which is down from a peak of 55% in August. And the speed at which sellers are accepting offers has also slowed.
Yet all real estate is local – and many markets are showing no signs of cooling. Raleigh, North Carolina, had the most competitive housing market in the country, according to the Redfin report, with 86.7% of households experiencing auction wars in August, up from 71.3% the month before.
The second most competitive market was San Francisco-San Jose, California, followed by Tucson, Arizona and Cincinnati. Of the 10 most competitive markets, only two saw the rate of the bidding war drop between July and August: Charlotte, North Carolina and San Diego.
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