Nationwide, 60.9% of home offers written by Redfin agents faced bidding wars in February, up slightly from a revised rate of 59.3% in January. That’s according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage, which also notes that this represents the 10th-straight month in which more than half of Redfin offers encountered competition.
Homebuyers have grappled with intense competition over the past year because low mortgage rates and a pandemic moving spree made possible by remote work have prompted scores of Americans to purchase houses. This has intensified an already-acute shortage of homes for sale, meaning there are far more buyers than sellers.
Mortgage rates, however, have started moving higher. The interest rate for a 30-year fixed-rate mortgage is now about 3.09%, compared with 2.67% at the end of 2020. For now, this appears to be increasing urgency among homebuyers rather than scaring them off.
“The uptick in mortgage rates is likely fueling more bidding wars in the short term because house hunters are rushing to buy homes before rates rise even further,” said Redfin Chief Economist Daryl Fairweather. “If mortgage rates move significantly higher, we’ll likely see some buyers move to the sidelines, which will curb competition in the long run.”
According to a recent Redfin survey, 17% of people would slow down their home searches if mortgage rates surpassed 3.5%.
Another sign of a competitive market is when homes sell quickly and fetch more than sellers are listing them for. The typical home that sold in February went under contract in 32 days—23 days faster than a year earlier—and a record 36% of homes went for more than their asking prices.
“Every home I put on the market for under $700,000 is selling in a day,” said Redfin Jacksonville, FL real estate agent Heather Kruayai. “I recently listed a three-bedroom single-family house in Durbin Crossing that got 30 offers. I’ve never seen that in my life. We had to stop showings because the sellers just couldn’t accommodate that many people coming through their house. Buyers were calling me up themselves and pleading with me to pick their offers. My client ultimately chose the bidder who had the highest offer and agreed to pay the difference if the appraisal came in lower than the contract price.”
With many Americans moving to more affordable places during the pandemic, Jacksonville has seen an influx of out-of-state buyers who can afford to offer far above sellers’ asking prices, Kruayai added. This has contributed to a surge in home value. The total worth of homes in the Jacksonville metro area was $165.9 billion in February, up 21.1% from a year earlier. That’s the biggest increase among the 50 most populous U.S. metros.
Salt Lake City, San Diego and Phoenix Were the Most Competitive Markets
Salt Lake City had the highest bidding-war rate of the 24 U.S. metropolitan areas in this analysis, with nearly all Redfin offers (92.9%) facing competition. Next came San Diego at 84.4% and Phoenix at 78.1%. Denver and San Francisco/San Jose rounded out the top five, both at 76.4%.
“You have to pull out all of the stops. Successful buyers are offering $30,000 to $50,000 over the asking price, limiting or waiving inspections, offering free rent-back and agreeing to make up the difference in the event of a low appraisal,” said Redfin Denver real estate agent Monica Arnett. “I had one client offer $800,000 in cash on a $750,000 listing. They were outbid by someone who offered $900,000.”
High-End Homes Were the Most Likely to Attract Bidding Wars
Homes listed between $1 million and $1.5 million were the most likely to see bidding wars, with 71.4% of Redfin offers facing competition in February. Next came homes listed between $800,000 and $1 million, with 69.6% of offers seeing bidding wars, followed by homes listed between $400,000 and $500,000, at 62.9%. Homes listed for less than $200,000 were the least likely to see competition, but still had a bidding-war rate of 49.3%.
Single-Family Homes Were Much More Competitive Than Condos
Single-family homes had a bidding-war rate of 63.7% in February, making them the property type most likely to encounter competition. By comparison, 58.5% of offers for townhomes and 49.3% of offers for condos faced bidding wars.
Single-family homes have performed relatively well during the pandemic because homebuyers have been prioritizing space and privacy over shorter commute times and access to city centers.
Redfin (www.redfin.com) is a technology-powered real estate broker, instant home-buyer (iBuyer), lender, title insurer, and renovations company. We sell homes for more money and charge half the fee. We also run the country’s #1 real-estate brokerage site. Our home-buying customers see homes first with on-demand tours, and our lending and title services help them close quickly. Customers selling a home can take an instant cash offer from Redfin or have our renovations crew fix up their home to sell for top dollar. Since launching in 2006, we’ve saved customers nearly $1 billion in commissions. We serve more than 95 markets across the U.S. and Canada and employ over 4,100 people.
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