Nationwide, 68.6% of home offers written by Redfin agents faced bidding wars on a seasonally adjusted basis in February, according to a new report from Redfin. February’s bidding-war rate was the highest level in Redfin’s records, which date back to April 2020. It is up slightly from a revised rate of 68% in January and 60.2% a year earlier. On an unadjusted basis, February’s bidding-war rate was 71.4%.
“It’s the most competitive time in history to purchase a home because mortgage rates are rising from historic lows amid a worsening supply shortage,” says Daryl Fairweather, Redfin’s chief economist. “Bidding wars intensified this year after rates started spiking, which lit a fire under buyers. Competition will likely plateau or even decline if rates keep increasing as expected. Monthly mortgage payments for new buyers are already at a record high. As they continue to creep up, some buyers will move to the sidelines.”
Mortgage rates have increased as the government seeks to combat inflation. The Federal Reserve raised interest rates for the first time in four years this week. That caused the average 30-year fixed mortgage rate to jump past 4% for the first time since 2019, hitting 4.16% during the week ending March 17. That’s up from a record low of 2.65% roughly two years ago. The government forecast six more rate hikes this year despite economic uncertainty stemming from the war in Ukraine.
El Paso, Texas had the highest bidding-war rate of the 50 U.S. metropolitan areas in this analysis, with 87.5% of offers written by Redfin agents facing competition in February. Next came Denver at 83% and Minneapolis at 81.1%. Raleigh, N.C. and San Francisco/San Jose rounded out the top five, with bidding-war rates of 80% and 79.9%, respectively.
“Housing inventory in El Paso is ridiculously low – especially for new-construction homes – which is brewing up bidding wars,” states local Redfin real estate agent Salvador Palos. “Buyers here have always loved new, turn-key homes, and those are nearly impossible to find because builders are delayed due to supply-chain issues and labor shortages. A lot of homeowners are also staying put because they’re worried about finding their next home at a time when the economy is so uncertain. It’s not uncommon for newer homes to get 10 to 15 offers and sell for $20,000 over the asking price.”
Three-quarters (75.3%) of Redfin offers for townhouses faced competition in February – a higher share than any other property type. Next came single-family homes, with a bidding-war rate of 72.9%. Multi-family properties and condos/co-ops essentially tied for third place, with respective rates of 64.8% and 64.6%.
Many homebuyers have sought out townhouses because they’ve been priced out of the market for single-family homes due to surging housing prices.
Homes listed in the $1 million to $1.5 million range were the most likely to face competition, with a bidding-war rate of 76.6% in February. Next came homes in the $600,000 to $800,000 range (73.8%), followed by homes listed for more than $1.5 million (73.1%).
Read the full report here.
