Competition among homebuyers drops to the lowest level in 2 years

For the first time in two years, homebuyers across the country might breathe a sigh of relief. The house bidding war era is over, at least for now. Fewer listings are getting more than one offer, which means buyers have an opportunity to spend more time shopping around before making a final offer. 

In June, less than 50 percent of the home offers written by Redfin agents faced competition, according to the company’s monthly report. The bidding war rate dropped to 49.9 percent, the lowest it has been since May 2020. An offer becomes part of a bidding war if it receives at least one competing bid. 

The market share of homes that received multiple offers went up during the pandemic, reaching its highest point in January when the bidding war rate climbed to nearly 70 percent. At the beginning of this year, people tried to buy a home ahead of the rising interest rates. Seven months later, the competition among buyers plunged.  

“Housing-market competition is declining because higher mortgage rates, high home prices, inflation and a falling stock market have eroded homebuyer budgets, causing some house hunters to drop out of the market,” the report says.

According to Redfin, an average homebuyer will have to spend $2,387 a month on mortgage payments at the current 5.51 percent interest rate. Borrowing costs have increased 44 percent from last year, which demotivated some would-be-buyers from entering the market.

In addition, roughly 60,000 home purchase agreements fell through in June, equal to 14.9 percent of homes that went into contract the same month. This is the highest percentage of canceled contracts on record, excluding March and April 2020, when the pandemic hit the country. 

Although the overall share of bidding wars has decreased, they remain common in Providence, RI, Boston, MA, and Philadelphia, PA. The bidding war rate in these areas exceeds 65 percent. The number of home offers that faced competition in New York City fell nearly 10 percent from last year to 50.8 percent. 

Resources:

“Homebuyer Competition Drops to Lowest Level in Over Two Years,” by Lily Katz (Redfin, 2022)

“Bidding wars drop to lowest level since pandemic,” by Holden Walter-Warner (The Real Deal, 2022)

“Bidding war rate drops to lowest level in two years,” by Brooklee Han (Real Trends, 2022)

“Bidding wars hit record high in January,” by Holden Walter-Warner (The Real Deal, 2022)