Last October 2018, 39% of all home sales were decided via bidding wars. This October 2019, only 10% of all home sales were decided via bidding wars, according to Redfin.
Along with this -29% decrease in bidding wars in just a year, mortgage rates and home price gains were also lower in October 2019 than October 2018. These declines in both interest rates and price gains, though both slightly rising currently, have been good news in making housing more affordable for more consumers but, because more consumers have been able to purchase more homes due to their increased buying power, the housing market’s long standing inventory shortages are even more pronounced.
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In fact, housing inventories in the low-tier segment of the market, houses priced at or lower than $200,000, have declined -15% annually, according to Redfin. Inventories within the mid to moderate segment of the market, homes priced from $200,000 – $750,000, fell only -4% between October 2018 and October 2019.
Clearly, consumers for mid-moderate tier homes have more choices within their market segment and therefore have less need to enter into bidding wars because of those choices. Conversely, consumers searching among fewer choices among low-tier homes have more need to enter into bidding wars but haven’t the financial means to back up their competitive needs.
Daryl Fairweather, Redfin’s chief economist, said, “Although the number of homes for sale is dwindling and prices are (slightly) rising…there are still homes on the market where sellers are willing to accept offers below list price, so buyers figure, why get involved in a price escalation when there are still deals to be found. But, as the number of homes for sale continues to decline, buyers will become more competitive.”
Markets currently seeing less than 10% of properties in bidding wars include Atlanta, Las Vegas, Miami and Chicago. Hotter markets such as San Francisco, where 35% of sales are the results of bidding wars, Phoenix, Philadelphia, Los Angeles and Boston are seeing more competitive action.
Fairweather underlines the reality of limited inventories by saying, “…if supply doesn’t improve, now may be the last chance in the foreseeable future for buyers to win a house if/when facing a bidding war.”
Thanks to CNBC’s Diana Olick for source data.