Key Highlights
- 41% of homes faced bidding war in four weeks ending in May 10, according to Redfin
- Inventory down -29% y/y for week ending May 9, according to realtor.com
No one anticipated that potential homebuyers would be back clamoring for new home space in May after demand hit rock bottom in April but here they are. If there were “real” open houses, buyers were looking inside. If there were “virtual” open houses, buyers were looking online.
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The problem for those potential homebuyers? Not much to look at either in-person or online. Supply levels of for-sale houses dropped to an historic low when the COVID-19 crisis hit plus new listings plunged by half during the second week in April, according to Redfin.
Little supply coupled with growing demand translates into bidding wars. Redfin tells us that more than 41% of homes listed for sale on the market generated bidding wars in the four weeks ending May 10. (In January before COVID hit the US, only 9% listed for sale on the market generated bidding war.)
Lead economist with Redfin, Taylor Marr, made the case of there being more demand by saying, “Demand for homes has picked back up after hitting rock bottom in April, and that uptick paired with lack of supply is a recipe for bidding wars. Homebuyers are getting back out there, searching for more space as they realize using their home as an office and school may become the norm.”
Robert Refkin, CEO of Compass, seconded Marr’s analysis of increasing demand as well as limited supply by saying on CNBC’s “Squawk Alley, “There’s more buyer activity on our site, as defined by engagement with our agents around homes that they’re looking at, than there are new listings coming on our site, as defined by new listing inventory in the market.”
Realtor.com indicated that new listings were down -29% annually for the week ending May 9. However, Danielle Hale, chief economist with realtor.com, added, “While new listings are still declining on a yearly basis, last week’s jump shows some sellers are ready for a summer home sale – a positive sign for the market.”
Still, increasing demand coupled with extremely slow growing supply translates into bidding wars.
Refkin said, “Buyers right now are saying to themselves, ‘I’ve been locked into my space for three months and they’re evaluating (that space by asking themselves) ‘do they they have enough space inside, outside? Do they have enough light? Do they have the right home office?’ If the answers to those questions are no, they call their agent. And, on top of that, you have record low interest rates…and…you’re not going to get a better price in two years.”
Where were the regional increases in bidding wars the most during May? Again, according to Redfin,
- Boston with +63% of offers written on behalf of clients
- San Francisco with +63% of offers
- Fort Worth TX with 62% of offers
- San Jose CA and Providence RI rounding out the top five
Thanks to CNBC’s Diana Olick.
Also read: Are Bidding Wars Past Tense?, Are We on the Cusp of the “Mother of All Bidding Wars?”, How Coronavirus May Change Your Nest Home and/or Apartment
