In San Francisco, Bidding Wars Return
Redfin, Seattle, said bidding wars for houses, which largely dissipated this spring amid higher prices and growing inventories, returned with a vengeance in San Francisco and other California markets.
Redfin said 35 percent of offers written by Redfin agents on behalf of their home-buying customers in San Francisco faced a bidding war in May, up from 5 percent in January but down from 77 percent a year ago. San Francisco was the most competitive market in the nation in May, beating San Diego (24 percent) by more than 10 points. No other metro saw more than one in five offers face competition in May.
Nationally, just 16 percent of Redfin offers faced a bidding war in May (https://www.redfin.com/blog/may-2019-bidding-wars).
“Earlier this year, the San Francisco housing market appeared to be running out of gas, but the recent tech IPOs have reignited competition,” said Redfin chief economist Daryl Fairweather. “Buyers want to get in now before prices shoot up, while many would-be sellers are holding out for higher prices. With more people looking to buy homes than there are homes for sale, what you have is a recipe for bidding wars.”
Bay Area Redfin agent Miriam Westberg said some properties have seen as many as 33 offers, “and most offers have no contingencies or are all-cash offers substantially higher than the list price. A few recent buyers have been surprised by how much competition they faced when they submitted their first offer since they heard about the slowdown at the end of last year. But it just takes that one failed offer for most to realize what they are in for. It feels like early spring/summer 2018 again.”
Redfin reported the least competitive market in May was Miami, where just 1 percent of Redfin offers faced competition, followed by Raleigh, N.C. (5%) and Dallas (6%).
A separate Redfin report (https://www.redfin.com/blog/homebuyer-contingencies-may-20) suggested buyers can be more judicious with their competitive offer strategies this yea. A growing share of buyers have had offers accepted that included inspection and/or financing contingencies. These are standard home purchase contract components meant to protect buyers that, when waived, serve as strategies to make an offer stronger and more competitive.
Redfin said in May, 14.6 percent of accepted offers waived the inspection contingency, down from 19.8 percent a year earlier. And 11.7 percent of accepted offers in May waived the financing contingency, down from 13.2 percent a year prior. The use of home-sale contingencies, which make an offer contingent on the sale of the buyer’s home, in accepted Redfin offers nearly doubled, to 8.4 percent in May from 4.4 percent a year earlier.
