Redfin: Bidding-War Rate Intensifies as Housing Shortage Fuels Fierce Competition
Redfin, Seattle, reported nationwide, 60.9% of home offers written by Redfin agents faced bidding wars in February, up from a revised rate of 59.3% in January, the 10th-straight month in which more than half of offers encountered competition.
“The uptick in mortgage rates is likely fueling more bidding wars in the short term because house hunters are rushing to buy homes before rates rise even further,” said Redfin Chief Economist Daryl Fairweather. “If mortgage rates move significantly higher, we’ll likely see some buyers move to the sidelines, which will curb competition in the long run.”
According to a recent Redfin survey, 17% of people would slow down their home searches if mortgage rates surpassed 3.5%.
The report said the typical home that sold in February went under contract in 32 days—23 days faster than a year earlier—and a record 36% of homes went for more than their asking prices.
“Every home I put on the market for under $700,000 is selling in a day,” said Redfin Jacksonville, Fla., real estate agent Heather Kruayai. She noted Jacksonville has seen an influx of out-of-state buyers who can afford to offer far above sellers’ asking prices, which has contributed to a surge in home value.
Redfin said Salt Lake City had the highest bidding-war rate of the 24 U.S. metropolitan areas in this analysis, with nearly all Redfin offers (92.9%) facing competition. Next came San Diego at 84.4% and Phoenix at 78.1%. Denver and San Francisco/San Jose rounded out the top five, both at 76.4%.
“You have to pull out all of the stops. Successful buyers are offering $30,000 to $50,000 over the asking price, limiting or waiving inspections, offering free rent-back and agreeing to make up the difference in the event of a low appraisal,” said Redfin Denver real estate agent Monica Arnett.
Homes listed between $1 million and $1.5 million were the most likely to see bidding wars, with 71.4% of Redfin offers facing competition in February. Next came homes listed between $800,000 and $1 million, with 69.6% of offers seeing bidding wars, followed by homes listed between $400,000 and $500,000, at 62.9%. Homes listed for less than $200,000 were the least likely to see competition, but still had a bidding-war rate of 49.3%.
In a separate report, Redfin said nationwide, 31.2% of Redfin.com users looked to move to a different metro in January and February, up from 26.1% from a year ago, the highest share since Redfin started tracking migration in 2017.
The share of Redfin.com users searching for homes outside their metro has steadily increased since the onset of the coronavirus pandemic, with remote work allowing homebuyers to prioritize affordability and living near family and friends. Fairweather said for many buyers, that means they now have the freedom to relocate to a different part of the country.
“Migration is on the upswing even as vaccines roll out, signaling that the rise in moving from one part of the country to another is likely to outlast the pandemic,” Fairweather said. “Although some coronavirus-driven moves will be temporary as people return to the office or go back to living alone after staying with their families, for many Americans one long-lasting effect of the pandemic and remote work is the freedom to live where they want to live.”
Phoenix, Austin, Las Vegas, Dallas and Miami had the biggest net inflows of Redfin.com users of any major metro in the U.S. in January and February. Affordable inland destinations and parts of Florida are typically the most popular destinations for migrants, a trend that has accelerated during the pandemic.
Los Angeles is the top origin for people moving to Phoenix, Las Vegas and Dallas, while San Francisco is the top origin for those relocating to Austin. The typical home in Los Angeles sold for $745,000 in February, and the typical home in San Francisco sold for $1.4 million. Meanwhile, the typical home in Phoenix, Las Vegas and Dallas sells for less than $350,000.