According to a new report from Redfin, around 70% of real estate offers written by Redfin agents faced bidding wars in January on a seasonally adjusted basis, compared to 67.7% in December and 61% in January 2021. is the highest share since April 2020, when Redfin began recording this data, making it the most competitive month ever for homebuyers.
The housing market was more competitive than ever in January as mortgage interest rates rose, prompting buyers to rush to make offers on homes before rates rise further. The average 30-year fixed mortgage rate was 3.55% at the end of January, up from 3.11% at the end of December and a record low of 2.65% about a year earlier. January was the first time rates had topped 3.5% since March 2020, when the coronavirus pandemic was just beginning. Rates have since jumped even higher, reaching 3.92% in the week ending February 17, 2022.
Redfin economists currently forecast the 30-year fixed mortgage rate to hit 4.3% by the end of 2022. Mortgage rates are expected to rise as the Federal Reserve raises interest rates in a bid to reduce l ‘inflation.
“Rising mortgage rates are intensifying an already severe shortage of homes for sale, as buyers feel more pressure to buy while homeowners feel less pressure to sell — an imbalance that is fueling increased competition,” he said. Redfin’s chief economist, Daryl Fairweather. “Buyers are scrambling for the few homes on the market in an effort to lock in relatively low payments before rates rise even higher, but homeowners who bought or refinanced last year are staying put because they don’t. don’t want to lose their lowest mortgage rate.
In the four-week period ending Feb. 13, a record 57% of homes under contract had an offer accepted in the first two weeks on the market, and asking prices jumped 16% from a year on year to reach a new high. Meanwhile, new listings fell 8%, dragging housing supply to a new low.
Townhouses are more competitive than any other property type, with nearly 72.6% of Redfin listings for townhouses meeting competition in January. As home prices rise, many buyers are looking for townhouses because they have been overpriced in the single family home market.
“Competition really intensified in the second half of January because buyers started feeling desperate to foreclose on homes while rates were still relatively low,” said Brynn Rea, a Redfin realtor in Spokane, WA. “One of my listings just had 45 screenings in five days and received 14 offers. Another received 12 offers and sold for $120,000 above the list price of $525,000.
Of 40 US metros in this analysis, the top metros with the highest bid war rates were:
- Spokane, Washington (83.3%)
- Sacramento, CA (80.4%)
- Seattle, Washington (79.7%)
- Dallas, TX (78.1%)
- San Francisco/San Jose, CA (76.5%)
“Rising mortgage rates won’t be too detrimental to out-of-towners moving in with lots of money, but it will push a lot of local first-time buyers out of the market,” Rea said.
She explained how essential it is to get into a home quickly, otherwise some buyers won’t be able to afford it. If that happens, consumers will have to keep renting, which is also difficult because most rental payments are higher than monthly mortgage payments due to “skyrocketing rents”.
To view the full report, including charts and methodology, Click here.