Increasing mortgage rates will likely move some prospective buyers to the sidelines
It is the most competitive time in history to buy a home, according to Redfin chief economist Daryl Fairweather.
Redfin reported that February saw the highest bidding war rate since April 2020 as rising mortgage rates and a worsening supply shortage continue to prompt bidding wars in several housing markets nationwide.
Nearly 69% of home offers written by Redfin agents faced bidding wars on a seasonally adjusted basis in February, up slightly from the revised rate of 68% in January and 60.2% a year ago. Unadjusted, the bidding-war rate was 71.4% last month.
“Bidding wars intensified this year after rates started spiking, which lit a fire under buyers,” Fairweather said. “Competition will likely plateau or even decline if rates keep increasing as expected. Monthly mortgage payments for new buyers are already at a record high. As they continue to creep up, some buyers will move to the sidelines.”
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El Paso, Texas, registered the highest bidding-war rate, with 87.5% of offers facing competition in February. Denver (83%), Minneapolis (81.1%), Raleigh (80%), and San Francisco/San Jose (79.9%) followed.
“Housing inventory in El Paso is ridiculously low - especially for new-construction homes,” said local Redfin real estate agent Salvador Palos. “Buyers here have always loved new, turn-key homes, and those are nearly impossible to find because builders are delayed due to supply-chain issues and labor shortages. A lot of homeowners are also staying put because they’re worried about finding their next home at a time when the economy is so uncertain. It’s not uncommon for newer homes to get 10 to 15 offers and sell for $20,000 over the asking price.”
