Buyers are going to extreme measures to win a home
Intense competition, coupled with tight inventory and high listing prices, has put buyers in a tight spot despite getting a good deal on a mortgage.
Redfin agents reported that the majority of offers they submitted faced competition in January as housing supply remains at its lowest point in seven years, aggravating the severe housing shortage in many areas.
"Low mortgage rates have brought buyers back to the housing market, but a lack of listings means buyers are having to compete with one another to secure a sale and lock in a mortgage rate," said Redfin Chief Economist Daryl Fairweather. "This competition pushes up prices, which means that even though buyers can get a good deal on a mortgage, now they are often paying a higher sticker price."
Last week, a report from RE/MAX revealed that national inventory dipped 4.5% year over year, while the number of homes for sale across 54 metros plunged 15.6% year over year.
In the San Francisco Bay Area, where the median home price is still well above $1 million, homes receive multiple offers more than 90% of the time.
But Arizona Redfin agent Thomas Wiederstein said offering well above listing price isn't enough in today's hot market. Homebuyers would also have to be willing to waive contingencies to have sellers consider their offer.
"After missing out on one home due to a bidding war, my clients were much more aggressive on their next offer," said Jennifer Tollenaar, a Redfin agent in San Jose. "In order to beat 24 other offers, they put 50% down, wrote a great letter to the sellers, and removed all contingencies. This was on a home with a purchase price of over $1.7 million."
Redfin Portland agent Meme Loggins recounted how her clients recently made an offer that was $8,000 above the property's $275,000 list price.
"Ours was the second offer the sellers had received," Loggins said. "Two days later, we were competing with 30 other offers. This bidding frenzy took place on a mobile home that was pretty far out of the metro area and not even in great condition. It's getting crazy out there."
January saw a 3.8% year-over-year gain in home price growth, with almost half of large US markets posting significant annual increases, according to the Zillow Real Estate Market Report.
"One home I recently helped my clients win had been on the market since June and hadn't been reduced in price since November," Redfin Philadelphia agent Brenda Beiser said. "When we looked at it in mid-January, the agent told me there had been six other appointments the day before. By the time our offer went in that evening, they had received two other offers."
Only five of the 24 markets Redfin surveyed did not face fierce competition in January. The area that was least prone to bidding wars was Greenville, S.C.
