A new Redfin report focuses on the decline in homebuyer competition—nationwide and by metro area. In August, a little over four in 10 home offers written by Redfin agents faced competition—down from six out of ten a year earlier.
The bidding war rate has hit its lowest level since April 2020, largely thanks to rising mortgage rates, though that isn’t the only reason.
Here’s what you need to know.
Bidding wars in decline for seventh straight month
Across the country, 44.6% of Redfin home offers faced competition in August, marking the seventh straight month of decline and the lowest bidding-war rate since the beginning of the COVID pandemic.
Just a year ago, that rate was 63.5%, with an average of five offers per home listed on Redfin. In August, the typical home in a bidding war saw 3.2 offers, compared to 3.5 in July, according to nationwide data submitted by Redfin agents.
Mortgage rates, inflation, and plummeting stock prices
Competition is in decline primarily because mortgage rates are twice what they were a year ago, reaching 6%+ in mid-September and pricing many buyers out of the market.
Higher mortgage rates make it much more expensive to buy a home, adding hundreds of dollars to the monthly housing payment for new homeowners.
Many prospective buyers—even those who could qualify for a mortgage—are backing off because the monthly payments that come with that higher rate would take too high a share of their income.
Another reason for buyers backing off is persistent inflation, which makes everything, including gas and groceries, more expensive. Plummeting stock prices are another issue for those who depend on stocks to supplement their income.
Also, some have decided to hold off on buying a home because they’re worried home values will fall, putting them underwater with their home equity.
Metros with the lowest bidding war rates
About one in five home offers (21.7%) in San Antonio, TX, faced competition in August, giving it the lowest bidding-war rate of the 36 metros in Redfin’s analysis.
Next in line were Tampa, FL (23.8%), Olympia, WA (24.2%), Phoenix (26.4%), and Minneapolis (27%).
During the pandemic, Tampa, Olympia, and Phoenix were among those that experienced a surge in buyer demand. Now, along with other pandemic hotspots, they are seeing a sharper competition decline.
At the other end of the list, Philadelphia had the highest bidding-war rate, with 61.7% of offers facing competition. Next in line were San Jose (58%), Providence, RI (54.5%), Boston (54%), and Detroit (52.9%).
Biggest declines in homebuyer competition
Raleigh, NC, topped the list of U.S. metros experiencing the biggest declines in homebuyer competition. Raleigh’s bidding-war rate in August was 35.4%, down from 78.9% a year ago.
Next in line was San Antonio, where the rate dropped from 59.8% to 21.7% year-over-year in August. Rounding out the top five were Charlotte, NC (from 68.8% to 31.4%), Olympia, WA (from 60.7% to 24.2%), and Colorado Springs, CO (62.5% to 29.7%).
All 36 metros in Redfin’s analysis experienced a decline in their bidding-war rate—except Philadelphia, where the rate went up from 60.2% a year ago.
Housing types most likely to face competition
According to Redfin’s study, 44.1% of offers on townhomes faced competition in August, making it the property type with the highest bidding-war rate. Next up were single-family homes (42.1%), multi-family properties (40.2%), and condominiums (37%).
Townhouses are more popular in today’s housing market mainly because, on average, they’re more affordable than single-family homes. Prospective buyers are willing to sacrifice square footage (townhomes typically run smaller) to save money on their monthly mortgage payments.
What can you do?
Keep this data handy when prospective buyers ask how much competition they’re likely to face; buyers want to know whether they’ll likely have to bid over the asking price to buy a home they want.
Sellers need this data, too. While homes are still selling (and many above the asking price), they’ll likely need to wait longer than they would have a year ago to see the first offer come in.
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